Ririn Radiawati Kusuma – President Susilo Bambang Yudhoyono's push to renegotiate oil and gas contracts with foreign companies would set a bad precedent, industry players said.

Sammy Hamzah, the vice chairman of the Indonesian Petroleum Association, said the government's plan "would create negative sentiment for oil and gas investment."

The IPA, whose 52 members include oil and gas companies such as Chevron Pacific Indonesia, ConocoPhilips, Total E&P Indonesie, BP Indonesia and state oil and gas company Pertamina, has been vocal in its opposition to government plans to renegotiate contracts and amend the country's oil and gas law.

If the government is determined to renegotiate, Sammy said, it should talk to oil companies and gain investor approval.

"I think the contracts are a very sensitive problem. A bad contract or a one-sided change will scare investors away," said Sammy, who is also the president director of Ephindo, an energy company specializing oil, gas and coal. "Please be careful when talking about the contracts. It should be fair for investors."

Claiming that the country's robust economy should give it more bargaining power, Yudhoyono said last week that the government would review contracts with foreign companies in search of better terms.

Freeport Indonesia, the country's largest gold miner, said it would continue to operate in here despite the increased scrutiny of foreign firms.

"We will continue to honor and abide by the terms of our contract of work. We have successfully operated in Indonesia for over four decades and look forward to many more decades of continued success. We believe our contract is fair to all parties and results in substantial contributions to the government that compare favorably to other major international mineral producing countries," Freeport spokesman Ramdani Sirait said in a statement.

The miner has contributed more than $12 billion to the government in royalties since its current began in December 1991, Ramdani said.

But Tony Wenas, president director of International Nickel Indonesia, said he welcomed the president's proposal. "It doesn't matter as long as I can get my profit and government also gets their profit," he said.

Satya W. Yudha, a Golkar Party lawmaker and member of House of Representatives Commission VII at the House of Representatives, which oversees energy affairs, said sales contracts should be revised instead of production-sharing agreements.

"For example, the gas sales from the Tangguh plant are sold very cheaply to China. We can renegotiate that contract," he said. China signed a contract in 2002 that allowed it to buy gas from Tangguh for a relatively cheap $2.40 per million British thermal units over 25 years.