Indonesia Urged By Foreign Oil Companies To Provide Incentives

Foreign oil companies on Tuesday urged Indonesia to provide more incentives in the oil and gas sector and further clarify complex laws to encourage investment. Cash-strapped Indonesia is desperate to attract funds after four years of crisis, and oil executives say although the government is moving in the right direction more work is needed to compete with other countries in the region.

``Obviously from our perspective any incentive that encourages investment, we believe is good, it is positive,'' Unocal Indonesia chief Brian Marcotte told reporters at the sidelines of a petroleum conference opened by President Megawati Sukarnoputri. He said suitable incentives would be in the form of oil and gas splits, flexibility in taxation and investment credit. ``We are in a risky business and any benefit that we can get is useful,'' Marcotte added. ``I think he (the energy minister) is serious about trying to provide the additional incentives for the industry. He needs to encourage investment.''

Marcotte also said the government had to give clear direction on new regulations, especially relating to domestic natural gas supplies following last year's ratification of the new oil and gas law. ``The idea of supplying (gas) to the domestic market is not a problem for us, (but) we need clarity and certainty.''


A senior ChevronTexaco Corp official said Indonesia needed to offer such incentives, as well as clear laws, as it was competing for investment with other countries in the region. ``Capital will go where it is most welcome and secure. Indonesia is working on the tough issues of deregulation. This is encouraging,'' ChevronTexaco Vice Chairman Peter Robertson said in speech at the conference. ``But at the same time, other countries are competing very hard to attract more foreign investment. They (oil firms) must invest in those countries and projects with the greatest upside potential to grow both production and earnings,'' Robertson said.

``It is encouraging to see that President Megawati and her cabinet are determined to create a competitive investment climate that Indonesia so urgently needs,'' he added. Mines and Energy Minister Purnomo Yusgiantoro said the Indonesian government was always open for suggestions to improve production sharing oil contract terms and conditions.

The minister said the government would also welcome any input from oil companies to government regulations, now being drafted to help implement the new oil and gas law. Indonesia has opened 17 new exploration areas for oil companies to bid for throughout the vast archipelago since the start of this month. Oil contractors operating in Indonesia in addition to Caltex and Unocal, include TotalFinaElf and Exxon Mobil Corp .