Oil & Gas Exploitation Obtains Fiscal Incentives

Jumat, 26 April 2013 | 10:56

The government finally agreed to provide incentives for oil and gas exploitation and exploration activities in form of exemption on import tax, value-added tax, and sales tax on imported luxury goods. The incentive provision has been regulated under the Finance Ministry Regulation 70/PMK.011/2013 dated April 2, 2013, which is also in line with the Presidential Instruction No.2/2012 on the Increase of oil Production. This instruction regulates all ministers and regional heads to support the government’s effort to increase oil and gas production.    

 The government added three types of goods that are free from import tax in the Finance Ministry Regulation 70/PMK.011/2013. Those three goods are temporary imported goods, goods that are used for the exploration of upstream oil and natural gas as well as geothermal, and goods that are used for the exploitation of upstream oil and natural gas. 


Previously, those three goods were subjected to import tax as regulated under Finance Ministry Decree No. 231/KMK.03/2001. The goods that are used for the exploration of upstream oil and natural gas as well as geothermal will also receive additional incentives in form of value-added tax and sales tax on luxury good.

 However, the incentives will be given if the goods have met three requirements. First, the goods can’t be produced domestically. Second, the goods can be produced domestically but they don’t meet the required specifications. As for the third requirement, the goods can be produced domestically but the number is not sufficient for the industry.


In order to obtain this facility, tax payer must submit a request to the Director General of Custom and Excise together with the request to obtain import tax exemption. 


The applicant companies must enclose Import Plan which is approved and validated by Directorate General of New Renewable Energy and Energy Conservation at the Ministry of Energy and Mineral Resources. While the submission system of import duty exemption to comply the Customs regulations.

 The Finance Minister Regulation No.70/PMK.011/2013 signed by Agus D.W.Martowardjojo take effect on enactment date.

SKK Migas Risk Management and Tax Chief, Bambang Yuwono, said that incentives are expected to boost oil and gas industry. “The incentives will encourage contractors to conduct oil and gas explorations and exploitations,” he said, Thursday (4/25).

Currently, with Deputy Minister of Finance involvement in SKK Migas Supervisory Commission, the Finance Ministry is expected to be more comprehend and understand the business process in upstream oil and gas industry which is capital, technology intensive and risky. “Business process in upstream oil and gas industry is different from other sectors.”

During this year, SKK Migas targets 258 exploration wells drilling, 1,178 development wells and 1,094 workover wells. In addition, upstream oil and gas industry also plan to conduct 2D seismic survey along 18,751 km and 3D seismic of 22,298 km2.

National oil production started to rise since early this year, the average oil production in March 2013 reached 840,000 barrels per day, while average oil production in Q1 reached 830,900 barrels per day.

If compared with production rate on the last day December 2012 amounted 825,000 barrels per day, SKK Migas has managed restraining oil production decline up to 0% or zero decline, in fact it’s likely increase.

 The zero decline achievement in Q1 is the success and hard work of stakeholders including Production Sharing Contract Contractor, the Ministry of Economic Affairs, the Ministry of Energy and Mineral Resources, the Ministry of Forestry and support from the House Representative and Regional Parliaments as well as all concerned parties. (t06/t08/lt)

by Firman Hidranto, Aprilian Hermawan
source http://en.bisnis.com