Oil association greets new oil and gas law cautiously

Indonesian Petroleum association (IPA) a grouping of oil companies that operate in Indonesia cautiously welcome the new oil and gas law which was passed last week by the house of representative, according to the association?s president.

?IPA is cautiously optimistic about the new oil and gas law. We are encouraged by the intention of the law. But the real story will be told in the implementing regulations on really what the full content of the law means to us,? Brian Marcotte IPA?s president who is also president director of US oil firm Unocal Indonesia told Petromindo.com on the sidelines of a gathering Tuesday.

?Until implementing regulations are ready, it?s very premature for us at this stage to say whether the new law will encourage or discourage investment.?

?However, there is a good opportunity the law could encourage investment if the implementing regulations are written properly,? said Marcotte.

He said one of the paramount concerns for oil and gas investors was the security of the existing contract.

?Every indication had showed that existing contracts will be honored in the new law.?

Other potential issue that raises concern said Marcotte, was the obligation to set aside up to 25 percent of gas production to domestic market.

?We don?t know enough at this point as to how the domestic gas obligation will be administered or under what market condition it will be determined and how it will impact future plan of development as we move forward in the industry. We have a very strong concern about the domestic gas implementation,? he said.

Earlier, an executive of US oil, gas firm Conoco Indonesia said that foreign investors had identified at least five articles in the bill which would cause problems for foreign investors, including those that concern tax, the establishment of an executive body, the obligation of investors to supply gas to the domestic market, the status of existing contracts and the licensing of operations

The new law is aimed at liberalizing the country's oil and gas sector, removing state oil and gas firm Pertamina's decades-long monopoly on the sector and turning the state company into a limited liability company. Production sharing contractors? management will be administered by the so-called executive body. (alex)