Oil companies say RI's oil potentials biggest attraction

Oil companies say RI's oil potentials biggest attraction

The Jakarta Post, Jakarta

Major oil and gas firms in Indonesia said the prospect of
finding more oil and gas here was the strongest reason for
investing in this country, a survey shows.

However, the survey also revealed the firms were concerned
about the confusion surrounding the government's role under
regional autonomy.

According to the survey by independent consultant firm
PricewaterhouseCoopers (PwC), top executives at major oil and gas
companies "overwhelmingly" agreed that the most attractive
feature of Indonesia was its "geological prospectivity".

"In fact, 90 percent of the CEOs agreed that the potential for
additional oil and gas exploration and production opportunities
was either the first or second most attractive reason for seeking
investment in Indonesia," PwC said in a press statement on
Friday.

PwC surveyed earlier this month 11 executives at major oil and
gas companies to gauge the attractiveness of the sector.

Respondents ranked seven prominent features in this sector
based on how attractive they were.

"The current Production Sharing Contract (PSC) framework was
also highly rated by many survey respondents," said PwC referring
to the contract under which most foreign oil and gas companies
operate here.

The PSC, a type of contract Indonesia pioneered during the
sixties to lure foreign oil companies, splits revenue to 15
percent for the investing company with the remainder going to
state coffers. The government, however, covers all costs from
exploration to production up until a certain period.

Set against the present uncertain regulatory environment, the
PSC has proved to be one of the most reliable contracts foreign
investors have entered into.

"... the stability of the PSC arrangement is one of the most
significant benefits of investing in Indonesia's upstream
petroleum industry," PwC said.

CEOs were also satisfied with Indonesia's skilled work force
and its foreign ownership regulations, with both features ranking
only slightly apart in third and fourth place respectively.

The country has seen a series of large oil and gas field
discoveries over the past few years on the back of explorations
made throughout the nineties.

Last year, American based ExxonMobil Oil Indonesia Inc.
announced the discovery of a giant oil field in Cepu in Central
and East Java with oil reserves it said amounted to 250 million
barrels.

Natural gas has also come to the forefront with developments
of new large gas fields in Papua and the South China Sea in the
Natuna area.

Ranking as the least attractive aspect for coming to Indonesia
however was the country's regulatory framework, PwC added.

Survey respondents welcomed the new oil and gas law, which
will liberalize the sector's downstream and have revoked the
monopoly rights of state-owned oil and gas company Pertamina, but
said its implementation was too slow.

PwC's survey also showed that respondents were most concerned
with the confusing roles of the government under regional
autonomy since it implementation in 2001.

Many investors complained that the shift to decentralization
had resulted in overlapping regulations and authorities between
the different administration levels at regencies, provinces and
the central government.

According to PwC's survey, 75 percent of respondents predicted
this situation would last until 2004.

The second biggest concern was interference from government
agencies such as tax authorities, and third, the country's
prevailing corruption, collusion and nepotism problems.

Ranking fourth is community relations, while taking the fifth
and sixth places are security and labor issues respectively.

Other issues according to their highest concern are political
risks, taxation, local government relations, and confusion over
Pertamina and the government's role under the liberalized oil and
gas sector.