Indonesian government ensures that it will continue to maintain the investment climate of upstream oil and gas sector during the pandemic by giving nine stimulus packages - Photo: Special

JAKARTA (TheInsiderStories) – Indonesian government ensures to maintain the investment climate of upstream oil and gas sector during the pandemic by giving nine stimulus packages. Earlier, the Special Task Force for Upstream Oil and Gas Business Activities (SKKMigas) sees the global investment in these areas is projected to fall by around 30 percent from the initial target US$325 billion to US$228 billion, due to the COVID-19 outbreak and the weakening of oil prices.

“We are taking steps to prevent a greater decline in investment (oil and gas) in Indonesia. There are nine stimuli that have been and are being processed,” said the chairman, Dwi Soetjipto in virtual press conference, on Friday (10/23).

The stimulus that has been implemented is the postponement of post-operation activity cost reserves or Abandonment and Site Restoration. There are 30 oil and gas contractors who have enjoyed the relaxation in this year.

Furthermore, a postponement or elimination of the liquified natural gas value added tax (VAT), by revised Government Regulation Number 81 of 2015 concerning Import and Delivery of Certain Taxable Goods that are Strategic in Nature Exempted from VAT imposition, abolition of rental fees for state property upstream oil and gas, as well as gas sales at discounted prices for all schemes above Take or Pay and DCQ.

The government has also made fiscal adjustments (flexibility) through the provision of incentives for a certain time limit such as accelerated depreciation, temporary split changes and full price Domestic Market Obligation. The ongoing stimulus package consists of a tax holiday for income tax in all oil and gas working areas and a delay or reduction of up to 100 percent indirect taxes.

There is also an elimination of the cost of utilizing the Badak LNG Refinery of US$0.22 per MMBTU which is currently being discussed between SKKMigas and finance ministry. Finally, support from the EMR ministry that fosters upstream oil and gas support industries (steel, rig, service and service industries) to support upstream oil and gas activities.

The EMR ministry just reported, the realization of the average Indonesian Crude Price (ICP) rose to US$42 a barrel at the end of September, higher than macro assumption of the Revised 2020 State Budget at $38 per barrel. It had a positive impact on state revenues which reached $6.99 billion or 119 percent exceeding the state budget’ target of $5.86 billion.

Sutjipto sees that the emergence of the second wave of COVID-19 is expected to cause an average ICP around $40 a barrel in this year and the outlook for state revenues from the upstream oil and gas sector will reach $7.21 billion. While, the investment realization in the third quarter was supported by PT Pertamina E&P, Chevron, PT Pertamina Hulu Mahakam, BP Berau and Eni East Sepinggan.

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