Frustrated over the low realization of investment commitment in the
exploration of oil and gas sector, the government will tighten its supervision
over oil and gas companies’ activities in the country, aiming to single out
obscure firms.
Susilo Siswoutomo, the newly
appointed deputy at the Energy and Mineral Resources Ministry, said that the
government had detected the presence of “brokers” in oil and gas industries,
particularly during the exploration activities.
“There are firms that have
secured the exploration rights but never performed any exploration activities.
Instead these firms are busy offering the rights to other firms,” Susilo told
the Jakarta Globe on Thursday.
“There will be a sanction [for
these companies],” said the deputy minister without further elaboration. Most
of th e“brokers” are firms that cannot afford to perform expensive and risky
exploration activities. Susilo called on oil and gas firms operating in the
country to abide by government-approved annual work and budget programs so that
the country can meet its production and revenue targets. “These stricter
supervisions would also be useful to hear their problems and concerns so that
the government can be more helpful,” he added.
Typically, oil and gas firms must
submit their work and budget programs — consisting mainly of investment
projection, production targets and progress reports — to the government every
year.
The investment realization for
oil and gas exploration activities last year was $160 million of a projected $2
billion.
Susilo acknowledged that it was
simplistic to put all the blame of low investment realization on the presence
of “brokers,” because exploration activities require a lot of investment and
the risk of finding a dry well is very high.
One very recent case involved
Statoil. The Norwegian firm, together with partner Pertamina Hulu Energi (PHE),
had spent as much as $271 million over six years for exploration and had not
found enough reserves. Both decided to return the rights to the government.
There are plans to provide tax exemptions for oil and gas companies during
exploration stages, Susilo added. “But remember it would be only for
exploration activities. Once they start production the tax obligation will
return to normal.” His statement echoed views of Energy Minister Jero Wacik,
that the government planned to provide more incentives to encourage
exploration.
Indonesia has seen insufficient
exploration activities of late, aggravating the fact that most of the country’s
oil fields have entered their mature phase. The government approved 274 work
and budget programs for 2013, which include 200 working areas in the
exploitation stage and 74 in the exploration stage. A total of $26.2 billion
will be invested in the oil and gas industry this year, but only $2.3 billion
will go to exploration.
Tito Summa Siahaan
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