Mitsui, Mitsubishi interested in entering into oil and gas investment in Indonesia
Tuesday, December 5 2000 - 02:30 AM WIB
Mitsui and Mitsubishi are reportedly interested in investing into the upstream and downstream oil and gas industries in Indonesia following the government's plan to give new incentives for new investment in the oil and gas sector.
Industrial sources in Japan said that Mitsui and Mitsubishi had reportedly partnered with Dutch oil giant Royal Dutch Shell and had presented a proposal to the Indonesian government to explore for oil and gas in a number of blocks, especially to exploit gas in the upstream sector.
They had also filed a proposal to the government to do a number of downstream gas projects, including gas to liquid (GTL) and middle distillate synthesis (MDS) projects.
"Those projects have been proposed by Shell, Mitsui and Mitsubishi, following the Indonesian government's plan to launch a package of incentives for oil and gas production sharing contractors," a Japanese industrial source was quoted by OPEC News Agency Bulletin as saying over the weekend.
The source said that the proposal for those projects was to support their main gas business in Indonesia, such as liquefied natural gas (LNG) business that had been proceeding well for decades.
"In a number of talks, Pertamina wants Japan to exploit more gas to flood Japanese market with more LNG from Indonesia," the source said.
"Meanwhile, Shell is interested in gas exploitation and processing in Indonesia in a bid to make its gas production location closer to Japan market," he added.
Currently, Indonesia exports about 40 trillion cubic feet of gas per annum to its traditional market of Japan, South Korea and Taiwan.
Incentives
The Indonesian government is currently preparing a package of incentives for oil and gas production sharing contractors.
According to the director of exploration and production at the Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources, Kardaya Warnika, the incentives include interest cost recovery for bank investment credit during exploration period and delay in the value added tax payment.
"This effort is to attract investors. Thus, we must provide an attractive investment climate and also compete with incentives provided by other competitor countries," Wardaya said.
In the prevailing production sharing contracts, the government gives cost recovery as an incentives for investors to come to Indonesia. But the government does not provide interest cost recovery, and tax relief. (*)