IPA calls for strong business climate
IPA calls for strong business climate
Fitri Wulandari, The Jakarta Post, Jakarta
Oil and gas contractors called on Tuesday for a favorable
investment climate in a bid to maintain sustainable development
in the oil and gas sector.
Chairman of the Indonesian Petroleum Association (IPA) Brian
W. Marcotte said while the IPA was fully aware that oil and gas
sector was a high-risk business, legal and fiscal uncertainties
were still a bigger problem for oil and gas contractors.
"Significant issues which affect the outcome expected from our
decision-making analysis in an arbitrary way is much more
difficult for investors to understand and mitigate," Marcotte said
in his speech on the opening ceremony of the 29th IPA Annual
Conference and Exhibition on Tuesday.
"Issues such as contractual uncertainty and fiscal-terms
uncertainty are much more difficult to deal with as they may come
in very unexpected ways," Marcotte said, adding that they would
undermine investors' confidence if the uncertainty becomes too
high.
Sustainable development of energy resources became the central
theme of IPA's conference.
A favorable business climate would support sustainable
development of oil and gas resources which are non-renewable
resources.
"Our goal is to provide a climate that will allow the
resources of Indonesia to be developed both today and tomorrow
for the companies involved in the investment decisions, the
government and the people of Indonesia," Marcotte remarked.
Legal uncertainty, red tape and collusive practices are often
blamed as the major hindrance in luring investors to Indonesia.
Particularly in the oil and gas sectors, apart from legal
certainty, the unattractive split in oil and gas revenue between
the government and the production sharing contractors (PSC) was
often blamed for declining investment in the sector.
Marcotte said Indonesia's oil and gas production had been
struggling to offset decline over the past few years due to
depleting resources.
Thus, it will be more difficult for Indonesia to maintain or
even to increase production.
"The answer will rely on investment as it will lead to
exploration that will lead to development and to production,"
Marcotte remarked.
However, Marcotte applauded the government's efforts to
improve the investment climate in the sector through Law No.
22/2001 on oil and gas, which he said would help boost investors'
confidence.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
acknowledged the need to preserve oil and gas resources for
future use.
In line with the sustainable development of oil and gas,
Purnomo said the government had formed policies on supply and
demand management, appropriate domestic energy pricing and
promoted an environmentally friendly policy.
As for the investment climate in oil and gas sector, Purnomo
said it was still conducive.
"One of the indications is that the realization of the
upstream expenditure has increased by about US$3 billion from
2000 to 2003," Purnomo said.
Purnomo added the government will soon issue regulations on
upstream and downstream business activities to provide a legal
foundation for investors.
The oil and gas industry has been the backbone of the
country's economy for decades, contributing between 25 percent
and 30 percent of the annual budget.
The Indonesian Petroleum Association (IPA) is an influential
non-profit organization consisting of 38 companies of oil, gas
and geothermal operations in Indonesia.
The association provides a forum for its members to exchange
ideas on all aspect of the oil, gas and geothermal industry from
both upstream (oil and gas exploration and exploitation) and
downstream (fuel refining and distribution).
Additionally, IPA has 91 organizations affiliated with
petroleum and geothermal industries such as service companies,
research and educational institutions. Some 1,417 individuals
related to the industry such as geologists and geophysicists are
also members of IPA.