Govt rejects Chevron?s request for incentive in IDD project

By Febry Silaban

The government has rejected the revised Plan of Development-1 (PoD-1) for the Indonesian Deepwater Development (IDD) project submitted by American company Chevron Indonesia Co. (CICo) due to what is considered as excessive tax incentive requested by the company to develop the Gendalo and Gehem fields in the Makassar Strait.

Upstream Director at Ministry of Energy and Mineral Resources Djoko Siswanto said on Tuesday Chevron has asked for a 240 percent investment credit for the IDD project.

According to Djoko, the investment credit should not be more than 100 percent, although the IDD is a deep-sea project that has a greater risk.

The Indonesian Petroleum Association (IPA) has proposed investment credit of only 50 percent for upstream projects. "Hence, the revision of the POD is returned and reviewed again by SKK Migas (upstream authority) for Chevron has asked too much," he said.

PoD for the IDD project was first approved by SKK Migas in 2008. However, after a phase of Front-End Engineering Design (FEED) in 2013, the cost required for this project increased almost two-fold, from about $7 billion to $12 billion.

After nearly two years of delaying the project, Chevron reinserted the IDD proposal of Gehem and Gendalo fields to SKK Migas at the end of 2015. However, SKK Migas rejected the proposal as the content was deemed incomplete, requesting CICo to revise the PoD.

The IDD project comprises of four gas blocks including Ganal, Rapak, Makassar Strait, and Muara Bakau, covering five fields including Bangka, Gehem, Gendalo, Maha, and Gandang. Ganal, Rapak, and Makassar Strait are operated by CICo, while Muara Bakau by Eni Spa. According to an estimate, the IDD project is able to produce 1,270 mmscfd of gas at peak production.

Editing by Reiner Simanjuntak