New director general to focus on incentives and Tangguh renegotiation
Friday, February 1 2013 - 01:17 AM WIB
The new Director General of Oil and Gas at the Ministry of Energy and Mineral Resources, Eddy Hermantoro said he will fight to provide incentives for oil and gas contractors and focus on the renegotiation of Tangguh contract with Fujian.
?We believe exploration activities will increase if contractors are provided with incentives,? Eddy said in his first interview with the press on Thursday.
Eddy was among several top officials installed by Minister of Energy and Mineral Resources Jero Wacik on Thursday.
Eddy did not provide much detail about the incentives, but he said one of the incentives expected by oil and gas contractors is an exemption of value added tax (VAT) on exploration equipment.
?If a company buys a rig for US$50 million for exploration, it means the company is subjected to VAT of 10 percent, amounting to $5 million. If the drilling does not produce anything, it means, the company has given $5 million to the government for nothing,? he said, adding the policy was too burdensome.
According to him, the ministry sent a letter to the Ministry of Finance a year ago, asking for the VAT exemption but the latter has thus far given no response.
?Nevertheless, we shall continue pushing for the VAT exemption. We will pursue what is best for the country," he said.
With regards to the renegotiation on the Tangguh LNG contract with Fujian, Eddy said, the ministry has yet to launch the renegotiation because President Susilo Bambang Yudhoyono has yet to issue a decree on the formation of negotiation team.
?The decree is necessary because people in China are very strict on rules,? he said.
He said the ministry has proposed the negotiation team include the minister of energy and mineral resources, the director general of oil and gas and upstream authority SKK Migas.
Currently, the price of LNG exported from the Tangguh LNG plant in Papua to Fujian province of China stands at US$ 3.5 per mmbtu. The price is much cheaper than the domestic prices which now reach $ 5-$ 6 per mmbtu. Nusantara Regas even pays more than $10 per mmbtu for LNG from Bontang LNG plant in East Kalimantan.
Editing by Johannes Simbolon