Government to increase IRR in upstream projects above 15%

The government is looking for ways to increase the internal rate of return (IRR) in oil and gas upstream projects beyond 15 percent to help lure new investment in the sector.

Interim Minister of Energy and Mineral Resources Luhut Panjaitan said in a statement issued on Tuesday that the ministry is currently finalizing the revision of Government Regulation No 79/2010 on cost recovery and income tax treatment in upstream oil and gas sector.

He said that while the final draft was supposed to be sent to the State Secretary this week for approval, it has been delayed as the ministry needs to discuss further with the Ministry of Finance and Directorate General of Taxation to reformulate the tax formula and other matters so that the IRR in upstream projects can reach more than 15 percent.

Luhut explained that increasing the IRR in the upstream projects is necessary to attract fresh investment as it is now more difficult to get oil from existing fields.

Editing by Reiner Simanjuntak