INTERVIEW: Government will soon issue new oil and gas regulation

The government will soon issue new oil and gas regulation as the follow-up of the introduction of the new Oil and Gas law. Below is an interview between Bisnis Indonesia and Director General of Oil and Gas Rachmat Soedibyo on the issue.

Question: How far the new regulation will provide incentives to oil and gas companies?

Answer: Up to now, the draft on the new oil and gas law has not provided much incentives to oil and gas investors. However, I could not yet explain which incentives which could be enjoyed by oil and gas companies.

Q: Is there any plan to provide incentives to oil and gas companies?

A: The government has at least planned to provide incentives as the compensation of the finance ministry?s decision to impose Value Added Tax on oil and gas exploration activities. We will continue to negotiate the VAT payment but the final decision will depend on the finance ministry. The problem is that the VAT payment could generate at least Rp 2 trillion in government revenues.

Q: Did oil and gas companies or Pertamina?s production sharing contractors protest the VAT payment?

A: The Ministry of Energy and Mineral Resources received a lot of complaints on the matter. If we do not pay attention on their complaints, the investors might leave Indonesia.

Q: If it is the problem, how the government will respond it?

A: As I said earlier? a number of efforts would be taken to ensure that the VAT payment would not cause loss to investors. The incentives will therefore be given on exploration activities on frontier areas including on deep-sea area.

Q: How about the new contract under the new oil and gas law?

A: There might be two different systems for old and new contracts. The government has made it clear that the VAT payment for new contract will continue despite protests, while the disputes on the VAT payment which are now still handled by the tax dispute settlement agency (BPSP) will be handed over to the finance ministry.

Q: If it is the problem, how about the draft of the new oil and gas regulation?

A: The government is currently drafting five regulations to support the implementation of the new oil and gas law. But the number could be increased to six. The current draft regulations cover issues related to the change of Pertamina?s status, the implementation agency, the regulatory body, upstream and downstream operations. And possible issue related to manpower.

Q: What we can expect from the new regulation?

A: The government expects that the issuance of the new oil and gas law would provide legal certainty to all companies involved in oil and gas exploration and production activities. However, I acknowledge that many financial burden imposed by the finance ministry has raised concerns among oil and