Govt mulls issuing favorable fiscal term for East Natuna

By Godang Sitompul

The Finance Ministry is mulling issuing favorable fiscal term to encourage Pertamina and its partners in developing the East Natuna gas block, formerly known as Natuna D Alpha, Deputy Minister for Energy and Mineral Resources Widjajono Partowidagdo said.

?I have met with Finance Minister Agus Martowardoyo. He now has the understanding about the reasons behind the demand for incentives and better fiscal terms for the East Natuna block. There has been positive signal from the Finance Minister,? Widjajono Partowidagdo told Petromindo.com.

Earlier, Pertamina said it has requested for incentives and favorable fiscal term from the government to develop the block given high level of carbon dioxide element found in the block. They demand the government to provide lower tax schemes as well as lower split for the government.

Widjajono expects the Finance Minister to issue stipulation over the fiscal term for Natuna project in February this year.

PT Pertamina has been awarded by the government to develop the major block. Pertamina said earlier it was planning to sign a Joint Operation Agreement (JOA) over the development of the major East Natuna block with its partners, ExxonMobil, Total Indonesie and Malaysia?s Petronas.

The development of the block will require advanced and thus more expensive technology to remove the carbon dioxide. As a result, out of 200 trillion cubic feet gas reserves at the block, only 45 trillion cubic feet would be able to be produced. Therefore, the contractors of the block want better incentives compared to other gas blocks.

Pertamina has estimated that the development of the gas-rich East Natuna block will cost between US$20 billion and $40 billion due to high carbon dioxide content.

Editing by Roffie Kurniawan