Govt rejects IPA? FTP proposal

By Bernard Loebs

The government rejects the contractors? proposal to reduce the portion of First Tranche Petroleum (FTP) to 1 percent for non-conventional blocks.

?One percent is difficult to accept. People will get angry with me, if I accept the proposal,? Djoko Siswanto, Upstream Director at the directorate general of oil and gas, said.

He said the ministry is still negotiating with the Indonesian Petroleum Association (IPA) on the issue.

?For conventional blocks, the FTP is 5 to 20 percent. For non-conventional blocks, 5 percent FTP still makes sense,? he said.

The reduction of FTP portion is part of the incentives proposed by the oil and gas contractors to allow them weather the current oil price drops. FTP refers to the portion of production shared by the government and contractors prior to cost deduction, while DMO is the portion of production allocated for the domestic market. The DMO price is usually lower than the international price.

Editing by Johannes Simbolon