RE:Indonesia - Expropriate Resources? Draft Oil and Gas Law
I performed some research online regarding the chance of this resource nationalization risk to become certain.
I found at least 3 reasons why I would assign that risk a remote chance of happening:
1. the new president is clearly pro business orientated
2. oil and gas production in Indonesia has been in constant decline for more than 10 years. Indonesia have changed from a net exporter to a net importer of oil. Due to that change, it leaves OPEC a few years ago. In order to resume increasing production the country needs to attract foreign investment. This potential "resource nationalization" issue will act in the opposite direction of that trend.
3.- there are billons of dollar already invested in the indonesian upstream oil and gas sector by companies like Chevron, Total, BP, Repsol, etc. It could not be possible for the country to compensate foreign investors for those losses in case of a resource nationalization. If they can´t afford a reasonable and timing compensation, they will risk being isolated in the international business community, as the case of Venezuela.
Of course, living thousands of kilometers away from Indonesia, it´s very difficult to predict any potential outcome for this issue, but so far I haven´t found any sign of really big trouble. Time will tell.
Justy my oppinion
Fernando