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.