More incentives needed for Timor Gap projects
More incentives needed for Timor Gap projects
By Riyadi
NUSA DUA, Bali (JP): Indonesia will propose additional
incentives at the meeting of the Ministerial Council on the Timor
Gap for oil and gas exploitation in the region, Minister of Mines
and Energy Kuntoro Mangkusubroto said here on Wednesday.
Kuntoro, who will lead the Indonesian delegation at the
meeting on Thursday, said more incentives were needed because the
exploitation of gas and oil in the Timor Sea has proved to be so
costly.
"BHP and Phillips have found gas reserves in the Bayu-Undan
field. But because development is not economically viable, they
need more incentives," he told journalists on the sidelines of
the fourth meeting of the Australia Indonesia Ministerial Forum.
Kuntoro noted that the incentives could include the abolition
of the various withholding taxes and the prolonged depreciation
of investment and assets.
Australia's Broken Hill Pty Co Ltd and Phillips Petroleum Co
are big shareholders in the Timor Gap project.
They have proposed building a gas liquefaction plant to
process natural gas from the Bayu-Undan field. The development of
this field is expected to cost US$1.5 billion.
Oil has been flowing since July, 1998, from the region's
Elang, Kakatua and Kakatua North fields, all run by BHP.
BHP said that the company would invest A$130 million to
continue developing the fields.
Some analysts have estimated that revenues from the Timor Gap
could reach some $11 billion based on reserves of 30 million
barrels of oil and 175 million barrels equivalent of liquefied
natural gas and plentiful supplies of condensate.
Kuntoro, however, downplayed the estimate, saying that so far
the Indonesian side has only been able to collect US$1.1 million
from oil coming from the Elang and Kakatua fields.
"It means that in one year, we will get only $2.2 million," he
said.
Kuntoro noted that the meeting of the Ministerial Council on
the Timor Gap would focus on technical and economic issues of the
projects in the region, including the fate of the Bayu-Undan
project.
"We will not talk about the political side of the Timor Gap
treaty. This is up to the foreign ministers to discuss."
Minister of Foreign Affairs Ali Alatas said Indonesia did not
expect any change in the status of the Timor Gap treaty unless
East Timor decided to part from Indonesia.
The Timor Gap treaty was signed by Australia and Indonesia in
1989 and splits the sea between East Timor and Australia into
three zones, one Australian, one Indonesian and the Zone of
Cooperation (ZOCA) shared by both countries.
Under its terms, revenue from production in the ZOCA is shared
equally between Australia and Indonesia. (rid)