Kontan Online

OIL AND GAS

The import duties for oil and gas equipment

Thursday, 23 February 2017 | Febrina Ratna Iskana

JAKARTA. The Ministry of Energy and Mineral Resources (ESDM) will immediately revise the Government Regulation No 35/2004 on Oil and Gas Downstream Activities. The revision aims at adjustment the gross split rules on oil and gas business.

Apparently, the discussion on the Chapter IX on the Utilization of Goods, Services, Technology and the Domestic Engineering and Design would be tough.

Vice Minister of ESDM Arcandra Tahar said, the Government Regulation No 35/2004 stipulates, if an exploration activity is considered as economically success, the goods imported by the contractor would be included under the recovery cost. Subsequently, the imported goods would be included under state's ownership.

The imported goods will still be included under state's ownership, despite the exploration activity does not have economic value, since those importer goods are considered as part of recovery cost.

However, the imported goods would have to go through a complicated process for two to three years to be handed over to the government. "The goods would have been broken when they are handed over," said Arcandra, Wednesday (22/2).

Even worse, the contractors still need to spend the returning costs.

According to Arcandra, if the exploration does not reach the economic value, the goods, which have been bought by the contractors, are supposed to go to the contractors. And, "It would be fair if the goods are imposed with the import duty," he said. To date, the imported goods have been free of import duties.

Arcandra suggested, the imported goods might be used in other working areas of the future projects, while the current regulation stipulates that the imported goods of an exploration activity may not be used for the next project in another area.

Arcandra claimed, the government wants to improve this condition so that the contractors can use their drilling instruments in other areas.

He expects that the revision would provide fairness to the government and the oil and gas companies. Let alone, the revision will not harm for the government.

The revision will boost the efficiency for the contractors in terms of goods expenditure to enlarge the results of the gross split.
The Secretary General of Oil and Gas Susyanto said that the revision also aims at simplifying the bureaucracy activities in the oil and gas sector.

Aside of revising the rules on imported goods, the Ministry of ESDM will also include the provision on the gross split and the participating interest of 10% for the oil and gas producer area in the revision of Government Regulation No 35/2004.
The Director of Indonesia Petroleum Association (IPA), Sammy Hamzah said that the policy would bring positive impact to the participants of oil and gas downstream business.

According to Sammy, to date, the process of returning goods is still complicated. In fact, the government does not necessarily benefit from those returned goods. “If the returning goods to the investors, would simplify the administration process, while the investors may want to use the imported goods for other purposes,” Sammy said. (Muhammad Farid/Translator)


 

Reporter: Febrina Ratna Iskana
Editor: Sanny Cicilia