The government is hoping to improve the appeal of oil and gas fields it is auctioning and lure much -needed investors as it plans to pass a new regulation to settle taxation issues under the gross-split scheme.
The Energy and Mineral Resources Ministry failed to whet investors’ appetite during a tender for 15 blocks that ran from May-September, mainly because of delay in issuing the new regulation. It has extended the period for accepting bids until Nov. 27.
The Energy and Mineral Resources Ministry’s director general for oil and gas, Ego Syahrial, said he hoped to pass the Government Regulation (PP) prior to November 27 in a bid to provide much-awaited incentives to potential contractors.
“I hope the coming regulation will be a good solution [for the contractors],” Ego said in a press conference on Friday, adding that the government was also banking on the regulation to boost the number of auction participants in a move that may increase its chances toflnd investors for all the blocks.
Nineteen investors had so far accessed the documents related to the auction, said Ego, He added that Energy and Mineral Resources Minister Ignasius Jonan wouldf soon send a letter to President Joko “Jokowi” Widodo to ask for' his approval of the new regulation, following approval from Finance Minister Sri Mulyani Indrawati.
The coming regulation addresses two key issues that Ego considers vital in the minds of prospective oil and gas investors, namely taxation under the grosssplit production-sharing scheme (PSC) and the'loss carry-forward period.
The secretary of the Directorate General of Oil and Gas at the Energy and Mineral Resources Ministry Susyanto, said the two crucial issues had been cleared in a discussion between his office and the Finance Ministry last week.
“The deputy minister [Archandra Tahar] met with Finance Minister [Sri Mulyani Indrawati] last Friday, and the meeting resulted in several agreements,” he said, referring to the extension of the loss carry-forward period to 10 years.
Under the 2008 Income Tax Law, the loss carry-forward period the period in which a tax-payer can delay tax payments - is limited to five years. Susyanto further explained that the tax during the exploitation period, a key issue for investors in the gross-split scheme, would be inserted into the sliding split scale between the government and contractors.
“The tax payment will be waived, as it will be inserted in the split calculation. This means the contractor does not need to pay tax, as it will be deducted from their split,” he said.
The gross-split scheme was introduced earlier this year to gradually phase out the current cost-recovery scheme, which obliges the government to reimburse contractors for exploration and exploitation activities. It was passed in the hope of boosting investor interest in the country and putting an end to the steady decline in oil and gas exploration, as well as to relieve the burden on the state budget.
The latest data from the Up-stream Oil and Gas Regulatory Special Task Force (SKK Migas) show that Indonesia has 264 oil and gas fields in the exploration or exploitation phase as of September, at least 40 of which are in the termination process.
The number of fields under exploration or exploitation has dropped from 280 last year and from 312 in 2015. SKK Migas head Amin Sunaryadi identified investors’ inability to keep financing the projects as a key reason behind the shrinking number of the fields.
“The decline in oil and gas field [in the exploration or exploitation phase] is due to the termination of several fields, because investors did not secure the necessary funds to uphold their commitment until the end of the exploration period,” he said at the press conference.
Separately, Indonesian Petroleum Association (IPA) executive director Marjolijn Wajong declined to comment on the new taxation scheme, adding that she would wait “until the regulation has been issued,”
The Jakarta Post, Page-13, Saturday, October 28, 2017
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