The fall in RI's oil production is caused by inefficiency: Expert

Declining oil production in the country is not caused by depletion of oil deposits or aging oil wells, but more due to inefficiency resulting from the introduction of the new oil and gas law, a senior oil and gas expert Kurtubi said as reported by Investor Daily on Friday.

Kurtubi, the chairman of the Center for Petroleum and Energy Economics Studies (CPEES), said in Jakarta on Thursday that the four major setbacks resulting from the issuance of the new oil and gas law includes:

- The lack of new investment. The delay in the issuance of the regulations on the implementation of the law has discouraged oil and gas companies from making new investments both in upstream and downstream activities.

- Inefficiency. The oil and gas authority such as BPMIGAS which was established under the new law has been too bureaucratic. This has also caused the delay in many exploration activities.

- Unreasonable Tax. The new oil and gas law which requires investors to pay tax even if they are still in exploration stage has also discouraged new investors. Before the implementation of the new law, oil and gas companies were only required to pay tax after they entered production activities.

- High Transaction Cost: The long bureaucratic procedures as the result of the new oil and gas law has also resulted in high transaction costs in almost all exploration and production activities. (*)