JAKARTA (TheInsiderStories) – The energy and mineral resources (EMR) ministry sees total investment in the energy and natural resources sector only reaches US$22.33 billion in 2020 from last year amounting to $31.9 billion due to COVID-19 pandemic. Early of this year, the government optimistic the investment realizations at $36 billion.
The secretary general of the ministry, Ego Syahrial, said on Monday (15/12), until October, the realization investment in these sector of $17.7 billion, consisting of $8.1 billion in the oil and gas sectors, $5.8 billion in the electricity sectors, $2.8 billion in the mineral and coal sectors, and the renewable energy sectors of $900 million.
For next year, he optimistic that investment activities in the energy and mineral sectors will rebound to $37.2 billion. He elaborated, the investment in the oil and gas sectors $18 billion, the electricity sector $9.9 billion, the mineral and coal sector $6.4 billion, and the renewable energy at $2.9 billion.
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 $325 billion to $228 billion, due to the virus outbreak and the weakening of oil prices.
“We are taking steps to prevent a greater decline in investment in Indonesia. There are nine stimuli that have been and are being processed,” said the chairman, Dwi Soetjipto in virtual press conference on October 23.
To attract more investment in these sector and to curb the declining, the government has offered various incentives and improve the policies. Recently, the government has giving nine stimulus packages to potential investors.
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 $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 $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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