Oil and gas investors to get interest and tax incentives

The government has prepared incentives for oil and gas production sharing contractors (PSC) in the form of interest cost recovery of investment credits and restitution of value added tax (VAT).

The director of exploration and production at the Director General of Oil and Gas at the Ministry of Energy and Mineral Resources, Kardaya Wardika, said that the move in giving incentives aimed to attract more investors.

"This move is part of our efforts to attract investors. So, we must create an attractive investment climate, and we must be able to offer more than other countries do," he said.

In the current incentive system, the government offers the so-called cost recovery, in which all production costs spent by contractors would be included in the calculation of the income split. The income would be split between the government and the contractors only after being reduced by all production costs.

Meanwhile, the director of exploration and production at state oil and gas company Pertamina, Gatot Kariyoso Wiroyudo, said the government would give tax restitution for PSCs from their exploration stage until they started their commercial production.

"I was told that the coordinating minister for economic affairs had agreed with the proposal to give incentives in the form of VAT restitution," he said.

PT Medco Energi International president John Sadrakh Karamoy welcomed the government's plan to offer more incentives to PSCs, especially the interest cost recovery and VAT restitution.

"That policy will drive PSCs to do more exploration. Currently our crude production keeps declining because of declining exploration activities," he said. (Godang/Epin)