Govt eyes $25b of investment in energy and mining

Alfian, The Jakarta Post, Jakarta | Fri, 12/19/2008 11:42 AM  

In a bold move, the government forecasts investment in the oil, gas, power and mining sectors next year will grow by 16.7 percent compared to this year, despite the global financial crisis and economic downturn constraining some financial flows. 

An official statement from the Energy and Mineral Resources Ministry issued late Wednesday showed that oil, gas, mining, and electricity projects are expected to attract US$25.39 billion investment in 2009, up from this year's target of $21.74 billion. 

Energy and Mineral Resources Ministry Purnomo Yusgiantoro said earlier in the day the global financial crisis would have only a minor impact on these sectors which all represent long-term projects. 

"Business in oil, gas, mining, and electricity is not short-term. The projects can last between 20 and 30 years. Thus, despite the crisis, these sectors will still be able to attract investment next year," Purnomo said. 

Purnomo added he had received information there were three mining companies, including the U.S.-based copper and gold mining company Freeport, which were in the process of laying off part of their workforce, but he was convinced that the dismissals reported now were far less than the workers these sectors would hire in 2009. 

"We have information that about 200 workers have been laid off, but the projects in these sectors could provide jobs for 150,000 workers next year," Purnomo said. 

Of the $25.39 billion of targeted investment for oil, gas, energy and mining in 2009, the oil and gas sector is expected to contribute the lion's share, at about $16.64 billion, or 66 percent of the total. 

The ministry said the investment would go into existing and new oil and gas blocks, as well as into coal bed methane development. 

Kardaya Warnika, the ministry's advisor for information and communication and former chairman of upstream oil and gas regulator BPMigas, said Indonesia's oil and gas sector was attractive for investors as production costs here were still reasonably lower than oil prices, even at the current levels. 

"Although the oil prices have now declined to below $50 per barrel, investors could still gain as the production cost for oil in Indonesia is only about $10 per barrel," he said. 

The ministry said investment in the oil and gas sector would also come from downstream projects, including two small oil refinery projects and three small LPG compression terminals. 

The oil and gas sector is expected to provide 56,650 new job opportunities in 2009. 

Electricity projects, including the state power firm PT PLN 10,000 megawatts accelerated program and a further 15,629 megawatts of power projects planned with private power producers (IPPs), are expected to bring in contributions in the coming year of $6.61 billion of inward investment. 

These new power projects are expected to generate about 92,250 jobs. 

The mining sector may attract up to $2.15 billion in investment. It was not stated if the recently endorsed mining law -- which many consider as not being business-friendly -- would have an affect on this forecast. 

The government has targeted that investment in oil and gas should reach $14.79 billion this year. While the mining and electricity sectors are expected to bring in $1.55 billion and $5.40 billion of inward investment, respectively. 

The ministry will publish the figures for actually achieved 2008 inward investment in these sectors by the end of this month.