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Same old problems plague investment in oil and gas industry
The classic problems of bureaucratic red tape and uncompetitive fiscal regulations are still clouding the country's oil and gas sector, an Indonesian Petroleum Association (IPA) discussion concluded
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The classic problems of bureaucratic red tape and uncompetitive fiscal regulations are still clouding the country's oil and gas sector, an Indonesian Petroleum Association (IPA) discussion concluded.
Director general of oil and gas at the ministry of energy and mineral resources, Luluk Sumiarso, admitted Wednesday that although investment in the sector was increasing each year, there were still some negative trends hampering the sector's growth.
"One of the biggest challenges is the lengthy bureaucracy while approving plans of developments (PODs) and authorizations of expenditure (AFE)," he said.
According to Luluk, contractors still have to submit their PODs to the ministry and oil and gas downstream regulator BPMigas, while AFE are handled solely by BPMigas.
"But we're trying to simplify them all and will use a self-supervision system in the future," he said.
The bureaucratic process in BPMigas is notoriously known to be too complicated, as the system often requires operators to deal with several different divisions for a single issue.
Recently, companies involved in around 20 production sharing contracts asked the regulator to provide a fast-track facility for the bidding process and address problems with local administrations over overlapping regulations and concessions.
The continuing uncertainty of taxation for upstream operators have also made things worse, Luluk said.
"The import duties applied in the oil and gas sector, for example, burden operators."
Luluk was speaking during the second day of the IPA Convention and Exhibition, which will last until Thursday.
Terry S. McPhail, president of ExxonMobil Oil Indonesia, also said in the same forum that another challenge for business was a limited understanding of the industry, caused by a lack of communication between related parties.
IPA president Roberto Lorato meanwhile said the obligation to sell part of gas production in the domestic market needed to be clarified in order to attract more investment in the sector.
"That is one thing of note that can affect the decision of investment in this sector," he said.
In 2007, the total investment in the oil and gas sector reached US$10.08 billion, up from $9.7 billion the previous year.
The country's oil reserves are now at 8.9 billion barrels while natural gas is at 187.1 trillion cubic feet.
Investment in oil and gas sector (in US$ billion) -------------------------------------------------------------Year 2000 2001 2002 2003 2004 2005 2006 2007 Investment 3.93 4.20 5.43 5.30 7.49 8.50 9.70 10.08 -------------------------------------------------------------Source: BPMigas
