Oil and gas investors warn of RI's waning attraction

Oil and gas investors warn of RI's waning attraction

The Jakarta Post, Nusa Dua, Bali

Oil and gas investors warned on Saturday of Indonesia's waning
attraction and urged the government to improve regulations and
the sector's fiscal environment to revive investor confidence.

The Indonesian Petroleum Association (IPA), which represents
both domestic and multinational companies operating in the
country's oil and gas sector, said Indonesia was rich with
hydrocarbon deposits, but its abundance of natural resources
would be rendered unattractive unless there was a conducive
climate for investment.

They said the country should create a clear legal framework
and fiscal environment, respect contracts and provide better
contractual terms to attract new investment in the increasingly
competitive global oil and gas industry.

"Investment is a balance between geology and fiscal terms,
bureaucracy and regulatory framework," Nurman Djumiril, the
chairman of IPA's regulatory affairs committee, said in his
presentation during the "Dialog Forum of Stakeholders".

The forum, which was opened by President Megawati
Soekarnoputri, was aimed at providing chances for oil, power and
mining investors to air their concerns with the government.

Several ministers, including Coordinating Minister for the
Economy Dorodjatun Kuntjoro-Jakti, Minister of Energy and Mineral
Resources Purnomo Yusgiantoro, Minister of Forestry M. Prakosa,
Minister of Industry and Trade Rini Soewandi, Minister of Home
Affairs Hari Sabarno, State Minister of the Environment Nabiel
Makarim and the chairman of the Investment Coordinating Board,
Theo F. Toemion, were present at the forum to listen to the
investors.

The half-day conference was held in line with the government's
pledge to create a better investment environment this year after
the country saw many foreign investors pull their operations out
of the country last year.

Thus far, players in the oil and gas industry, which is
dominated by western investors, have rarely voiced their
concerns, creating a misleading impression that the situation was
fine, unlike the manufacturing sector, in which investors
regularly air their complaints.

The industry contributed 29 percent to national revenue last
year and saw investments of between US$5 billion and $6 billion
in exploration and production activities during that period,
Minister Purnomo said.

Although existing investors continued making investments in
exploration and production activities, their interest in new
contracts has apparently declined.

Last year, BP Migas signed only two contracts -- a new
contract and an extension contract -- compared to 28 contracts in
1997 and eight contracts in 2001.

Investor interest in new contracts has been declining because
many things remain "unclear", including the role of BP Migas, the
new upstream authority established under the 2001 Oil and Gas Law
to replace state oil and gas company Pertamina, Nurman said.

The investors also want "more interesting" contractual terms
that assure greater rewards for investors, he said, adding that
the investors also doubt if the government is really committed to
respecting contracts.

With regards to the mining sector, Purnomo called on his
fellow ministers to seek a comprehensive solution to the problems
faced by many mining investors who could not continue their
operations due to the 1999 Forestry Law, which bars open-pit
mining in protected forests.

He said unless the problem was solved, Indonesia would lose
the chance of attracting billions of dollars in investments.

"If overlapping land use and fiscal policy constraints did not
exist, 50 mining companies would be willing to invest during the
period of 2001 to 2005.

"Four of them would invest a total of $3.2 billion," he said.

Minister Prakosa said he would be consistent with banning
open-pit mining operations in protected forests, but he was ready
to review certain areas.