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)