Govt considering reducing its oil share to attract investment

Jumat, 17 Mei 2013 | 09:56

The Indonesian government is considering to give an incentive by reducing its share in the oil and gas production to attract investment in the sector.The director general of oil and gas of the ministry of energy and mineral resources, Edy Hermantoro, said here on Thursday the system would be easier to implement as it would not require changes in regulations.

"We are still considering it," he added.

Besides a fiscal incentive, he said, the government would also give legal certainty and simplify licensing procedures in its effort to attract investment in the field.

He said since 2000 the government has already given better production sharing incentives for exploration activities in difficult regions including in the deep sea.

He said production sharing has been given up to 65:35 for oil and 60:40 for gas while in general the ratio is 85:15 and 70:30 respectively.

The chairman of the oil and gas regulating task forces SKK Migas, Rudi Rubiandini meanwhile has asked for a larger reduction in production share.

He said reduction could be done in normal blocks especially new ones where the production sharing is initially 85:15 or in blocks difficult to explore.

Rudi said President Susilo Bambang Yudhoyono has already asked for considering to give more incentives to oil and gas exploration activities.

"The easiest one is a production sharing incentive," he said.

He said Indonesia is the fifth country that gives the biggest production sharing incentive.

Four other countries that give big production sharing incentives are owners of big reserves like those in the Middle East, he said.

"So, if Indonesia that has small reserves gives small production sharing incentives investors would not be willing to invest in the country," he said.

He admitted reduction in the production share would reduce revenue in the short term but "in the future the benefit will be bigger." "So, it is alright to sacrifice a bit," he added.(*)