Govt to set up Interagency Team for energy sector: Boediono
Wednesday, May 19 2010 - 02:10 PM WIB
The interagency team will ?formulate and operationalize gas infrastructure development? with initial focus on Java and to ?formulate medium term energy pricing policy and subsidies policy,? Boediono said in his presentation during the 34th IPA (Indonesian Petroleum Association) Convention and Exhibition.
Boediono said the formation of the interagency team reflected the government?s awareness of the importance of the oil and gas industry and commitment to solving problems in the industry.
He said the industry was extremely dominant in 1970s and 1980s as the generator of government revenue and foreign exchange earnings. Although the national oil production has declined, the industry remains important as it accounts for 19 percent of total government revenue (down from 54 percent in 1970) and 17 percent of the country?s total exports.
As part of the energy support system for the economy, the industry is playing an increasingly strategically important role as the economy grows in size. As such, he said, there is a need now for ?an explicit, rational, long term oil and gas policy as part of the national energy policy.?
He said there are two key issues as far as oil and gas policy is concerned. First, Indonesia needs to secure economically optimum oil and gas production as part of total supply of energy for, first, the fulfillment of domestic needs (growth objective) and, second, exports (revenue objective). Secondly, Indonesia needs to ensure pattern of energy consumption that supports maximum, cost efficient, ?clean? economic growth.
On the production side, the vice president said, the government?s policies will focus on, first, reviving and accelerating exploration activities by reviewing the incentives structure, streamlining regulations and eliminating implementation bottlenecks; secondly, setting up an effective system for the monitoring of the progress of the development of all significant fields in the national oil and gas portfolio.
On the consumption side, the government?s policies will focus on, first, developing domestic infrastructure that will support optimum gas utilization by domestic industries, power, transport and households; secondly, designing multiyear plans toward rational, sustainable pricing system for domestic fuels, gas, power and fertilizers. ?Hence, rational sustainable subsidy system,? he said.
Boediono said concrete actions that will be taken by the government is holding dialog with oil and gas stakeholders to identify problems in the industry; developing investment frameworks for unconventional gas and energy; reviewing administrative processes at BPMIGAS, the Ministry of Energy and Mineral Resources and related ministries; setting up ?dedicated, high-level team? to monitor and debottleneck progress of significant oil and gas fields.
Meanwhile, in his speech during the convention, IPA?s president Ron Aston reiterated that Indonesia is a resource-rich country with great potential. Indonesia is also well poised for future economic growth and, as such, needs energy supply to meet domestic needs and earn valuable export revenues.
He noted that gas is getting greater attention at present.
?Exploration activity needs to be significantly increased and investment climate must be kept positive,? Aston said.
In order to attract investment, he said, the government needs to create a certainty regarding cost recovery with no capping or change to existing contracts. It should also ensure that gas pricing will be market driven and contractors have ability to export gas. Contractors also need a tax and fiscal regime that provides clarity, consistency and certainty; a clear and transparent process for extending PSC; improved speed and efficiency of approval cycle; and early engagement on energy policy formulation. (Denny)