Pertamina faces tax challenge in Mahakam block
Saturday, March 11 2017 - 05:08 AM WIB
State-owned oil and gas firm PT Pertamina is reconsidering its earlier plan to drill a total of 19 wells at the Mahakam block this year due to emerging tax issue, Bisnis Indonesia reported on Saturday.
The paper quoted Chairman of upstream oil and gas authority SKK Migas, Amien Sunaryadi as saying that the Ministry of Finance considered the drilling program planned by Pertamina in Mahakam block this year, during a transition period before the block is transferred to the company from existing operator PT Total E&P Indonesie, subject to value added tax (VAT).
Amien explained that the additional financial burden from the VAT has affected the economic feasibility of the planned drilling program, prompting Pertamina to reconsider the plan. ?There are factors particularly tax that (makes) the number of wells to be drilled will probably not 19, but less,? he said, adding that discussion with the Ministry of Finance over the tax issue has been scheduled.
The Mahakam block in East Kalimantan province will be transferred to Pertamina via subsidiary PT Pertamina Hulu Mahakam after the contract of existing investors Total and Inpex Corp will expire end of this year. In a bid to help maintain production at the block, which contributes about 20 percent to the country?s gas output, Pertamina has been allowed by the government to make early investment in the block this year with a plan to drill a total of 19 wells. Meanwhile, existing operator Total plans to drill six wells this year.
Minister of Energy and Mineral Resources Ignasius Jonan visited on Friday the Mahakam block?s South Processing Unit and Bekapai fields where he reiterated calls for maintain production at the block during the transition period to Pertamina. ?Production must be maintained, and operation must be efficient. As such, cost must increase and output must no decline,? he said in a statement issued by the ministry.
Mahakam block?s average production currently stands at 1,635 mmscfd of gas and 63,000 bpd of oil. (*)