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)