Raras Cahyafitri, Jakarta – Investment in energy, mining, oil and gas exploration and production activities will likely fall far below the government's target this year as investors are holding off on expansion plans amid a gloomy outlook in the world's commodity markets.
According to data provided by the Energy and Mineral Resources Ministry, realized investment in the energy, mining, oil and gas sectors reached only US$20.87 billion year to date, less than half of the ministry's target of $45.59 billion this year.
Of the total, $9.6 billion was poured into the oil and gas sector during the first nine months, $1.17 billion into new renewable energy, $6.8 billion into electricity development and $3.3 billion into the minerals and coal sector.
"The amount is not bad. However, we understand that decisions on the investments were made before the economic growth slowed down," Energy and Mineral Resources Minister Sudirman Said explained on Monday.
Therefore, he said, the ministry wanted to maintain the investment momentum particularly by streamlining bureaucratic processes and a deregulation policy to deal with the slowing economic growth.
Earlier this month, the government introduced the deregulation of a number of rules that were seen to have hampered investment in the country. The deregulation policy covers 134 regulations in 17 ministries and state institutions. Of the total, 11 regulations are under the ministry.
Among regulations in the energy and mining sectors that have been revised to boost economic growth is a regulation regarding the time line for a contract extension request in the minerals and coal sector. Apart from the deregulation moves, the ministry is also working on a new regulation to encourage development of oil refineries in the country.
Minerals and coal director general Bambang Gatot Ariyono said that realized investment in the minerals and coal sector was about 54 percent of a full-year target of $6.1 billion.
"Despite the weakening economic growth and plunging coal price, the investment keeps flowing. Smelters projects are also progressing," Bambang said.
He cited that the development of 18 smelters processing nickel had reached more than 30 percent completion, with one bauxite smelter hitting over 30 percent and a much awaited copper smelter by PT Freeport Indonesia having progressed by around 11 percent. In the oil and gas sector, the $9.7 billion realized investment as of the end of August was less than a half of the overall target.
"Reasons behind the low realization are various, but partly due to external factors, such as the plunging oil price that has made some projects no longer economical, and changes in operatorship and companies' parent firms so that policies are different," said Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) spokesman Elan Biantoro.
"However, we are still expecting that some of the investment will be disbursed by year-end. Usually, more projects are executed in the third and fourth quarters," he added.
Figures from SKKMigas showed that the oil and gas sector's contribution to state income reached $8.9 billion during January to August. Under the state budget, oil and gas is targeted to give $14.99 billion in total contributions by year-end, far below $28 billion in 2014.
A low oil price and worries on declining national production are behind the lower target. Oil and gas contractors in the country initially planned to invest $20.4 billion this year, according to SKKMigas.
Source: http://www.thejakartapost.com/news/2015/09/29/investment-energy-well-below-govt-target.html