Stimulus gives temporary relief

Alfian, ,  The Jakarta Post, ,  Jakarta   |  Wed, 01/07/2009 11:18 AM  |  Business

The government's stimulus package for the oil, gas, and geothermal sectors -- which amounts to Rp 2.5 trillion (US$225 million) -- may help consolidate exploration schedules, but the one-year incentive may be too short to yield long-term benefits.

Still, Sammy Hamzah, vice president of Indonesian Petroleum Association (IPA), said the stimulus packaged launched by the government would be very helpful for oil and gas contractors to keep their activities going amid the current crisis.

"With the stimulus, we expect the exploration activities can be done as planned, even though the economic situation is now no longer similar to that of six months ago," Sammy said through a short message service (SMS) on Tuesday.

The government Monday launched a fiscal stimulus package worth a total Rp 50 trillion (US$4.6 billion) to help the country survive the economic crisis. The package will operate for the 2009 fiscal year.

Included in the stimulus package are measures to relieve import duties, import taxes and value added tax on certain imported items used in the oil, gas, and geothermal industries. The policy is actually an extension of a 2008 finance ministry regulation.

For 2009, the government estimates that waived taxes for the three industries would have generated Rp 2.5 trillion in state revenue, which will now be foregone.

The government has said earlier that it expected oil and gas this year would attract investment of up to $16.64 billion, up from $12.21 billion in 2008.

Sammy said the incentive would have indirect positive impacts on production as well.

Meanwhile, Suryadarma, chairman of the Indonesian Geothermal Association (API), said the stimulus which only last for one year making it difficult for geothermal operators to calculate long-term costs and values for their projects.

"There is no guarantee that the stimulus will be given again next year ?" he said.

Suryadarma said the incentive ideally should be given for the whole period of a geothermal contract, which could last between 25 and 30 years.

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