IPA calls on government to improve investment climate

The Indonesian Petroleum Association, which groups all oil and gas contractors in Indonesia, called on Tuesday on the government to ease uncertainties in the oil and gas sector to increase investors? confidence.

IPA?s president Brian W.G. Marcotte said that oil and gas business is a high-risk business teeming with uncertainties.

As far as the uncertainties pertain to the natural elements of investment in the sector such as amount of reserves, reservoir characteristics and resultant flow rates, investors were always ready to face them and have equipped themselves with skills and technology to mitigate the risks.

However, oil and gas investors are concerned with uncertainties resulting from the government?s policies because they are outside the realm of their technical analysis and control, Marcotte said.

Marcotte said investors wanted the government to respect the sanctity of their contracts.

?What we are really talking about is keeping the environment and terms upon which investment decisions were made intact throughout the term of the project. When this is achieved, investors will feel confident and the ?investment climate? will be secure,? Marcotte said.

Marcotte did not specify cases where the government had sought to change the terms of contracts held by the investors.

He however noted that all government offices needed to improve coordination to strengthen investors? confidence in the future of their investment.

?In Indonesia, keeping the climate right requires the coordination, will and leadership of all involved ministries ? energy, finance and tax, environment, trade and manpower among others.

?Changes in any of these have the effect of altering the investment climate upon which decisions were made and, thereby, deteriorating the confidence of the investor,? he said.

Elsewhere in his speech, Marcotte praised Minister of Energy and Mineral Resources Purnomo Yusgiantoro, chairman of upstream authority BP Migas Rachmat Sudibyo and director general of oil and gas Iin Arifin Takhyan for their leadership in the transition period starting from the implementation of the new Oil and Gas Law of 2001 and for their efforts in driving the process of regulation under the new law.

The 29th annual IPA Convention and Exhibition, which runs from Tuesday to Thursday, is entitled ?Sustainable Development and Energy Resources ? Adapting to Change?.

In his speech marking the opening of the annual convention, Purnomo insisted that investment climate in the country?s oil and gas sector was still conducive.

One of the indication of the conducive climate is the realization of the upstream expenditure has increased by US$3 billion in 2003 from 2002.

He also said the implementation of the new oil and gas law has improved business climate in the industry and the climate will be further strengthened once the government issue the governmental regulations on the upstream and downstream sectors of the oil and gas business by the end of this year.

He said the government was committed to developing policies that will further strengthen the investment climate. In this case, the government has set objectives as follows:

Continually adding oil reserves base by ensuring investment policy for oil and gas and exploration and development to be globally competitive.

Using advanced technology to increase oil recovery rate such as EOR and to explore deep sea basins

Drastically reducing the amount of oil used in domestic power generation, industry, transportation and households

The most efficient use of oil and gas domestically

Setting domestic pricing policy to achieve economic level in all energy commodities. (Godang/Alex)