Ministry to issue incentive packages in Q3
Wednesday, May 25 2016 - 04:05 PM WIB
The Ministry of Energy and Mineral Resources will announce incentive package for oil and gas industry in the third quarter of 2016, according to a senior official of the firm.
The ministry chooses to announce the incentive package in the third quarter rather than in the first half of the year because it is still under discussion and there will be soon a long holiday, Director General of Oil and Gas IGN Wiratmaja said.
It is expected that the incentive package will make Indonesian oil and gas blocks more attractive to investors, Wiratmaja said.
In the latest block tender announced in the third quarter of last year, few investors were willing to participate and the government finally declared zero winner.
The incentive packages will consist of five main points. One of the points is that the exploration period will be extended if exploration brings no fruit. The PSC contractors will thus be able to extend its exploration to more than 10 years.
Furthermore, a special incentive will be given to deeepwater and remote area projects, while access to data will be simplified. Besides, the government will give chances for contractors to substitute well drilling with other activities in case situation is less conducive for drilling.
The other incentive is the government will allow investors to carry out cross cost recovery. While at present, the cost recovery is carried out based on the Plan of Development (PoD), PSC contractors will be allowed to cover the exploration costs of one working area using production revenue from another working area as long as both are located in one block.
?All the incentives will complement the dynamic split incentive which have implemented,? he said.
Aside from these incentives, there are several other incentives that have been prepared but the schedule of its announcement is not fixed yet since the issuance of these incentives needs coordination with other governmental institutions.
?One example is tax holiday. This incentive is still under review by other ministries,? he said.
Earlier, the Indonesian Petroleum Association (IPA) has asked for incentives to maintain the interest of investors amid the collapse of oil prices.
Editing by Johannes Simbolon