Oil and Gas firms say no to contract renegotiation
Friday, July 22 2011 - 03:36 AM WIB
?I think most of the contract signatories believe that their contracts need to be honored because they were agreed upon in the past,? Jim Taylor, a vice president at the Indonesian Petroleum Association, said on Thursday. The IPA represents the 52 oil and gas companies that operate in the country, including such international giants as ExxonMobil, Chevron Pacific Indonesia, French Total E&P Indonesie and ConocoPhillips.
Taylor, who is also the general manager of the country's second largest gas producer ConocoPhillips Indonesia, went on to say that renegotiation on any existing contracts would send a bad signal to the international community with regard to contract sanctity in Indonesia, which could result in dwindling confidence and investment.
Taylor's comments were made in response to calls by lawmakers for the government to renegotiate oil and gas contracts. The calls were made on Wednesday during a hearing between the lawmakers, upstream oil and gas regulator BPMigas, the Tax Office and the State Development Financial Comptroller (BPKP) upon revelation that many were paying taxes not to the full amount that have been stipulated under their contracts.
Taylor stressed that no oil and gas contractors would be willing to renegotiate the contracts, saying: ?I don?t think everyone will agree to renegotiate the PSC [production sharing contract].?
Taylor's responses were echoed on Thursday by representatives from ExxonMobil, Chevron Pacific Indonesia and Total E&P Indonesie. They also are in agreement that renegotiation could only harm investment in Indonesia.
BPMigas chairman Raden Priyono is in favor of industry players, saying that the government must honor contracts to ensure certainty. ?Because as soon as we do not honor contracts, we [Indonesia] will be disrespected by the world.?
Current oil and gas production sharing contracts in general give the government a 85 percent share of profits and the remaining 15 percent to contractors. According to the Tax Office however, oil and gas producers end up getting 21.5 percent, largely because of international double taxation treaties. (*)