Remarks by The Vice President of the Republic of Indonesia at the 35th IPA Convex 2011


Jakarta, 18th May 2011

Assalamualaikum wr. wb.
Honourable Ministers,
Mr Ron Aston,
Members of IPA,
Distinguished guests, Ladies and gentlemen,

Good morning,

Exactly one year ago today, I was standing before you on the occassion of the opening of the 34th IPA Convention and Exhibition. I used the occassion then to outline the broad direction of government’s policies for the oil gas sector. The results and recommendations of the Convention were presented to me by the IPA two months later.

Today, I have the honor to be back on this same stage to officiate the 35th IPA Convention and Exhibition. One year has since passed.  The question immediately springs in our mind must be: Have we made any progress since? 

Stocktaking exercise, both by government and by the industry, is I think necessary before or as we move on.
I would be very much interested to know the industry’s assessment of the progress or perhaps that the lack of it. Let me reaffirm to you that the government’s is serious to work with you to resolve issues that may still hamper the development of the oil and gas sector. Please be assured that we want you to be our partners in developing this very important sector.

Ladies and Gentlemen,
Let me share with you what I see happening in the sector, in the past year or so.
My own assessment is that we have made progress on some important issues and have not on some others. Let me start with issues on regulations.

My understanding is that some important issues raised last year such as those on cost recovery, cabotage, value added taxes have been adequately addressed to or are in the process of being so.   While others, such as the process of approval of variety of implementational permits, involving both central and local institutions, have not improved perceptibly. There are also still complaints on the lack of clarity in some regulations.

I can only say that we will look more carefully into these outstanding issues and resolve to make tangible progress in the coming years.  Your feedbacks would be very useful and helpful for our effort.

Ladies and Gentlemen,
Last year I mentioned that gas is our future. That remains our basic policy. I have received report that important projects are moving ahead reasonably well.  The government obviously has a strong interest in keeping them on track and will continue to closely monitor their progress.
I also mentioned last year that the government intended to facilitate gradual moves toward economic pricing for domestic gas uses.  This policy stands. 

Rooms for direct negotiations between gas consumers and gas producers are being open up. But we know that the issue is more than this. The critical step is how to accelerate the development of gas infrastructures.  It is for this reason that high in our agenda now is how to speed up the completion of gas pipelines on Java.  It is for the same reason that we urgently push the construction of Floating Storage and Regasification Units (FSRU) in several locations in Sumatera and Java.  One unit in Jakarta area is expected to be ready as early as in 2012.   The need for gas in Java and Sumatera will be growing very rapidly, for power generator, manufacturing activities and later, I am sure, also for transportation and households in the cities.   There is therefore plenty of room for other potential investors to joint in.

Ladies and Gentlemen,
There is one area of development that I admit I am not particularly happy about.  This is in the performance of our oil sector.  Oil lifting has been declining.  This is bad for our fuel supply security, bad for our exports and bad for our budget.

We all know that the basic problem is the declining exploration activities in the past many years.   The decline may now have halted, but exploration level remains well below that required to turn the production around in order to reach our target of 1.2 million bpd.

This is an area that we need to  work closely  together .   We need to come up with a workable, sustainable, win-win model and tangible improvements in its implementation.  But  even if we do all this the results will only come in the long term, not immediately.

So, aside from those efforts we also need to work together to find ways to get results a bit sooner.  Let me mention some of them.   We should step up our joint efforts to get maximum benefit from the potential enhanced oil recovery.   We should work together to eliminate those ”unplanned shutdowns” that had recently negatively impacted on production.  On my part, I will be asking BP Migas and ESDM Ministry to pay more serious attention to these issues.

I wish also to reaffirm also that we are very much interested in developing our non conventional gas and non conventional energy in general,  the potentials of which in this country are substantial.  I understand that in other countries too, the business models for such ventures are still evolving.  We wish to work with potential investors to come up with appropriate, readily implementable models.

Finally let me reconfirm that the government remains committed to achieving in the medium term rational schemes of subsidies for fuel and electricity. It is a medium term exercise. Uppermost in our mind is how to protect the poor and the vulnerable groups in our society as we proceed.

Ladies and Gentlemen,
Before ending my remarks let me take this opportunity to express my appreciation to the IPA and all its members for your continuing commitment to Indonesia. The communications and exchanges between IPA and the government have been candid and effective.  Let us keep them that way.

Finally, by reciting
Bismillahirrohmannirohim I hereby declare the 35th  IPA Convention and Exhibition officially open.  I wish you all productive  meetings.
Thank you.

Wassalamualaikum wr. wb.
Vice President of the Republic of Indonesia



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