The Executive Agency for Upstream Oil and Gas (BP Migas) stated that the issue of Rp 1.6 trillion in tax arrears of three oil and gas companies from 1991-2008 is caused by the tax treaty and royalties for transfer of ownership of oil and gas working areas.
The Energy sector, particularly oil and gas, is in a dire condition due to the mismanagement of natural resources, when actually as a nation we should be grateful to have such abundant resources. Due to overcomplicated management, crude oil production has consistently missed targets for the last couple of years while in the downstream sector,consumption keeps increasing uncontrollably.
The Executive Agency for Upstream Oil and Gas (BPMIGAS) have requested that the Government Regulation no. 79 of 2010 on Recoverable Operating Costs and Income Tax Treatment in the Oil and Gas Upstream Sector (GR Cost Recovery) should not be applied to existing contracts in order not to disturb the contracts that have been running for a long time, says the BPMIGAS Chairman. The implementation of the policy will affect the return on investment and the legal security of investors.
The government admits the dilemma regarding several articles within Government Decree No. 79/2010 on Cost Recovery.
“We are waiting for the result of judicial review proposed to Supreme Court. It appears that they (Indonesian Petroleum Association/IPA) want to capitalize on the timing to bring the whole issue up,” said the head of Upstream oil and gas regulator BP Migas Security and Formality Division, Gde Pradanyana, at Hotel Mulia, Monday (04/07/2011).
The Indonesian Petroleum Association (IPA) believes the cost recovery policy could potentially depress oil production. “Not only reduce production, the regulation is predicted to reduce the interest of foreign investors in investing,” said IPA President Ron Aston in Jakarta late last week.
JAKARTA: Despite the government having prepared the implementing regulation on Government Regulation No.79/2010 regarding cost recovery, the GR is still unworkable because it is fundamentally contrary to the prevailing law. The Indonesian Petroleum Association (IPA) Attorney Todung Mulya Lubis said that basically there should be no rules which conflict with its higher regulations.
Indonesian Petroleum Association (IPA) said on Monday that Indonesia may lose at least 150,000 barrels per day of its existing hydrocarbon production if the government continues to apply new cost recovery ruling that the association saw detrimental to upstream investment.
Your Excellency Bapak Boediono, VP of the Republic of Indonesia,
Your Excellency Bapak Darwin Saleh, Minister of Energy and Mineral Resources,
Ibu Evita Lebowo, Director General MIGAS,
Bapak Hardiono, Vice Chairman of BPMIGAS
Members of House of Representative, DPR
Distinguished participants, IPA colleagues, ladies and gentlemen.
Jakarta Convention Center, May 18th 2011
Jakarta, 18th May 2011