Much still to be done in oil, gas sector: IPA

Much still to be done in oil, gas sector: IPA

The Jakarta Post, Jakarta

The government must work hard to provide legal certainty --
particularly in the area of tax regulations -- if it wants
investment in the country's oil and gas sector, which has lately
been on a declining trend, to pick up, an industry player says.

President of the Indonesian Petroleum Association (IPA)
Christopher B. Newton said there at least were four main issues
the government needed to address immediately in its efforts to
accelerate investment in the sector.

"First, the government should seek the complete resolution of
the value-added tax (VAT) issue that investors are facing, while
(second) taking the opportunity presented in the new tax law to
enhance fiscal certainty," he said during the first day of the
association's annual convention on Tuesday.

Newton was referring to the tax incentive that the government
has been giving to production-sharing oil and gas contractors in
the country, which enables them to reimburse the VATs imposed on
the equipment they use for exploration and production.

On a day-to-day basis however, the reimbursements are often
delayed, creating uncertainty, Newton added.

His third and fourth points respectively were that,"the
government should continue improving the coordination between
related ministries and local administrations, as well as the
partnership between investors and the sector's regulators."

The IPA is holding a three-day convention and exhibition here
in Jakarta, which President Susilo Bambang Yudhoyono officially
opened. Some 1,700 participants are expected to attend the event,
which will showcase 96 exhibitors and include a series of
discussions on the latest developments in the oil and gas sector.

Among the exhibitors are state oil and gas firm PT Pertamina,
local energy firm PT Energi Mega Persada, as well as major
foreign oil companies such as BP Indonesia, PT Caltex Pacific
Indonesia, Chevron and ConocoPhillips. Speakers include Minister
of Energy and Mineral Resources Purnomo Yusgiantoro and Chevron
president David J. O'Reilly.

Newton further said that recent high oil prices alone would
not be enough to attract investors to Indonesia as other
countries had also increased their efforts to do so.

"The drive to attract foreign direct investment is
significantly more competitive today," he said.

Newton said Indonesia's share of global upstream capital
allocation had declined from 8 percent to 3 percent over the last
five years, indicating its eroding competitiveness.

The IPA estimates that Indonesia's oil and condensate
production will average this year some 1.06 million barrels per
day (mbpd), a 2.5 percent decline from last year's output. Its
gas production is still high at 8 billion cubic feet (bcf) per
day, but below 1996's peak of 8.7 bcf. Without significant
investments in production optimization, production from existing
discoveries will decline by 50 percent in the next decade.

Speaking after Newton, President Susilo Bambang Yudhoyono said
that the government was committed to providing a favorable
investment climate in its efforts to boost the country's current
1 mbpd oil production to 1.3 mbpd by 2009.