New Oil and Gas Fiscal Policies are Needed to Attract Investors, Says Energy Minister

MINISTRY OF ENERGY AND MINERAL RESOURCES

THE REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 20.Pers/04/SJI/2022

Date: 12 January 2022

New Oil and Gas Fiscal Policies are Needed to Attract Investors, Says Energy Minister

The Ministry of Energy and Mineral Resources (EMR) has continued to make improvements in order to anticipate domestic demands for energy in the future. One strategic policy the government has adopted is to set a target for oil production of 1 million barrels of oil per day (bopd) and natural gas of 12 billion standard cubic feet per day (bscfd).

"We have formulated a road map, and are executing several strategies," said Minister of EMR, Arifin Tasrif, in a press conference titled Performance of 2021 and Work Program for 2022 held in Jakarta on Wednesday (12/1).

The strategies include optimizing existing fields' production, transforming resources to production, accelerating the technologies for chemical Enhanced Oil Recovery (EOR), and massive exploration for major discoveries. "All these strategies must be supported by new policies of oil and gas fiscal to attract investors," said Arifin.

In particular, Arifin explained that the government has implemented flexibility in oil and gas contracts, to be either in a gross split or a cost recovery scheme, so as to increase the investment amount in upstream oil and gas.

In addition, the Ministry of EMR has also improved the terms & conditions (T&C) of oil and gas block contracts, from a biddable signature bonus, contractor split of up to 50%, a 100% price for DMO, no ceiling cost, investment credit, to accelerated depreciation. "In 2021, we announced the winners of two blocks (EMP & Husky)," explained Arifin.

Special for existing blocks, Decision of Minister of EMR Number 199 of 2021 on Guidelines for Providing Incentives for Upstream Oil and Gas Business mandates the improvement of T&C and the increase of IRR which is below the plan of development (POD) or at least in a 15% range.

Improvements were also made to the management and access to upstream oil and gas data and licensing process through online system. "Many people complained about time, so we have now reduced the processing time," said Arifin.

In terms of upstream oil and gas fiscal incentives, the Ministry of EMR has in the last two months coordinated with the Ministry of Finance to improve the provisions on indirect tax, adjust income tax rates, and apply up to 100% of price for DMO. (IY)

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