Oil majors praise Indonesia's new investment tack

Jakarta

EFFORTS by Indonesia's new administration to attract investment to the country's troubled energy sector are being viewed favourably by energy giants Exxon Mobil and Chevron.

Graft and regulatory, legal and contractual uncertainties have undermined energy investment in South-east Asia's biggest economy. Ageing oil wells and a lack of exploration have led to declining output and the former Opec member is now a major fuel importer with soaring energy demands.

President Joko Widodo has ordered his Cabinet to simplify bureaucracy and de-bottleneck problem areas, Widhyawan Prawiraatmadja, a special assistant to the new energy minister, said earlier this week. "We are facing a daunting task to bring back confidence, bring back credibility and bring back people who want to do business in Indonesia," Mr Widhyawan said at an investor conference.

Long-delayed decisions, including on expiring oil and gas contracts such as the Mahakam block operated by Total, had been held up by vested interests, he said.

According to new Coordinating Maritime Minister Indroyono Soesilo, who also oversees the energy ministry, the administration is compiling a list of areas that the industry wants fixed, including a tax on land use being applied to oil-and-gas exploration.

The push to improve regulatory efficiency is heading in the right direction, ExxonMobil Indonesia's chief executive Jon Gibbs told Reuters. "A lot of things being said are very positive and I look forward to seeing those materialise," he said.

Mr Gibbs praised Indonesia's president for his recognition of the need for "appropriate" fiscal terms for the different geological specifications in Indonesia's oil and gas reserves. "When you look for that equitable value for both the country and the investor, that is a key mechanism to be able to achieve that and help things to get developed," he said.

Indonesia has struggled to attract investors to develop unconventional reserves such as the East Natuna gas field, the biggest untapped gas reserve in Asia.

Exxon is partnered with Pertamina, Total and PTT Exploration and Production to develop East Natuna, but discussions over how to extract its gas (which contains high amounts of carbon dioxide) have been going on for decades. "The challenge that we have in oil and gas, going east and going deeper, with new technology is that investment is needed with demand much, much higher than supply," said Yanto Sianipar, a senior vice-president at Chevron Indonesia.

He praised the administration for opening a constructive dialogue with the industry in "very clear words". Reuters