Government urged to promote gas usage
Government urged to promote gas usage
JAKARTA (JP): A major energy company called on the government
on Thursday to promote the use of natural gas domestically and
offer bigger incentives for oil and gas exploration in order to
avoid becoming a net oil importer in the near future.
President and resident manager of Atlantic Richfield Indonesia
Inc. (ARII), a subsidiary of the giant United States energy
company Atlantic Richfield Company (ARCO), Leon Codron, said the
country's oil production had remained stagnant at the rate of 1.5
million barrels per day over many years due to the lack of new
oil discoveries while the country's oil demand had continued to
increase.
He said the country would become a net oil importer in the
near future unless the government quickly promotes the use of
natural gas, which the country has in abundance, as an
alternative source of energy and encourages oil and gas
contractors to increase oil exploration.
Codron noted that some half a billion barrels of proven oil
reserves in Indonesia are sitting in fields currently too small
for viable economic development.
"Economic incentives in the form of interest-cost recovery on
unrecovered capital, investment credits, and domestic holidays on
oil are needed to make investment in these identified oil sources
more attractive," Codron said in a discussion during the
Indonesian Forum's two-day international seminar.
Codron called on the government to diversify to natural gas,
noting that by substituting gas for imported oil-based fuel, the
government will save hundreds of millions of dollars annually.
He also called on the government to adopt a transparent
domestic natural gas pricing policy.
He said currently natural gas prices are set by the
government, but there is no formula or established pricing policy
for investors to calculate the risk-reward ratio.
He also called on the government to assist oil and gas
contractors to market liquefied natural gas (LNG) in overseas
markets in view of the ever tighter competition in the LNG market
in the Asia Pacific region.
Codron hailed the government's plan to minimize state
interference in the procurement of goods and services by oil and
gas mining contractors.
Oil and gas contractors have long complained about the tight
bureaucratic supervision in their procurement of goods and
services.
Minister of Mines and Energy Kuntoro Mangkusubroto recently
promised to ease that bureaucratic supervision.
Codron also praised the government's current plan to
deregulate the oil and gas downstream sector by removing the
sectoral monopoly of the state oil and gas company Pertamina.
The deregulation on the downstream oil and gas sector is one
of several main goals of the new oil and gas law being drafted by
the government.
Codron reintroduced the long-standing call from the oil and
gas companies on the government to allow them to consolidate
taxes so that they can deduct the cost of exploration from their
total tax bills.
Under the current system, Pertamina will only reimburse the
exploration costs spent by contractors for drilling productive
wells. Under the consolidated tax scheme, contractors will also
recover the exploration costs for drilling unproductive wells.
"Forgive me for bringing this up once again, but this policy
has worked everywhere it has been instituted and it has served to
rapidly stimulate new exploration activities," Codron said.
Kuntoro had earlier rejected the proposal for the tax
consolidation scheme. (jsk)