RI seen struggling to lure oil investors

RI seen struggling to lure oil investors

JAKARTA (JP): An executive of a major American oil company
said on Tuesday the Indonesian government had its work cut out
for it in attracting new investors to the country's oil and gas
industry amid the monetary crisis.

President of Unocal Corp. John F. Imle told the 26th
convention of Indonesian Petroleum Association (IPA) that the
industry had been the engine of development for Indonesia in the
1960s and 1970s, and could serve an equally important role in
fueling economic recovery in the crisis.

Imle suggested five major measures to reinvigorate the
development of the oil and gas industry through the first decade
of the next millennium.

The country should prioritize the creation of an environment
that encourages investment, welcomes international
competitiveness and supports the sanctity of contracts.

He said multinational firms and producers could take their
pick around the world from numerous opportunities. The limited
dollars ultimately go to the ventures that yield the highest
risk-adjusted return.

"To compete successfully in such an environment, Indonesia
must offer fiscal terms attractive enough to encourage
exploration in remaining basins, promote the development of
stranded or small hydrocarbon accumulations and cause the timely
implementation of secondary methods."

While noting that Indonesia had done well in honoring
contracts over the years, Imle said the consistency was recently
tested with geothermal and gas payments during the crisis.

State electricity company PLN has defaulted on its payments to
contractors, including Unocal.

Imle said the second challenge for Indonesia was accelerating
the domestic use of natural gas.

He believed domestic gas production should replace pricier
imported fuels such as diesel and coal in a gas-rich country like
Indonesia. Gas is environmentally cleaner than fossil-fuel energy
sources.

He noted that Indonesia lagged behind regional neighbors like
Thailand, Bangladesh, Vietnam and India in promoting domestic
utilization of natural gas.

"If I may be blunt, we often wonder about the import of
subsidized diesel to Java for power generation almost within
sight of gas flares in the Java Sea. And there is still gas being
flared in East Kalimantan despite the presence of power plants
and a refinery which still consume liquid fuel," Imle said.

"Now it's time to get it right."

Imle said the government should fully deregulate the oil and
gas industry to enable foreign companies not only to develop oil
and gas resources, but also to build pipelines or grids to
directly distribute commercial energy to customers.

"Believe me, there are foreign pipelines, power and utility
companies who are willing to invest in these infrastructure
projects when Indonesia is ready to privatize, deregulate and
remove subsidies."

He observed that the oil and gas industry should also continue
to spearhead innovative technology to output.

The three-day convention through Thursday has drawn 2,000 oil
and gas executives and experts from across the country and
overseas. The convention mostly discusses latest developments in
oil and gas technologies.

Competitive

Minister of Mines and Energy Kuntoro Mangkusubroto, who opened
the convention, maintained that the country's oil industry was
still globally competitive. He cited the fact that Indonesia
remained the world's largest supplier of liquefied natural gas
(LNG) with an export of 36 million tons last year.

He said the protracted monetary crisis and the undermining of
investor confidence in the country had little effect on oil and
gas investment. Both seismic and exploration drilling activities
have substantially increased in the first half of this year over
the same period last year.

Kuntoro promised that the government would continue to
deregulate the oil and gas industry to maintain competitiveness
on the global market.

"We are aware that competition is intensifying and we shall
stay alert to ensure our investment policy remains attractive to
the investor community."

Kuntoro said the government was drafting a law on gas and oil
which would deregulate the industry and promote transparency and
a competitive environment for the upstream and downstream sector
to attract global investors. (jsk)