JAKARTA: The goverment of Indonesia plans to revise Government Regulation No. 79/2010 scrapping several taxes that have been a burden for those companies that invest in Indonesia’s oil and gas industry (both the exploration and production phase). The government expects that several new fiscal and non-fiscal incentives will boost investment in this industry starting from 2017. Indonesian Finance Minister Sri Mulyani Indrawati said it is important for the government to share in the “pain” in order to make oil and gas projects economically viable for investors.
Sri Mulyani said a sliding scale concept is proposed to be added to Government Regulation No. 79/2010 meaning that the government will receive a higher share of revenue when the oil price climbs, but will share the loss in case the oil price plunges and – in addition – scraps various taxes.
She added that a revision is needed as the existing legal framework discourages investment in oil and gas exploration. This is one of the main reasons why Indonesia’s oil production realization has been on the decline for the past 20 years. If the current trend continues, then Indonesia may only produce 400,000 barrels of oil per day (bpd) in 2020, from around 834,000 bpd in 2016.
