Government reviews incentives for gas producers
Government reviews incentives for gas producers
JAKARTA (JP): A top official at the Ministry of Mines and
Energy announced on Thursday the government had reviewed a
planned incentive package for the country's natural gas
producers, following approval of the intergovernmental fiscal
balance law by the House of Representatives.
Director General of Oil and Gas Rachmat Sudibjo told The
Jakarta Post the government planned to reduce its shares in the
natural gas contractors' earnings to promote the development of
the country's natural gas fields and the use of natural gas in
the country.
He said producers would sell their gas at cheaper prices if
the government demanded lower shares in their earnings.
This would attract people to prefer natural gas over other
types of fuel, and the increasing number of gas users would in
turn stimulate exploitation of the country's natural gas
reserves.
Rachmat said, however, a consequence of the plan would be
that provinces would receive reduced natural gas earnings from
the central government.
"In fact, we (the Ministry of Mines and Energy) have finished
drafting the incentive package, but we delayed submitting it to
the president following approval of the intergovernmental fiscal
balance law by the House.
"We don't want to see the provinces get angry over a decrease
in their gas revenue caused by the incentive package," Rachmat
said.
He did not specify the proposed revenue cut resulting from the
incentive package.
Under the intergovernmental fiscal balance law, approved by
the House last month, provincial administrations will receive a
15 percent share in the government's net (after tax) oil revenue
and a 30 percent share in the government's net (after tax) gas
revenue derived from their respective provinces.
The law will become effective in the fiscal year of 2000/2001.
Under the production-sharing contract system, natural gas
producers have to submit to the government 20.45 percent of their
earnings in corporate taxes.
Aside from the taxes, gas companies has also to hand over
44.55 percent of their gas output to the government via state oil
and gas company Pertamina. Pertamina sells the gas and gives the
proceeds to the government.
The government receives a 70 percent share in the contractors'
gas output.
Rachmat said the ministry was formulating a new incentive
package to promote exploitation of the country's natural gas
resources and the use of natural gas in the country.
"We have to find a new formula in which we can reduce the
government's gas earnings, but in which the provinces can still
receive a significant income from the development of their
natural gas resources," Rachmat said.
However, he said the government would not reduce taxes payable
by gas producers to the government. (jsk)