IPA to draft oil and gas code of conduct

Moch. N. Kurniawan, The Jakarta Post, Jakarta

The Indonesian Petroleum Association (IPA) said on Thursday it would draft a code of conduct on good corporate governance for the country's oil and gas industry to help strengthen business ethics and eradicate rampant corrupt business practices in the sector.

"I'm speaking before discussing with the board...but it will be great support for putting together some general frameworks into a code of conduct for the industry.

"A code of conduct is a powerful tool for industry and it's a significant issue in the board of directors of the IPA." IPA chairman Brian Marcotte told The Jakarta Post and Petromindo.com after the plenary session of the IPA's 28th annual convention.

He added that oil and gas companies, all of which have individual codes of conduct, could put their principles into an industry acceptable code.

Marcotte said, for example, that one important area that should be addressed was a code for outlawing corruption, which would provide rules of thumb for companies in interacting with the government.

The IPA would set up a forum to further discuss the planned code of conduct, he added.

The country's oil and gas industry has been plagued by corrupt and collusive business practices for decades although the sector is dominated by foreign companies, many of which are listed overseas.

The state-owned oil and gas company Pertamina, which controls the management of production sharing contractors, has been blamed for failing to curb the corruption.

Critics have also said that Pertamina had long been treated as the cash cow of the family and friends of former authoritarian president Soeharto.

In 1999, auditing firm PricewaterhouseCooper uncovered losses amounting to US$4.69 billion at Pertamina between 1996 and 1998 due to various factors such as inefficiency, loss of income opportunities and future obligations.

The situation has prompted the government to remove Pertamina's supervisory role over oil and gas companies in the upstream sector as provided for in the new oil and gas law, which came into force in November last year.

Pertamina has to turn itself into a limited liability company within two years, and the government will establish an independent body known as the Executive Board to take over Pertamina's supervisory role in one year.

Gulf Indonesia Resources Limited's Paul C. Warwick agreed that rampant corrupt and collusive business practices in the industry must be cleaned up to help raise foreign investors' confidence.