Opening Ceremony Speech at The Third International Indonesia Gas Conference and Exhibition

TRANCRIPT
OPENING CEREMONY SPEECH
BY
PRESIDENT OF THE REPUBLIC OF INDONESIA
THE THIRD INTERNATIONAL INDONESIA GAS CONFERENCE
AND EXHIBITION
JAKARTA CONVENTION CENTER, 16 JANUARY, 2007

Bismillahirrahmanirrahim,
Assalamu`alaikum Wr. Wb.
Selamat pagi, salam sejahtera,

Excellencies Ministers and Former Ministers, Ambassadors, Members of the Participants,
Distinguished Speakers, Distinguished Business Leaders,

Ladies and Gentlemen,
While we are still in the first half of January, let me begin by wishing all of you a Happy New Year. May the year 2007 bring us better progress, greater peace and more strength.

As you all know, we did not begin the new year with a happy start, due to the tragic Adam air and Senopati ferry incidents. We are doing all we can to find the missing airplane, which is what I promised the families of the Adam air passengers when I visited them 2 days ago in Manado. With regard to the Senopati ferry incident, I have been heartened that survivors were still miraculously found after being lost for many days at sea.

Indonesia has become no stranger to crisis and tragedies. Indeed, the past 2 years have taught us that each crisis made us more resilient and each crisis drew our nation closer to one another. This is why I have nothing but optimism regarding Indonesia’s political economic outlook, which I believe will still be better this year compared to the previous 2 years.

But before coming to that, let me express a warm welcome all of the participants of the Third International Indonesia Gas Conference and Exhibition, or INDOGAS 2007, here to Jakarta. The Indogas Conference is a premier annual event for the Indonesian gas industry, where policy makers and industry leaders meet to exchange views on how to advance Indonesia’s natural gas industry. It is a testament of my Government’s full support that I have attended all Indogas Conferences for the past 3 years.

Excellencies, Ladies and Gentlemen,
You have chosen an appropriate theme this year : “The New Era of Indonesian Gas-Progressing Business Opportunity”.
Indeed, tremendous opportunity lie await in Indonesia’s gas industry and it is a trend that is also reflective of generally positive developments that Indonesia is experiencing.

In the past 2 years, we have maintained political stability, strengthened our democracy and rejuvenated reforms. We have advanced very far in the Aceh peace process, especially with the successful local elections last December.

We have conducted successful local elections throughout the country, including in Papua and West Irian Jaya, thereby solidifying our democracy at the local levels and further changing Indonesia’s political landscape.

And we continued to actively promote tolerance, pluralism, human rights and governance as the bedrock of our democracy.

Our economy has also performed reasonably well, despite world oil price shocks, natural disasters and other challenges.

Last year, our economy grew by around 5,6%, about the same rate of growth as in 2005. This is the highest rate of consecutive growth that Indonesia has had since the economic crisis of 1997. We reduced inflation significantly from 17,1% in 2005 to 6,6% in December last year. The Rupiah has been stable between Rp. 9.100 to Rp. 9.200. Our exports averaged close to 20% between 2005 and 2006 and our reserves-at over US$ 43 billion after IMF at payment is the highest ever. Our stock market hit record high and was the third fastest growing in the world after Russia and China.

The painful structural reforms taken by my Government in the last two years particularly the reduction oil subsidies is also showing results. I am proud to say that very few countries in the world has SHIFTED resources from the state budget to help the poor as Indonesia has in the past 2 years. Huge sums of founds that used to “burn up” in gas emissions were now used constructively to help the poor get education, free health service, rice, basic needs, village infrastructure and even cash hand outs. This year my Government plants to allocate 51 trillion rupiah (about US$ 5,6 billion) for the poor which remains a priority area for my Government.

To complement our anti poverty program my Government has launched the most aggressive anti corruption campaign in Indonesia’s history where no one and certainly no official is exempted from the arms of the law.

What all this means is that Indonesia is surely and confidently changing for the better. The rating’s agencies – Moody, Standard and Poor and Fitch – have given us the highest ratings since the economic crisis. Last year the World Economic Forum also raised Indonesia`s ranking in global competitiveness inde x from 68 to 50, ahead of China, Brazil, Nigeria, and Argentina.

So yes, the numbers are good and pointing in the right direction. We will continue to relentlessly tackle the persisting problems of poverty and unemployment to promote education and health to improve the quality of growth, to improve the investment climate for investors.

We also know that the economy runs on energy. And that is why in the past 2 years we have revaluated and reformed our energy policy to reflect the changing realities and new opportunities.

Indonesia’s energy policy rests on several pillars. First, is to increase our oil and gas production which includes more exploration. Our aim to raise oil production from 1,1 million barrel per day to 1,3 million barrel per day by 2009.

Second, to diversify our energy sources from oil be they natural gas, coal, solar, geothermal, biofuel and possibly nuclear energy one day. My Government is in fact very keen to develop our biofuel industry which aside improving the overall energy picture will also have positive impact on agriculture, rural development, industry, infrastructure, poverty reduction and employment.

Third, to promote greater energy conservation and efficiency. This means educating the public to be more energy efficient in the conduct of their daily lives. It also means getting the transport industry, factories and offices to use innovative technology to save energy.

In short, we want the economy to run on smart energy on clean energy and on a more diverse energy. We want to develop an energy policy that will help the poor, fuel growth, conserve environment and sustainable for the long term.

Excellencies, Distinguished participant, Ladies and Gentlemen,
In the grand scheme of our energy policy, we very much count on the role of the gas industry. We have been too reliant on oil for too long, it is time for us to shift to gas which is cheaper, cleaner and the nearest is substitutes to oil. And we have it in great abundance : Indonesia’s natural gas reserves is estimated at 180 trillion cubic feet half of which are proven reserves and this will enable us to meet gas demands for several decades to come.

We will therefore utilize more natural gas in the generation of electricity as a clean source of energy in industrial consumption as fuel and feedstock in transportation and also in households-all in the near term to substitute for oil.
My Government is determined to shore up our position as the world’s top producer of LNG. Our goal is to substantially increase our total gas production from 0,82 TCF in 2005 to about 5,5 TCF in 2025, contributing 30% of the total national energy consumption mix.

All this is entirely within our reach. This is where I renew my invitation to the business leaders in the gas industry to join us in developing Indonesia’s very promising gas industry.

We are actively establishing the necessary conditions and the regulatory framework to enhance Indonesia’s gas industry and in rationalizing the gas market in general. We have produced specific regulations directed to maximize and expedite the development of discovered gas fields and in intensifying the search for new resources, particularly in frontier areas.
The government is aware that an important necessary condition of a viable domestic gas market is the rational pricing of gas. Natural gas prices should arrive at a balance : on the one hand, it should be able to support development a sustainable gas industry in the domestic market, and on the other hand, it is able to provide fair and equitable price from the consumers, pertaining to specific standard of service.

The government is working towards finding a solution on this matter, which will provide increased viability and security to investment n the gas industry. The solution on price in certain cases may involve a combination of market principles and certain restrictions to reduce the possibility of market abuse.

We are also aware that clarity regulation is very important. We know that a clear role and function of the regulatory body and it’s independency is crucial to the success of realizing the national plans on energy, including o natural gas. We are therefore working hard to ensure that all policies are clear and do not overlap with one another.

So my Government continues to improve our regulations, making them more responsive to the needs of the industry, the investors and our people.

I Know there are concerns and expectations from the industry relating to investment conditions. You want to see the removal of any possible conflicting regulations and to promote consistency in interpreting government policies and regulations across all government institutions.

You want to see the formulation of detailed long-term natural gas development, and implementation plan and strategy which specify the domestic and global market opportunities.

You want to see the establishment of a comprehensive gas pricing policy for the domestic gas market, which reflects the cost of delivery, and encourage business-to-business transactions, thus, providing broader range of transaction options.

Now here is my answer.
The government remains and will always be committed to ansure that the appropriate regulation are In place to encourage and promote a fair market and level playing field, regardless of the size of investors and projects.

The Government will consider accepting various new financing schemes, and may consider the appropriateness of certain fiscals, VAT and import duties as well as consider implementing tax reforms.

And the long-term gas planning should incorporate principles of least cost and set priorities of the entire supply chain: from reserves to the end users.

So do I hope that the gas industry will utilize this unique opportunity I participate in developing Indonesia’s large gas reserves, to supply an emerging large domestic market, and to also continue Indonesia’s large gas reserves, to supply an emerging large domestic market, and to also continue Indonesia’s long tradition as a natural gas supplier to the global market.

Indeed, to the prospects for domestic and export market are both good. Indonesia’s gas market is quite extensive. To begin, energy security is major concern of all ASEAN member countries. ASEAN is currently planning to develop an ASEAN gas transmission pipeline, which expect to rely heavily on supply from Indonesia’s gas reserves to enhance he energy security of the region.

Indonesia presently supplies mostly to markets in Japan, Korea and Taiwan, and in the near future we will begin LNG exports to China and North America. And we know that global gas demand is projected to increase sharply particularly In the Far East and in the US.

That is why with regard to gas export, our new policy is to maintain a balance between exports of gas and domestic use of gas. I do believe that with our new gas policy, and with the increase of new gas production resulting from new contracts, new investment and new explorations, we CAN meet the dual objectives of fulfilling the rising domestic needs while supplying the exports market.

I am happy therefore to announce that the South Sumatra-West Java gas transmissions project is nearing completion and will soon be able to deliver gas from Sumatra to supply consumers in Java. The formulation of new production sharing contracts has demonstrated that the government is determined in improving investment conditions of Indonesia’s gas Industry.

I am glad to hear from Minister Purnomo that 16 new oil and gas cooperation contracts ( KKS ) in several regions will be signed after this opening ceremony. I am also pleased to learn that 10 small and medium-scale coal power plants will be developed outside the Java-Bali system.

Excellencies, Ladies and gentlemen,
On this fine occasion, I would like to say a few words with regard to recent unfortunate events in the capital market. I wish to stress that the gas industry can only excel IF state-owned companies operating in this sector UPHOLD sound corporate governance at all costs and at all times. Indeed, this applies to ALL our state-owned companies : our owned BUMN they must strive to be winning companies, and they can only do so if they win market confidence by constantly applying vigorous corporate governance, practice transparency, and comply with capital market regulation, including and providing timely and quality disclosure. It’s quite clear. This is the Indonesia stand, my firm stand.

Ladies and gentleman,
I closing, I wish all the participant of the INDOGAS 2007 conference lively and productive deliberations over the next two day. I am confident that the conference will arrive at constructive recommendations and new ideas to advance Indonesia’s gas industry capacity in capturing domestic and global market opportunities.

In the name of ALLAH SWT, by saying Bismillahirrahmanirrahim, I hereby declare the INDOGAS 2007 open. I thank you very much.

Wassalamulaikum warrahmatullahi wabarrakatuh.



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Bureau for Press and Media Affairs
Presidential Household