Oil companies ask govt for more incentives
Oil companies ask govt for more incentives
JAKARTA (JP): American and Indonesian business executives have again called on the government to improve incentives for investment in oil and natural gas exploration and development.
"This incentive package should include consideration of adjustment of tax consolidation policies," David Jhirad, deputy assistant secretary for international energy of the U.S. Department of Energy, told the sixth Indonesia-U.S. bilateral energy consultation meeting yesterday.
The two-day meeting was attended by 33 delegates, consisting of 22 representatives from Indonesia, headed by Director General of Oil and Gas Suyitno Patmosukismo, and 12 American delegates, led by Jhirad.
The meeting was preceded on Monday by the first Indonesia-U.S. private sector energy issues forum, which adopted several recommendations to the Indonesian government, including one calling for additional incentives.
Jhirad said the incentive package should include an adjustment in the division of projects between the private sector and the government.
He said consideration should be given to new forms of contracts, including performance-based or incentive contracts, as well as affinity or alliance contracts.
Jhirad said Indonesia should continue efforts to encourage private investment in downstream petroleum processing, including investment in refining, distribution and retailing.
Last month, American oil executives submitted similar suggestions at the Indonesian Petroleum Association's convention here.
In response, Suyitno said that the government is currently preparing some additional incentives to stimulate investment in oil exploration.
"But, with regard to tax consolidation, that is in the hands of the tax director general. Moreover, tax incentives are regulated under separate laws," he said.
Main problem
Suyitno argued that the main problem being faced by multinational oil companies is not a lack of exploration and development incentives, but persistently low oil prices worldwide.
"The problem is mainly related to the low oil prices on the international market and the steady increase in the costs of oil and gas explorations and development," he said.
As a result, oil companies are seeking lower tax burdens in order to reduce their production costs, Suyitno said.
"Hence, the best solution would be to increase international oil prices," he added.
Asked about the opening of the downstream oil industry to the private sector, Suyitno said that even if the government opens distribution and retailing to the private sector, private distributors or gas stations may not be able to compete with state oil company Pertamina.
"What is the point of opening the downstream market when none of the private oil refineries have come on stream?" he asked.
Yesterday's meeting also discussed the financing of power projects and prospects for renewable energy investment. (04/vin)