Singaporean Investors Eye Piece of Lippo Cikarang?s Pie
[caption id="attachment_350631" align="alignright" width="398"] CEO of Lippo Cikarang Meow Chong Loh (right), was giving explanations about the benefit for investing in Lippo Cikarang's industrial estate to Singapore's Minister of Trade & Industry Teo Ser Luck (second from right), CEO of Indo Creative Mebel Tan Cheng Whatt (third from the right), and the CEO of International Enterprise Singapore Teo Eng Cheng (top right)[/caption]
Jakarta. A delegation from the Singapore Business Federation, representing the interests of the city state?s business community in investment, trade, and industrial relations, paid a visit to Lippo Cikarang?s industrial estate on Tuesday.
A statement released by the industrial township developer said the visit was lead by SBF director Alan Tan and Singapore?s Trade and Industry Minister Teo Ser Luck.
About 50 executives from various Singaporean companies toured Lippo Cikarang?s industrial estate to scout for possible investment and cooperation with the developer, the statement added.
The group also stopped by Cellini Design Center, a Singaporean manufacturer of furniture and accessories with light manufacturing facilities in a part of the industrial estate called Delta Silcon 2.
Lippo Cikarang president director Meow Chong Loh said the industrial estate is growing rapidly, thanks largely to the success of the companies it harbors.
Some of the world?s top manufacturing giants, such as Toyota, Honda, Hyundai, Hankook, Danone, Coca-Cola and Bridgestone to name a few, operate in the area, which is located about 30 kilometers east of Jakarta.
According to Meow, Lippo Cikarang is currently focusing on the development of Orange Country, an integrated property project spanning 322 hectares and worth Rp 250 trillion ($20.53 billion). The property developer?s township concept also includes urban facilities such as international schools, five-star hotels, hospitals and family entertainment centers.
The Jakarta Globe is affiliated with the Lippo Group.
Total Indonesie?s Mahakam Block Revisited
Mahakam. As Total E&P Indonesie?s oil and gas contract with the government is set to cease in 2017, what?s on the horizon for the Mahakam block?
Uncertainty looms over the future of the Mahakam block, with a failure of the previous government to make a decision on who will operate the field after Total E&P Indonesie ends its contract with the country in 2017.
Mahakam is the archipelago?s most important producer of gas, with this year expecting to produce a daily average of 1.7 billion cubic feet of gas (bcfd).
In the past it was also a significant contributor to national oil production, although output at the Handil field at the Mahakam River delta has dropped to a mere 16,000 barrels a day compared to its peak production of around 197,000 barrels a day in 1977.
An accumulated total of at least 900 million barrels of oil has come from the Handil field over more than 39 years. Meanwhile, the search for more oil will not be easy as the water content in oil is now higher at up to percent, compared to 10 percent in the past. Gas reserves, on the other hand, remain extensive.
Mahakam utilizes 410 wells for its output of oil and gas, grouped in 65 clusters with an average depth of 3,000 meters each. Each cluster is connected to a pipe network to channel oil and gas to the central production area (CPA) for processing and separation.
The oil is then sent to a terminal in Senipah, while the gas is piped through to the liquefied natural gas (LNG) terminal in Bontang.
On a visit to Total Indonesie?s CPA, a 15-minute boat ride from the mainland, site manager Sudjud Sudjarwadi outlined to GlobeAsia the importance of the Mahakam block to the nation.
GlobeAsia was accompanied by site engineer Fakhir Razy on a tour of the main production facilities and its operations control room. Both Sudjud and Fakhir are experienced and capable Indonesians ? like most of the people who make up the majority of Total Indonesie?s staff running the sophisticated and complex operation.
This is also the first time the firm has been headed by an Indonesian; chief executive Hardy Pramono is a veteran oil engineer with more than 30 years in the business.
Total has repeatedly asked for a contract extension over the past years, but all of its requests fell on deaf ears as former president Susilo Bambang Yudhoyono?s administration seemed unable to come to an agreement on how to proceed.
This uncertainty has become a national issue. Total is waiting for an answer from the new government under President Joko Widodo, one that would allow the French oil giant to continue its operation of the Mahakam block for five years beyond the expiration of its contract in 2017, and give the next operator a transition period.
Under the scheme, Total is proposing that a new joint operation with state oil company Pertamina operate the block throughout the transition period. During that time, transfer of know-how, expertise and experience, given the complexities at the site, could be passed on.
Total will own 30 percent and Total?s partner, Japan?s Inpex, 30 percent; while Pertamina will receive the remainder.
A GlobeAsia source has said the government wants Pertamina to take over but the state-owned oil company has rejected the transition proposal and prefers an immediate handover of the Mahakam block after Total?s contract expires.
?But that?s not so easy for Pertamina,? the source pointed out. ?Total still has the back office and the technology, which can?t be given away just like that. If something happens, where would the operator go? Elsewhere, at Petronas or PTT, such a transition scheme worked and they have become giants.?
Total has warned that output from the field could decline by up to 72 percent if investments in development and maintenance are not made soon.
?This is why certainty is important. We have to make huge investments and those need time to prepare,? Total communications chief Arividya Noviyanto told GlobeAsia in Balikpapan recently.
But despite having to play the waiting game, the company remains committed.
?Next year we will invest around $2.5 billion. We are going to drill more than 100 development wells and continue to complete the South Mahakam phase three project at the Jempang and Metulang fields, and Bekapai phase 2B,? Noviyanto said.
?We sincerely hope that we will get word soon on the transition proposal and that the government sees it as a good option. Total Indonesie as a company has a reputation and is responsible. We don?t want to leave a bad impression. It?s all for the well being of Indonesia and Mahakam as a national asset.?
Total and Inpex have invested over $1 billion a year in Mahakam projects over the past years. Meanwhile, in a more recent development, new Energy and Mineral Resources Minister Sudirman Said told Reuters that the government hopes to leverage a partnership between Total and Pertamina to expand the country?s resource base.
?We will use this opportunity to expand Pertamina?s access to resources not just domestically but also overseas. We will invite Total Indonesie or whoever finishes this: ?Let?s work together, but can you take Pertamina with you to where you operate????
Sudirman added that he was targeting a decision on the matter within three months.
On the Handil shore, at the Meindo Elang Indah yard, workers are putting together a $120 million offshore head-well platform which was subcontracted by Total in its bid to boost gas production from the Mahakam block.
Total spokesman Kristanto Hartadi told GlobeAsia that the most recent project developed is South Mahakam 3. Construction of the offshore head-well platform is to be completed and operations will begin in the third quarter of 2015.
?South Mahakam 3 could be the last project of the company in the Mahakam block. We are not stopping building projects. There are a number of PODs [plans of development] proposed and already approved by SKK Migas, but support from the government is needed to achieve the economic level,? he said.
The wellhead platform is as tall as a six-storey building. It will be deployed and stand on a tripod 35 kilometers offshore named the Jempang-Metulang field.
According to Meindo construction manager Yono Eko Prasetyo, the platform will be placed in 47 meters of water.
?From zero until 100 percent completion, it is entirely the work of Indonesians. We work day and night until 10 p.m. to create this wellhead platform and it is our pride,? Yono said.
Pertamina Could Meet Merpati Air?s Fate Amid Unequal Market
The tragedy of Merpati Nusantara Airlines is still glowing and the future of its workers still unclear. Established in 1962, Merpati was originally conceived on the premise that the company?s air service would serve as a pioneer for ?poor? and remote areas in Indonesia.
Merpati served this mission admirably, as evidenced, for example, by its heroic provision of airline services for Papua since 1962. Sadly, this heroism ? along with some hedonism put the company on the knife?s edge of its parent, the Indonesian government, in February this year.
In the Suharto era, state enterprises were spoiled by the government and often used as cash cows. Efficiency was not their primary objective. Serving government
officials were regarded by the management of such firms as the keys to success.
That philosophy of corporate management met the realities of an increasingly competitive market following the Suharto regime?s collapse. Executive perks for state-owned firms? C-level had to be quickly curtailed.
As a result, many state-owned firms faltered like a baby pushed to run. Many have been dying; others have shuttered, as has Merpati. It is a sign of the times that many of the roles left by these companies are now fulfilled by foreign firms, rather than domestic ones.
It?s not impossible that Pertamina may meet such a grievous fate, too. As a state enterprise, it is charged with operating in the government?s interest, which often runs contrary to the company?s own.
First, the state-owned energy company is bound by a public service obligation to serve poor and remote areas. This is expensive, due to high transportation costs and low economies of scale.
Second, Pertamina must build domestic refineries, requiring high capital expenditures.
Third, money from oil sales do not flow directly back to the company?s accounts, but are instead diverted to the state treasury. This diminishes Pertamina?s ability to finance productive activities.
Pertamina?s first and second assignments are fine because they encourage equity in access to energy across the country, as well as industrialization. The fairness of shouldering those activities? burden is contingent on government subsidies.
Pertamina?s public service obligations weaken its competitiveness in the domestic oil market. Indeed, the 2004 law on downstream energy clearly states that oil and gas companies are obligated to serve areas that are remote or where no market exists.
Pertamina is the only firm that does so.
Amid Indonesia?s regime of high fuel subsidy spending, most downstream private companies operate only in ?rich? areas, such as Jakarta and other large cities. Here, Pertamina?s competitive advantage is unintentionally saved by the low prices of subsidized fuel for mid-sized and rural areas.
However, when fuel subsidy cuts deliver subsidized prices close to market levels, Pertamina loses its competitive advantage and private companies may enter other promising areas ? leaving the poor ones for Pertamina.
As the state-owned energy company?s competitive advantage erodes, so does its market share.
This is a slippery slope that, if permitted to slide towards its natural conclusion, could send Pertamina tumbling toward the fate of Merpati. If Pertamina faces dark days ahead, would it ? should it ? be allowed to fail? The firm may very well be a priceless asset to Indonesia, since oil is of strategic importance to our nation?s security.
Fuel shortages have the potential to paralyze our economy a destabilize our social fabric. The national security risks of ceding this sector to foreign companies, which represent the interests of their home countries and shareholders, is clear.
The government should take action to fix the competitive imbalance that Pertamina?s public service mission imposes. All players in the oil industry must be treated equally. But as a state enterprise and a bulwark of the nation?s energy resources, Pertamina should be given extra privileges without being spoiled.
A few policies could support this: First, the government should obligate all firms in downstream oil to build domestic refineries, not just Pertamina, thereby potentially broadening access to employment.
Second, the government should implement the 2004 law on downstream oil firms consistently. For example, if an oil company wants to enter a ?rich? area, access should be granted on condition of service to one or two remote areas.
Third, cash flow mechanisms among Pertamina, its customers, and the government should provide flexibility to snare emerging opportunities.
This could also potentially provide savings on currency exchange, since companies will import more intermediate oil products, rather than finished ones such as gasoline and diesel fuel.
Pertamina?s destiny is perhaps equally a function of market forces as it is management?s ability to harness to lead internal change that harnesses those forces for the company?s benefit.
Agus Tony Puputra is a lecturer at Sam Ratulangi University and chief economist for state lender Bank Negara Indonesia in Manado, North Sulawesi.
Protests Force Cancellation of Marlboro Concert Series in Bangladesh
A recent report by the Campaign for Tobacco-Free Kids and other public health organizations exposed how Philip Morris International is conducting a global marketing campaign — called Be Marlboro — that uses themes and images that appeal to youth.
Now Philip Morris has canceled a series of concerts in Bangladesh after health advocates protested that the concerts violated the country’s tobacco control laws and marketed cigarettes to kids.
Big Tobacco Fined for Fueling Black Market in U.K.
For years, the major tobacco companies have fought cigarette tax increases and other tobacco control measures by claiming they will spark massive increases in cigarette smuggling and black markets. But stories in The Wall Street Journal (subscription only), The Guardian and other media reveal that British American Tobacco (BAT), the world’s second largest multinational tobacco company, has been supporting — and profiting from — the same cigarette smuggling schemes that tobacco companies claim are caused by policies to reduce tobacco use.
As Young Fans Enjoy World Series, Magazine Ads Link Baseball and Smokeless To...
For millions of fans of all ages, October means the excitement of the baseball playoffs and World Series.
For tobacco companies, it means another opportunity to target kids by associating smokeless tobacco with baseball and other sports.
This month’s issues of the two leading sports magazines, Sports Illustrated and ESPN, have included huge, two-page advertising spreads for Grizzly, which is by far the most popular smokeless tobacco brand among youth ages 12-17. Grizzly is made by American Snuff Company, a subsidiary of tobacco giant Reynolds American.
Mixing the sacred and the profane
Teeth filing is mandatory for Balinese Hindu children when entering adolescence.
Congo detains 6 UN peacekeepers
Congolese authorities detained six members of a Ukrainian aviation crew working for the U.N. peacekeeping force on Wednesday after Congolese military uniforms were found in their luggage, the U.N. force said.
In the time of giants
Made Dharma speaks standing in front of what the people of his village believe is a flower stem from a massive tree of legend.