Oil firms want bigger say

Rangga D. Fadillah, The Jakarta Post, Jakarta | Thu, 05/24/2012 7:30 AM

Oil and gas companies must have more say in the policy-making process so that new regulations will not create uncertainty in Indonesia’s investment climate, an industry group leader says.

Elisabeth Proust, the president of the Indonesian Petroleum Association (IPA), said in Jakarta on Wednesday that oil and gas companies wanted to be involved in the formulation of new energy policies so that new regulations would not be counterproductive.

“The request from the industry is for early engagement in policy formulation and ongoing consultation, and for dialogue on the regulatory process,” Proust said at the opening of the 36th IPA Convention and Exhibition.

Proust cited a 2010 government regulation on cost recovery and income tax in the upstream business sector that she said had created uncertainties over the status of production-sharing contracts (PSCs).

Such uncertainties were generally caused by a lack of communication between the government and oil and gas contractors, she said.

“When we reflect on the lessons learned related to the regulation, it was the lack of consultation that led to the IPA to conclude that it had no choice other than to launch legal proceedings at the Supreme Court to make its voice heard,” Proust said.

In June 2011, the IPA filed a judicial review request with the Supreme Court on the regulation that was eventually rejected.

The government must provide appealing incentives to boost exploration and production, particularly in deepwater and frontier areas, Proust said, while praising the government’s current incentive that provided an improved split system for development.

“We hope that these incentives will not be negatively impacted by land and building taxes currently imposed on new productions hiring contractors.”

“The incentives are needed to guarantee the stability of PSCs. The current 2001 Oil and Gas Law has granted that stability, and we’re not in favor of new regulations that can create uncertainty over PSCs,” Proust added.

She ensured that the IPA would support the government’s target of producing 1 million barrels per day (bpd) of oil in 2014.

The key to doing that was to improve communications and coordination between all government institutions nationwide, she said.

IPA, which comprises oil and gas companies, is holding its annual gathering to discuss the latest developments in the country’s oil and gas industry.

Several other executives have also been slated to speak at the three-day meeting.

In his speech, Energy and Mineral Resources Minister Jero Wacik acknowledged the need to improve coordination between the oil and gas industry and the government.

The government and the companies had to be able to respect each other’s interests, Jero said.

If not, cooperation that benefited both would not be able to be established, he added.

“I open my door to all companies to come to me. I know companies want to make a profit and therefore I have ordered [upstream oil and gas authority] BPMigas to work faster so that no time will be wasted,” Jero said.

“That’s the best incentive we can offer for the time being,” he added.

According to the IPA’s data, the oil and gas sector invested US$16 billion in 2011. This year, their investment might top $19 billion, it said.

The sector contributed more than 25 percent of the state’s revenue in 2011.

Indonesia’s oil production has continued to decline in past years.

In 2001, the country only produced 902,000 bpd of a target of 945,000 bpd.

From January to April this year, production was only 881,000 bpd of the target of 930,000 bpd.

Meanwhile, during a discussion titled “What are Indonesia’s Current and Future energy needs?”, executives said that the government must change its energy policy to ensure a sufficient energy supply for the domestic market and to encourage new exploration activities.

The chairman of Indonesian Chamber of Commerce and Industry (Kadin), Suryo Bambang Sulisto, said that the government had to develop a new policy that could support the nation’s future energy needs. (nof)

http://www.thejakartapost.com/news/2012/05/24/oil-firms-want-bigger-say.html