Oil, gas firms seek incentives amid oil price drop

By Febry Silaban

Oil and gas contractors operating in the country have asked for the government to ease a number of requirements as incentives to help them cope with the current oil price drop, according to a senior official.

Upstream Director at the Directorate General of Oil and Gas, Djoko Siswanto said that the requests were made during a recent meeting with the Indonesian Petroleum Association (IPA).

Djoko said that the PSC holders, for instance, has asked for a moratorium of exploration period requirement as they have been facing difficulties in meeting the exploration commitment amid the lingering weak oil price.

"We met with the members of IPA (Indonesian Petroleum Association) in order to hear input from the PSC holders. They proposed for a moratorium of exploration period," he said.

Djoko explained that according to the Oil and Gas Law, oil and gas contractors are given until 10 years to carry out exploration activities. But with the current low oil price condition, the PSC holders have difficulties in requesting for exploration funds from its head office abroad.

Djoko said the government has yet to decide on the request, but it would likely apply it on a case by case basis as some companies may want other forms of incentives such as tax holiday, flexible commitment, etc given the wide gap in exploration and production cost among the companies, which ranges from US$4 per barrel to $70 per barrel.

?Thus, our action later is that one by one of the PSC holders will meet and discuss with the government, whether they want to a moratorium or others, for example tax holidays, flexible commitment, etc.," he said.

Elsewhere, Djoko said that some PSC holders have also asked for flexibility to transfer exploration commitment particularly among companies that own more than one field, and flexibility to substitute types of exploration activities.

"PSC holders that have more than one block want to divert their exploration commitments from one block to another block which is considered more economical. Rather than having to drill today, the company wants to replace it instead with seismic activity only. For example, seismic survey in the deep sea is more expensive in Papua and they want to transfer the seismic activity to Sumatra which is cheaper. That is flexibility," he explained.

According to Djoko, the transfer of the exploration commitment does not need to change the rule, but can be facilitated by only changing the contract. "Meanwhile, the financial value of the commitments is still same," he said.

Editing by Reiner Simanjuntak