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Oil and gas industry wants existing contracts exempted from carbon tax
Indonesian Oil and gas firms want existing contracts exempted from the carbon tax, arguing this is necessary to ensure the country remains attractive for upstream investment.
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Operators open a valve to release the first gas of the South Jambi B Block on June 24, 2021. (Courtesy of SKK Migas)
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ndonesian Oil and gas firms have demanded that existing contracts be exempted from the carbon tax, arguing this is necessary to ensure the country remains attractive for upstream investment.
National Energy Board (DEN) member Satya Widya Yudha said the Indonesian Petroleum Association (IPA) hoped the government would not impose a carbon tax that would affect existing contracts in the oil and gas industry.
To soften the blow of a carbon tax, he proposed an exemption from value-added tax (VAT) and fiscal policy changes to make contracts more appealing to developers.
“Should the [carbon tax] be imposed, additional fiscal and other incentives are crucial for oil and gas investment to remain competitive and attractive,” he said in a webinar by set up by Reforminer Institute on Tuesday.
Putra Adhiguna of the Institute for Energy Economics and Financial Analysis (IEEFA) said that, should a carbon tax be implemented, it would have to be balanced between sectors and adjusted to government priorities.
“A fiscal stability clause for existing contracts will most likely be included, albeit as a separate consideration,” he told The Jakarta Post on Wednesday.
The government has announced plans to introduce a carbon tax to tackle a wide budget deficit and meet its climate goals.
