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Elections won’t change investment climate in energy, mining
State-owned oil and gas holding company Pertamina is on track to take over expiring production sharing contracts.
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Miners use heavy equipment at an underground mine operated by PT Freeport Indonesia in Timika, Papua. (Courtesy of/PT Freeport Indonesia)
T
he presidential and legislative elections will not lead to a change in energy policy and will not improve the investment climate in energy and mining, according to global energy think tank Wood Mackenzie (WoodMac).
In a press statement WoodMac research director Andrew Harwood said state-owned oil and gas holding company Pertamina was on track to take over expiring production sharing contracts.
The government will continue to prioritize the energy sovereignty policy to curb costly oil imports that supply about half of domestic oil demand. “This suggests that restrictions on crude exports will remain in place,” he said.
Furthermore, the think tank believes efforts to improve the investment climate in the sector are too little, too late as many big companies have exited or scaled back in Indonesia.
“Slow progress in projects of national strategic importance such as the transfer of the Rokan PSC and approval of the Abadi LNG [Liquefied Natural Gas] development has given mixed signals to investors,” he said.
Meanwhile, Hugo Brennan, a senior political analyst at WoodMac’s sister company Verisk Maplecroft added that the country will go ahead with the plan to ban exports of unprocessed minerals. “The incoming administration will likely implement a full ban on the export of unprocessed minerals, which is to take place in 2022,” he said.
Brennan further said the government would continue its preferential treatment policy with state mining holding company PT Indonesia Asahan Aluminium (Inalum) as part of the government’s effort to turn Inalum into a global miner.
He believed that the next government would force foreign miners to divest in the mining sector, a policy that would deter greenfield investment.
“All eyes will be on how Freeport McMoRan operates the Grasberg copper mine as now it only holds a minority stake,” he said. (bbn)
