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Interview

with Roberto Lorato, President, Indonesia Petroleum Association(IPA)

27.02.2008 / Energyboardroom

To start, would you please give us a history of yourself in the industry?

I have been involved in the Oil and Gas industry for over 20 years and taken up different professional and managerial jobs, including assignments in Russia & Central Asia, the North Sea, and Asia. My first involvement in Indonesia was as President & CEO of VICO starting five years ago. Currently, in addition to my duties as President of IPA, I am also the Managing Director of Eni Indonesia.

Not particularly, because I have been active in IPA since 2006, and the association has always been inclusive and welcoming of all members’ opinions and positions. IPA is not run as a “one-man show,” but rather as a committee. As such, IPA has regular meetings with Officers and the Board of Directors, and brings people together to run the association on behalf of the industry, not individual companies, to address common industry issues.

What is on the top of your agenda as President of IPA in 2008?

IPA’s general long-term mission is to work collaboratively with all stakeholders to enhance investment in and hence the economic health of the petroleum industry, to deliver greater benefits to government, investors, communities, employees, customers and the environment.

Inclusive in this mission are numerous specific long-term objectives, to: support government petroleum sector objectives by strengthening the partnerships with government authorities to maximize production from and investment in the petroleum industry; promote exploration investment to increase reserves and production; improve Indonesia’s investment competitiveness and efficiency through a continuous dialogue with those government authorities empowered to define the Regulatory and Fiscal Environment. Finally, a very important objective of IPA is to promote the oil and gas industry as an employer of choice and to enhance total workforce capabilities.

The IPA Board of Directors reviews its objectives every year and identifies action items which are then pursued through specific committees that are entrusted to responsibilities in areas of concern. Now that IPA has grown in terms of membership, visibility and size overall, one of the main goals for 2008 is to review IPA’s Secretariat organization’s purpose. In doing so, IPA aims to create a more effective forum for the whole industry, encouraging accessibility for the industry in obtaining data and increasing effectiveness throughout the entire organization.

What is the biggest impact of IPA’s activities on its members’ day-to-day business?

There are many big impacts, resulting from effectively channeling the common issues between members and industry to the appropriate stakeholders and government authorities through the active and continuous activity of the Board, Officers, and Executive Director. The primary change agent is maintaining open channels to the key government authorities, to provide feedback and input on their proposals.

IPA members may have different business objectives, but there are underlying common issues since everyone is part of the same industry and subject to the same laws and regulations. As IPA, we focus on such common issues. Changes and amendments proposed with respect to PSCs are examples of items about which there is a tendency toward high activity due to a shared feeling of common concern. IPA also produces fiscal term studies, incorporates recommendations, reviews BP Migas’ regulatory procedures, and provides feedback. The overall purpose is to help improving the business environment and to contribute to the establishment of principles of clarity, certainty, and consistency. This is in the interest of everyone.

What are the biggest political issues IPA is currently addressing?

IPA is just an industry association and does not engage itself in political debates. Recently, IPA expressed concerns to the government about import duties, which could greatly affect the ability of PSCs to execute and implement exploration programs. These concerns were channeled through our government counterparts and IPA was active in providing its views and feedback. It is the government’s prerogative to make the final decision. In the specific case of import duties, the government made some decisions which I think will greatly benefit the O&G exploration activities in Indonesia.

There are always concerns about the search for talent in human resources. To what degree does IPA deal with facilitating development of universities, to promote engineer recruitment for example?

The oil and gas industry has a widespread issue of the scarcity in the areas of suitable technical resources. This is a big issue for the members of IPA, as for all oil-producing countries like Indonesia. As an association, IPA addresses this problem by trying to promote the industry as an employer of choice through specific initiatives, for example co-operation with Indonesian Universities. IPA engages directly with BP Migas, to improve the country’s ability to attract, retain, and develop professional technical resources.

IPA’s 15 committees span the spectrum from Data Management to University Assistance. Which are currently the most active, and what initiatives are on top of mind for the coming year?

IPA is a voluntary organization and all of its members and Committees tend to be very active. Then, at any point in time, depending on the emergence of specific new issues, each Committee’s activity may pick up. Right now, we are devoting attention to the organization in May 2008 of the IPA Convention, which has become an annual event due to the overwhelming success of last year’s edition. The theme of this year’s convention is “Meeting Energy Challenges Through Cooperation.” It is not only an annual exhibition of the association’s members, but an opportunity for a public forum and debate on the main issues that affect the industry in Indonesia, from business environment to Corporate Social Responsibility. Key executives give speeches, but the central aspect is the plenary sessions with key representatives from industry and government debating major issues. For example, last year featured the Minister of Energy and Mineral Resources, Purnomo Yusgiantoro, not only giving speeches but actively participating alongside key government officials like the Director General of Migas, Luluk Sumiarso and the Head of BP Migas, Kardaya Warnika. The Minister of Finance, Ibu Sri Mulyani, was also a welcome and lively participant to one of participant in our annual convention.

You mention Minister Purnomo, and the importance of the government’s shift in energy balance, which hopes to move more attention away from oil to gas, coal, and alternative energies. What are the implications of this strategic change?

There is a remarkable effort being made by the government, and Migas in particular, to formulate a National Energy Balance. It’s still a work in progress, and being debated within the government. We don’t have a specific objective as an organization in this regard, other than to understand where the government wants to go, what the country needs are, and how we can support the government in reaching its objectives.

In terms of diversifying Indonesia’s energy mix, how is IPA encouraging new technologies such as CBM?

CBM is a new development which will be included in the oil and gas regulatory framework, and IPA will be an active and collaborative member and partner. Some of our members are already active in this regard, and as an association of companies that do real work on the ground we try to represent their needs, be they in the exploration, development or production phase.

There are many medium-sized players entering Indonesia from China and the US. Have you seen interest from these firms in becoming involved in IPA?

IPA is open to all companies who are active in the oil and gas industry, whether PSCs, contractors, or companies providing technical services. There is increasing interest from players who are not currently active in Indonesia, and we welcome everybody to join the association. IPA has seen new members and associate members, and this interest indicates an increased focus of the industry towards Indonesia.

Does IPA have a part of its mandate promoting itself outside of Indonesia?

IPA’s members include national and international companies, which operate around the world and already belong to similar associations in other countries. So the association does not need to have an international presence. Rather, this sort of awareness-building activity is the job of the Indonesian government, Migas and BP Migas.

What personal objectives do you hope to achieve in your tenure as President?

The IPA board aims to make the association open to all industry players in oil and gas. In doing so, the IPA strives to improve the services it provides, the information and support offered to members via the IPA Secretariat, and its position as a partner of choice for stakeholders and especially the government. To become a partner of choice means being recognized because of size, visibility, and especially credibility; there are many elements to achieving this aim, which rise above defending individual interests for the benefit of the whole.

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