Oil association calls for security, fair competition

JAKARTA (JP): The Indonesian Petroleum Association (IPA) on Wednesday called upon the House of Representatives and the government to enact an oil and gas law which ensures investment security and fair competition in the oil and gas sector.

Association chairman William T. Fanagan, who is also president and chief executive officer (CEO) of Gulf Indonesia Resources Limited, said in a conference that the future oil and gas law should underline the sanctity of contracts and contain a provision regarding dispute resolution.

He also said the law should provide a level playing field for contractors and the state oil and gas company.

"To have a workable oil and gas law, there must be a level playing field and certainty of law," Fanagan said in a seminar titled PDI-Perjuangan face to face with investors on the oil and gas bill. The seminar was organized by online mining and energy news provider Petromindo.Com.

IPA is comprised of foreign and domestic oil and gas investors operating in the country.

The seminar was held while the House and the government have started debates on the oil and gas bill proposed by the latter.

Investors have often raised concerns over the growing disputes between them and local communities, who have often resorted to acts of violence in demanding shares in the companies' oil and gas revenues.

The investors have also often voiced concerns over the dual role of Pertamina as an oil and gas producer as well as the industry regulator, claiming the dual role obstructs fair competition in the country's oil and gas industry.

John S. Karamoy, the president of PT Medco Energi International Tbk, said in the seminar the dual role undermined the bargaining position of investors negotiating with Pertamina.

Karamoy, who was speaking in a personal capacity, said oil and gas investors expected the future oil and gas law to eradicate all monopolies and guarantee fair competition in the country's oil and gas sector.

"The oil and gas law that production-sharing contractors (PSC) want to see, is the one that provides opportunities for the development of the oil and gas upstream and downstream sectors in a competitive way," he said.

Under the bill proposed by the government last January to replace the existing Pertamina Law No. 8/1971, the government would set up an independent body to take over Pertamina's role of managing and regulating the oil and gas industry. The so-called Implementing Body would be accountable to the President.

Fanagan noted, however, the planned Implementing Body should guarantee the sanctity of contract.

"The law must clearly state that signature of the Implementing Body binds the government of Indonesia," Fanagan said.

He also said the future law should clearly state that there is no sovereign immunity under the cooperation agreement signed by investors and the government's agency, and investors may declare force majeure in cases where the government's actions precluded contractors from advancing their projects.

Fanagan said the current political instability, unreliable security of operations, uncertainty surrounding contracts, new levels of taxation imposed by the government and lack of a workable domestic gas policy had been hindering new oil and gas investments in the country.

Yet, oil and gas investors are still attracted to developments in Indonesia in view of the country's abundant hydrocarbon resources; low development costs; the availability of experienced personnel and new technologies; as well as the industry's track record on cost control.

Also speaking in the seminar were the head of the PDI- Perjuangan faction at the House, Arifin Panigoro; deputy head of the House's Commission VIII for energy and mineral resources, environment, science and technology Emir Moeis; and the president of lubricant producer PT Wiraswasta Gemilang, AP Batubara. (jsk)