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Jakarta Post

Oil and gas industry prioritized in upcoming policy package

Ayomi Amindoni (The Jakarta Post)
Jakarta
Wed, May 25, 2016

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Oil and gas industry prioritized in upcoming policy package An oil pump seen at sunset in the desert oil fields of Sakhir, Bahrain, Sept. 30, 2015. The Indonesian government is preparing stimuli for the oil and gas industry for the 13th economic policy package to buttress investment in the industry in a sluggish market. (AP/Hasan Jamali)

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he next economic policy package will specifically address the oil and gas industry, Coordinating Economic Minister Darmin Nasution has said.

The capital-intensive industry has played a major role in Indonesia's economy. However, the global economic slowdown and a plunge in oil prices, as well as domestic policies, have hampered oil and gas investment in the past two years.

Therefore, the 13th policy package aimed to develop the oil and gas industry this year, Darmin said in his keynote speech at the 40th Indonesian Petroleum Association (IPA) Convention and Exhibition, held at the Jakarta Convention Center in Jakarta on Wednesday.

"We do not have much time to waste and let it slip into the coming years," he said, adding that deregulation and infrastructure development as the backbone of the economy were needed to mitigate the impact of the global slowdown.

In 2015, Indonesia booked US$12.9 billion in oil and gas revenues. It was the first time for the government to see the industry contribute lower revenues than the cost recovery, which stood at $139 billion.

The 64 percent drop in oil prices last year corresponded with a 44 percent drop in oil and gas gross revenues. Average production fell by 28% due to limited investment in exploration and delays at strategic projects, including Banyu Urip, Ridho, Bukit Tua and North Duri.

Energy and Mineral Resources Minister Sudirman Said added the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas) was in the process of streamlining current regulations, while at the same time preparing a friendlier portion split in production sharing contracts, referred to as a “sustainable split”.

"We will offer this concept to the industry, on how to determine the split and the time frame to establish sustainable partnerships [...] We commit to being the initiator of reform in the oil and gas industry. There is room for improvement, and we will always encourage this," he said.

The ministry's director general of oil and gas, IGN Wiratmaja Puja, added that other incentives the government would offer were the extension of exploration periods, flexibility of exploration transfer and substitution, and incentives for exploration in deep water and remote areas.

All incentives are expected to be completed in the third quarter of 2016, he said. In addition, the ministry would continue streamlining industry regulations, after reducing the previous 104 regulations to 42 regulations.

"We are currently in the process of cutting them to only 20 regulations. In the long term, we will reduce them even further to eight regulations," he said, adding that revision of the Oil and Gas Law would support government efforts to reduce the regulations to only three. (ags)

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