Tax Office imposes tax on exploration drilling: BPMIGAS

Contractors that are conducting drilling in Indonesian exploration blocks are facing another cost headache as the Directorate General of Tax is imposing 20 percent withholding tax on exploration drilling activities, which in the past had been exempted.

BPMIGAS Deputy Chairman Wibowo S. Wirjawan told Petromindo.Com on Thursday that Tax Office is insisting that rig rental and equipment rental related to drilling activities are subject to 20 percent withholding tax.

Wirjawan said that BPMIGAS together with Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources are trying hard to lobby Tax Office to cancel its decision, as it would make PSC contractors reluctant to carry out drilling activities in Indonesia.

?Exploration drilling risks are in the hand of contractors. If they fail to find oil, gas then they will shoulder the financial loss alone. They should not be burdened with additional 20 percent cost,? he said.

He said that the Tax Office has ordered ExxonMobil Oil Indonesia (EMOI), a unit of US giant Exxon Mobil Corp., which is currently conducting a deepwater drilling in Mandar exploration block in Makassar Straits to pay 20 percent tax for rig and equipment rental.

An EMOI official said in January 2010 that the Company would spend US$100 million to drill the well. (alex)