Comment: Stop reimbursements in Indonesian oil PSCs

Paper Edition | Page: 8

Aug. 27, p. 6

A recent purview of the August edition of Indonesia’s PetroMiner and ASIA OGE (Oil, Gas, and Electricity) magazines show that the investment vehicle of production sharing contract (PSC) is still alive and well in Indonesia.

It is interesting to note that talk of reducing fuel subsidies is never linked with increased guarantees (payments to) oil and gas companies in regards to the PSC. (By Will Hickey, Jakarta)

Your comments:

The problem is not the fuel subsidy, but how it is optimally used for the so-called “best interest of the people”. As long as it reaches the very people it is intended to reach, then no argument here.

As for the cost recovery, it is paid for only when oil and gas are produced. So production, which means revenue, is already guaranteed. The government’s share is much higher anyway: 85 percent for oil and 70 percent for gas (normally) as compared to some 12.5 percent the mining firms pay the government.

The scheme is a form of incentive at a time when companies already bear the risks and costs for exploration drilling which hits dry holes.

My argument is, I think the country can afford to maintain both the fuel subsidy and cost recovery for PSC holders.

Furthermore, please check your facts. The “British Petroleum’s US$11 billion Tangguh train 3 Coal Bed Methane (CBM) project in West Papua” is incorrect. Tangguh is a gas project (LNG), not CBM. Indonesia has yet to produce CBM.

Cumi