JAKARTA (TheInsiderStories) - Indonesia will eliminate taxes on oil and gas exploration in an effort to bolster investment in the country´s flagging oil and gas sector. The revision of PP No. 79/2010 on Cost recovery will be announced today (Sept. 23) by Acting Minister for Energy and Mineral Resources Luhut Panjaitan and Finance Minister Sri Mulyani Indrawati.
Luhut said the government is aiming to remove all taxes on exploration, including a value-added tax on imported goods and a land tax that had been a deterrent to investment since it was introduced in 2010. Indonesia´s crude oil output peaked at around 1.7 million barrels per day in the mid-1990s but with few significant oil discoveries in Western Indonesia in the past 10 years, production has fallen to roughly half that as old fields have matured and died.
Those are seen hitting $10.4 billion in 2017 above a targeted $8 billion this year. Under the new regulation, the government will provide oil and gas contractors an internal rate of return above 15 percent, Pandjaitan said.