Mines, energy minister wants incentives for Exxon be revoked

Minister of Mines and Energy Susilo Bambang Yudhoyono has asked President Abdurrahman Wahid to revoke the gas production sharing incentive for Exxon Mobil Corp. for its multi-billion dollar East Natuna project.

The request was revealed by state oil firm Pertamina's exploration and production director Gatot Karyoso Wiroyudo, who said that the incentive in the form of better revenue sharing for Exxon violated the principle of Indonesia's production sharing contracts (PSC) for gas.

Under the current gas PSC system, the government is entitled with 70 percent of revenues, while the remaining 30 percent goes to the contractors.

However, in the Natuna project, Exxon is entitled with 40 percent, while the government will get only 60 percent. This incentive is given by the government with proposal from then state minister of research and technology B.J. Habibie.

And when Habibie rose to presidency, he also gave incentives in the form of better revenue sharing for gas contractors, with 35 percent of revenue going to contractors and 65 percent to the government. This incentive was given to Premier Oil and Conoco Indonesia for their gas project in West Natuna.

Gatot said that if the government wants to give incentives to investors in the gas and oil sector, it should give it in other forms, such as in the taxation side, but not in the PSC contract itself.

He revealed that when Exxon's PSC contract expires in 2004, the government will likely ask Exxon to stop its exploration activities if it could not find significant amount of gas reserves.

The Natuna gas field is said to be the world's largest gas field, with gas reserves projected at 222 trillion cubic feet of gas, of which 46 trillion cubic feet can be commercially exploited. (*)