Playing second fiddle to anyone is hard, however, the upstream oil and gas sector seems to be all but neglected now that it is no longer the state’s main money maker. State revenue from the oil and gas sector is no longer what it once was amid low global crude oil prices.
It only contributed Rp 44.9 trillion (US$3.35 billion), around 17 percent, to non-tax state revenue totaling Rp 262.4 trillion, a far cry from the target of Rp 68.7 trillion. A former member of the Organization of Petroleum Exporting Countries (OPEC), the country faces the painful reality of being a net importer of oil, as its output -has consistently been low because of aging oil fields and minor investment in exploration.
Oil and gas imports surged 55.7 percent year-on-year (yoy) to US$ 88.2 billion from January to April, according to the Central Statistics Agency (BPS). However, the grim picture may soon change as Indonesia is apparently determined to reverse a drop in its crude oil production.
In its latest plan to overhaul the flagging upstream sector, the government has expressed its desire to follow the footsteps of Mexico, which it considers a role model, It is preparing a set of new regulations to patch up loopholes and , disincentives that have made the sector largely unattractive, according to the Energy and Mineral Resources Ministry’s oil and gas director general, IGN Wiratmaj a Puja.
“We are trying to copy what our friends in Mexico did to attract more investment in the upstream. We will use, Mexico as a benchmark, although We won’t make everything the same,” said Wiratmaja on the sidelines of the 41th Indonesian Petroleum Association (IPA) exhibition and conference on Thursday.
“We are trying to copy what our friends in Mexico did to attract more investment in the upstream. We will use, Mexico as a benchmark, although we won’t make everything the same,” said Wiratmaja on the sidelines of the 41th Indonesian Petroleum Association (IPA) exhibition and conference on Thursday
The plan includes online integrated data on the oil and gas industry available to both investors and researchers, and a few rules, including one to enhance the edge of the ultra-deepwater fields. The prepared measures were being Hnalized, Wiratmaja said, without elaborating on the time frame.
Deputy minister Arcandra Tahar, meanwhile, said the ministry would propose an Amendment to Government Regulation No. 35/2004 on upstream oil an gas activities to allow more Flexibility under the available contract schemes. Earlier, Energy and Mineral Resources Minister Ignasius Jonan said his office was designing a set of financial incentives, such as a tax exemption for imports of drilling equipment and a simpler cost recovery scheme.
Mexico carried out full regulatory and institutional reform to lure new investment after closing off its energy sector from the world for 75 years. These include amendments of three constitutional laws and dozens of secondary laws and regulations, as well as the establishment of two independent regulatory agencies with tenures beyond the president’s six years in office, according to Nicole David Palau, the director general of investor relations and promotion at Mexico’s energy secretariat, who spoke at the IPA exhibition and conference on Wednesday.
Jakarta Post, Page-1, Friday, May 19, 2017
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