Minister to draft regulation on groundwater acquisition value

Minister of Energy and Mineral Resources Ignasius Jonan plans to issue a new ministerial regulation on groundwater acquisition value (better known here as NPA) in upstream oil and gas activities.

Jonan revealed the plan during a hearing with the House of Representatives Commission VII on energy and mining on Monday.

The ministry said in a statement Wednesday that the NPA is used as a basis by provincial administration to determine income tax on groundwater produced by extractive industries such as oi land gas.

But the minister feared that assigning a high tax on the groundwater produced in upstream oil and gas activities will undermine the economic feasibility of the oil and gas projects.

?Philosophically, the extractive activity (of upstream oil and gas industry) is to get oil and gas, not water. (The extracted) water is unavoidable. If it is subject to high income tax, the upstream oil and gas projects will no longer become economically feasible,? he said.

He said that the new regulation would accommodate both the interest of the oil and gas industry, and local administration in getting new revenue sources.

The current regulation determining NPA was based on a regulation issued by Minister of Home Affairs, the drafting of which did not involve the Ministry of Energy and Mineral Resources.

Meanwhile, Director General of Oil and Gas Ego Syahrial suggested that the water extracted in the upstream oil and gas industry to be returned into the reservoir, and not utilized, as such it would not have to be subject to income tax by local government.

Editing by Reiner Simanjuntak