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Jakarta Post

Indonesian oil, gas firms rely on foreign loans for exploration

  • News Desk

    The Jakarta Post

Jakarta   /   Thu, September 8, 2016   /  08:55 pm
Indonesian oil, gas firms rely on foreign loans for exploration Interim Energy and Mineral Resources Minister Luhut Binsar Pandjaitan strikes a bedug drum to open the National Energy Security Forum at the Grand Sahid Jaya Hotel in Jakarta on Sept. 8. (JP/Reza Zafiruddin)

The low oil price has had a double impact on the oil and gas industry, with industry contractors (K3S) now relying on foreign loans to finance oil exploration as domestic bank loans become increasingly inaccessible amid gloomy market conditions.

Indonesian lenders had decided that oil exploration projects were not bankable and thus oil contractors currently preferred foreign loans to finance their activities, said Indonesian Petroleum Association (IPA) executive director Marjolijn Majong.

“No national banks are capable of providing US$100 million for oil drilling projects,” she told The Jakarta Post in Jakarta on Thursday, adding that foreign financial firms have a larger capacity to disburse loans than the national banks.

Given the situation, she further said, the government should create more incentives to stimulate the oil and gas industry.

Responding to that, Interim Energy and Mineral Resources Minister Luhut B. Pandjaitan promised to revise regulations which hampered oil firms’ expansion, in a bid to encourage contractors [K3S] escalate national oil lifting.

Luhut cited Government Regulation 79/2010 on cost recovery and taxation treatment in the upstream oil and gas industry as an example of legislation that discouraged oil firms from drilling as it obliged contractors to pay tax and cost recovery before engaging in exploration.

“The regulation doesn’t make sense for the oil business,” he said in a discussion held by the Indonesian Chamber of Commerce and Industry (Kadin), Indonesian Employers Association (Apindo) and National Resilience Institute (Lemhanas). (rez/ags)

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