Of the country’s 60 hydrocarbon basis, 15 to 20 are yet to be explored

lessed with a vast array of natural resources, including oil, Indonesia has become a leading global player in the mining and energy sectors. The only Asian member of the Organization of Petroleum Exporting Countries (Opec), it is a strategically important supplier of crude oil to the rest of the region.

Increasingly, it is becoming a key exporter of gas to energy-dependent countries such as Japan and South Korea. Already the world’s largest supplier of liquefied natural gas (LNG), Indonesia is eyeing up the U.S. West Coast market, which is set to open up in the coming years as domestic reserves dwindle. On the mining and minerals side, Indonesia is again one of the richest territories on the planet, home to a multitude of resources from the exotic to the more mundane.

Despite falling oil production in recent years, as a result of the maturity of the major fields, there is general optimism that the country can continue to be a major supplier in the years to come. Purnomo Yusgiantoro, Minister of Energy and Mining and current President of OPEC, says that out of the country’s 60 hydrocarbons basins, around 15 to 20 have not yet been explored. “The prospects are there for exploration and production,” he says. “That’s the reason why we provide fiscal incentives for companies to come in and sign contracts with us.”

During 2003 the ministry signed 15 production-sharing contracts for exploration and production. It is aiming at 27 for 2004. In a bid to ramp-up production, the government has streamlined its processes and is starting to see an upturn in foreign investment in new exploration and production activities.

As well as the geological potential – Indonesia has a good track record in turning up oil discoveries – it is strategically located between two oceans: the Pacific and Indian, and between two continents: Australia and Asia. This means it is closer to major consuming markets like China and Japan than the oil-rich Middle East.

One of the reasons behind the surge in energy sector investment is the shift towards natural gas – an increasingly important product in its own right – as well as oil. Indonesia is a long established LNG supplier to the region but is looking to strengthen its hold in emerging gas markets such as China and the U.S. BP is developing the Tangguh LNG export project to take advantage of these opportunities. Mr. Yusgiantoro says China has already agreed to buy Indonesian LNG for one of its first import terminals. Gas is also to be sent to a receiving terminal in Baja California, which could end up in the U.S. market. “Gas is a form of clean energy and we are pushing for that market.”

At home, the demand for gas is growing with state firm PT Perusahaan Gas Negara (PGN) rolling out new pipelines to supply more areas. “During the last decade, natural gas emerged to become a very promising alternative energy in Indonesia,” says President and CEO of PGN WMP Simandjuntak.

The mining sector also holds significant potential given the country’s substantial mineral wealth but has suffered through lack of investment in recent years.

One of the companies turning this trend around is International Nickel Indonesia (INCO). CEO Bing R. Tobing says, “INCO’s mission “is to become a reliable and profitable company. We have three goals. Goal number one is bout business. Goal number two is about safety and health. Goal number three is to work with the community and the government.” INCO works hard to communicate these goals to its employees. “Clarity is very important I am very proud that we are working as a team,” says Mr. Tobing. “We also work with many expatriates. We don’t see white, yellow or brown. People who come to Indonesia need to understand how people work here,” he adds.

PURNOMO YUSGIANTORO Minister of Energy and Mining	SIMON F. SEMBIRING Director General of Geology and Mineral Resources	B. N. WAHJU Chairman of the Indonesian Mining Association

The Director General for Geology and Mineral Resources at the Ministry of Energy, Simon F. Sembiring, says that the industry can be revived through clear planning and greater transparency and through streamlining procedures and lowering the cost of doing business.

Mr Sembiring is committed to the development of a Master Plan for the development of the sector. The plan includes a mechanism for attracting investment, to help reverse the decline in the industry in the wake of the economic recession. One of its main points is the reduction in the royalty tax, which is expected to deliver an increase in revenue. It also lays the basis for more cooperation between the Ministry of Forestry and the Ministry of Mining, and provides a clear and sound legal system for investors.

Attracting investment is one of the sector’s greatest priorities. About $30 billion is needed by 2010 to improve the energy sector infrastructure, to increase efficiency and to connect supply and demand points. Since mining commodities continue to play a key role in Indonesia’s economy, earning much needed foreign exchange revenues, the sector has huge potential.

“The role of foreign companies is crucial,” says Mr. Sembiring. “We must find a way to invite foreign investment to come into Indonesia.”

The Indonesian Mining Association – a key link between the government and the mining companies themselves – is at the heart of plans to revitalize the industry. Its Chairman B. N. Wahju says Indonesia’s major competitive advantages include its mineral resources and proximity to major markets.

The challenge ahead, according to Mr. Wahju, is for existing producers to feel that their investments are safe. “Mining is a type of investment that takes a long period of time to attain profit, commence exploitation,” he says. “That is why it is important that the government has said it will recognize all existing contracts of work and that it will always honor every agreement that has been signed in the past. This is one of the significant pluses of the past as well as the current government,” concludes Mr. Wahju.