T

he 37th Indonesian Petroleum Association (IPA) convention ' a major conference for local petroleum industry players ' failed to answer questions over the sector's current investment climate as it wrapped up on Friday.

The three-day convention was the first major annual meeting of oil and gas giants ' including US companies Chevron and ExxonMobil and France-based Total ' since upstream watchdog BPMigas was dissolved in November last year.

Even though this year's conference adopted 'Promoting Investment in a Challenging Environment' as its theme, no clear answer on the subject had been provided when the event was concluded by Deputy Energy and Mineral Resources Minister Susilo Siswoutomo.

In his closing speech, Susilo simply stated that with the conference, the government expected more investors to enter the hydrocarbon industry, as well as encouraging current oil and gas contractors to commit to the 2013 oil and gas investment target of US$26.2 billion.

Susilo only said, however, that the government would have to work hard to overcome the challenges facing the industry's investment climate, without elaborating further.

Legal uncertainty is a lingering issue.

Lawmakers are revising the 2001 Oil and Gas Law after the Constitutional Court handed down a ruling that annulled several articles in the law that had served as the legal basis for BPMigas.

The court ruled in favor of a judicial review that was filed by several organizations, including Muhammadiyah, the second-largest Muslim organization in Indonesia, which claimed that BPMigas was too 'pro-foreign' in its administration of contracts for the nation's oil and gas resources and, thus, should be disbanded.

Head of upstream research at Edinburgh-based oil and gas think tank Wood Mackenzie Asia, Craig McMahon, who was present at the review, told The Jakarta Post that industry players knew exactly what they were dealing with and that they were now waiting to see whether the amended law would have the teeth to ensure the stability of the industry.

Noted economist Darmawan Prasodjo echoed McMahon, saying that the main difficulty for the industry today was legal uncertainty; thus, 'good leadership' was needed to ensure stability in the industry.

'We can devise a number of strategies, but they will all be useless without the leadership that can take us there,' he said.

IPA chairman Lukman Mahfoedz, who is also president director of the country's largest private oil and gas firm, PT Medco Internasional, said the umbrella organization was nevertheless 'pleased' with this year's convention.

'The number one person in this country [President Susilo Bambang Yudhoyono] has expressed his support for the industry. I think that shows that the government is committed to the nation's oil and gas sector,' he said.

Yudhoyono, who officiated at the convention on Wednesday, tried to convince oil giants that the government was on their side by offering better incentive packages, saying that he had asked the Finance Ministry and the Energy and Mineral Resources Ministry to discuss what would be the best incentives for oil and gas companies.

The Finance Ministry's chief of fiscal agency, Bambang Brodjonegoro, said on Friday that his office would likely offer a cost recovery scheme for oil and gas contractors that successfully applied enhanced oil recovery (EOR) programs to boost production.

Indonesia, a former net oil exporter in Southeast Asia, aims to produce 1.01 million barrels per day (bpd) of crude oil next year, while its current production has dropped to 830,000 bpd amid aging oil fields.