Cost recovery regulation finally settled

JAKARTA. The government finally settled the revision on Government Regulation No 79/2010 on cost recovery and oil and gas downstream tax. This regulation will only affect to the new oil and gas contracts, which are made after the regulation is signed by president.

Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan said that the regulation respects the existing contracts, which have been running before Government Regulation No 79/2010 was revised.

Some entrepreneurs consider the revision draft of Government Regulation No 79/2010, which were made by Ministry of ESDM and Minsitry of Finance does not provide incentive. Conversely, the revision draft is a disincentive, on the grounds that the tax exemption during the exploration period only targets some taxes collected at the central level, such as imports value-added tax, import duty, domestic value-added tax, as well as land and building tax.

Meanwhile, contractors of cooperation contracts (KKKS) are still subject to some other taxes, such as the tax on explored oil field location.
According to Jonan, the assume and discharge, which were requested by the contractors to be included in the revision of Government Regulation No 79/2010, do not have the legal base. Because, the Law No 22/2001 on Oil and Gas does not include this matter.

Jonan added, the government hopes that the revision can drive the entrepreneurs to develop their investments to exploration and exploitation activities in order to find new oil and gas reserves. “The revision aims at providing regulation related incentives for contractors to develop exploration activities, such as to find new oil and gas fields, and others,” he stated.

Director General of Oil and Gas at Ministry of ESDM I Gusti Nyoman Wiratmaja Puja stated, the government decision respects the oil and gas contracts, which have been signed and have certain legal base. Therefore, the revision will only affect to the new contracts. The finalization of the revision is expected to settle before 2017. “The revision will be submitted to Coordinating Minister of Economic Affairs, then to Ministry of State Secretariat. We will finalize in one week ahead,” he said.

Director of Indonesia Petroleum Association Sammy Hamzah previously requested the government to include assume and discharge principles in the revision of Government Regulation No 79/2010.

However, until the news was revealed, Sammy has not yet responded to the phone calls or short messages from KONTAN related to government’s decision on Government Regulation No 79/2010.

(Muhammad Farid/Translator)