Ministry of ESDM Says Oil and Gas Investment Starts Rising

INDUSTRY.co.id - Jakarta - The Ministry of Energy and Mineral Resources (ESDM) stated that investment in oil and gas sector began to show improvement after bureaucratic cuts.

"It is impossible for any Government to deliberately impede investment, as early as this year the Minister of Energy and Mineral Resources has cut 186 licensing of the EMR sector, 56 of which are related to oil and gas." "It's not a discourse yet, but it was done last March as a result, the investment process is smoother, many business actors feel the benefits directly," said Head of Communication, Public Information and Cooperation Services (KLIK) Ministry of ESDM, Agung Pribadi in Jakarta, Tuesday.

The results of the next oil and gas investment policy of 20 oil and gas blocks with the contract scheme "Gross Split" enthused investors. Nine of them are from oil and gas block auction results in 2017 and 2018.

But the 2018 auction is also not finished, so it will potentially add again later in June 2018 when the auction is complete. In fact, auction in 2015 and 2016 with the contract scheme "Cost Recovery" there is absolutely nothing to sell.

"From January 2017 to May 2018, there have been 20 oil and gas block contracts using gross split, 1 ONWJ block, 5 blocks of 2017 auction results, 6 termination blocks 2018, 4 blocks of direct offer auction 2018 and 4 termination blocks 2019. Regular auction 2018 results will be announced in June 2019. Can add more," said Agung.

Meanwhile, Vice Minister of EMR, Arcandra Tahar said that gross split oil and gas contract is aimed to accelerate upstream oil and gas business process. So that the time needed since the first oil and gas reserves was discovered (first oil) until the field is producing no longer takes a long time, which since the era of the 2000s could reach 15 years.

"Gross split is our choice because of the many challenges ahead, especially in accelerating the business process from exploration to exploitation," explained Vice Minister of EMR, Arcandra Tahar.

The government has also improved the oil and gas investment climate through the Government Regulation (PP) No. 27 of 2017 and Government Regulation No. 53 of 2017 related to fiscal incentives on oil and gas contracts. Substances include, among others, the exploration period of import duty has been waived.

Value Added Tax (VAT), Sales Tax on Luxury Goods (PPnBM), Import Income Tax is also free of charge. Land Building tax is down to 100 percent. As for the period of exploitation can also be given based on economic considerations.

The next investment policy that gives an opportunity to existing investors to be able to manage oil and gas blocks so that national investment and production are maintained, but still must be more profitable to the State. The policy is implemented through Minister of Energy and Mineral Resources Regulation No. 23 of 2018 on Management of Oil and Gas Working Areas that Will End Their Contract of Work as amended through ESDM Regulation No. 28 of 2018.

Pertamina is said to be able and potential to get the right to manage the terminating oil and gas blocks. Pertamina may apply for the management of the oil and gas blocks and will be evaluated by the ESDM Ministry and inter-agency team.

Since last year, 12 oil and gas termination blocks have been granted to Pertamina. Finally, from 4 termination blocks in 2019, two of them are given to Pertamina, while the other two Pertamina are less interested or do not apply.

The twelve blocks of termination make Pertamina control about 36 percent of national oil and gas production this year (April 2018 status).