PSC holders asking for incentives to weather oil crisis

By Febry Silaban

PSC production holders are asking for government incentives to help them weather the impacts of the oil price drops. The incentives include tax holiday, waivers of First Tranche Petroleum (FTP) and Domestic Market Obligation (DMO), and change in profit split, according to an official of the Ministry of Energy and Mineral Resources.

With regards tax holiday, the PSC holders want to be exempted from tax-paying obligation over a certain period, Djoko Siswanto, Director for the Management of Upstream Activities at the Directorate General of Oil and Gas, said.

"So far, the government only give five-year (tax holiday). In situations like these, the contractors would rather have a longer tax holiday, say 10 years. They also asked for a faster approval for the management of tax,? he said.

With regards FTP and DMO, PSC holders want the FTP and DMO obligations should be waived at the current market depression to allow them receive enough revenue to cope with the oil price drop.

FTP refers to the portion of production shared by the government and contractors prior to cost deduction, while DMO is the portion of production allocated for the domestic market. The DMO price is usually lower than the international price.

"With regards their request for change in production split, such request is difficult to meet. What we have done is changing the production split for contract extension. (For instance), we've introduced a new production split scheme for the new contract on Mahakam block, that is the sliding scale (revenue over cost) scheme," he said.

Djoko said the requests of the PSC holders are still being discussed by the government. There is no certainty if the government will accept all the requests or, if the requests are accepted, they can be immediately applied to help oil and gas companies, according to Djoko.

Editing by Johannes Simbolon