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Policy Review: More Breakthrough Needed to Improve Investment in Energy Sectors

Insider Seminar Series 2nd session talked about coal, oil and gas sector.

JAKARTA (TheInsiderStories)—The government already revoked 186 conflicting regulations in the energy sector, but apparenyly it is not enough to improve investment climate in this sector.

The Deputy Minister of Energy and Mineral Resources Arcandra Tahar said the revoked regulation include 56 troubling regulations and complicated licencing prosesses in the oil and gas sector. Therr are also 96 mining from the mining sector, 20 in the power generation sector, 14 in renewable energy sector.

“In line with the President [Joko Widodo]’s direction, we revoked the regulations and permits to build a friendly investment climate, boost economic growth and create jobs,” he said during a discussion themed “Energy Policy: Disruption Approach to Improve Friendly Investment Climate,” hosted by The Insider Stories and Bimasena on Thursday (19/04).

Despite all the efforts the government apparently has not been able to increase the investment in the energy sectors.

Last year, the investment in the energy sectors only reached US$26.7 billion, it shrunk by 10% from the 2016 investment of US$29.7 billion. It also lower than investment in the 2014 and 2015 that reached US$33.5 billion and US$32.3 billion respectively.

Industry players had said the government set the unrealistic investment target in 2018 of US$37.2 billion. The target was actually a revised version from the initial US$50,12 billion target.

The Executive Director of Indonesian Coal Mining Association Hendra Sinadia said the business player in the mining sector appreciate the government effort in revoking the regulations and permit. However, there are some obstacles in the mining sectors that government should pay enough attention.

The main obstacle is conflicting regulation and policy across ministries such as the Ministry of Energy and Mineral Resources, the Ministry of Trade, the Ministry of Finance, the Ministry of Forestry and Environment, etc. The similar problems also occurred between the central government and local administration.

He also questioned what incentives a company gets if they meet all the requirements from the government.

Meanwhile, the VP Corporate Business Strategic Planning PT Pertamina (Persero) Ernie D. Ginting explained investment in the oil and gas sector is challenging because it has three characteristics namely the high risk, the high technology, and the high capital. The oil and gas industry that need a long-term investment also brings another challenge.

Furthermore, the energy business also disrupted by the external condition such as the geopolitical condition, the business climate, the environmental aspect. It is including the high volatility of the oil price. In 2015, the oil price reached US$30 per barrel although it once reached the average of US$100 per barrel. Currently, the oil price improved to US$68 per barrel.

That national oil company has a partnership strategy to overcome this issue. Pertamina currently the main operator in the 63 per cent of the company’s total assets. In other 10 per cent of total assets, the state-owned company co-operates with partners and another 27 per cent become the non-operator.

“The financial and production ability of Pertamina is small compared to other international oil companies. We hoped the government will support us,” she added.

Vice President of Adaro Power Dharma Djojonegoro said the government should revise some regulation in two issues namely force majeure and the share transfer. In the force majeure issue, the government should revise the regulation that set the no PLN payment obligation while natural force majeure affecting PLN grid is occurring or upon termination due to such condition.

In addition, the share transfer before the commercial operation date (COD) is only allowed to the affiliated company with at least 90 per cent owned by the sponsor who wishes to transfer its share.

“The government has a good intention, but it brings negative effect for the power company because it makes use difficult to finance our project,” he explained.

Meanwhile, Chairman of the Indonesian Renewable Energy Society Surya Dharma explained the government should give the incentive to the renewable energy industry. According to him, the government already give abundant incentives to the conventional energy but there are no incentives for the renewable energy.

Email: fauzulmuna@theinsiderstories.com