Indonesia Awards 15 PSCs; Tax Regime To Be Improved.

The Energy Ministry in Jakarta on Dec. 13 signed 15 oil production sharing contracts (PSCs) with companies including Anadarko Petroleum Corp and Unocal of the US, Petronas of Malaysia and ENI of Italy. Energy Minister Purnomo Yusgiantoro then said: "The contractors have committed for exploration spending of around $200 million". Anadarko would explore the Madura III block and Petronas the Madura IV, both offshore north-east Java. ENI would explore the offshore Bulungan block in East Kalimantan. Unocal would explore the East Ambalat block, off East Kalimantan, where Indonesian and Malaysian territorial claims overlap. Petronas had said in September its plans to develop two new deep-water blocks in the Sulawesi Sea might be disrupted by Indonesian claims to the same area. The rest of the contracts were signed mostly with local companies. "The signing of contracts today will boost Indonesia's oil production in future and open job opportunities to our people", Purnomo said.

President Susilo Bambang Yudhoyono told oil executives in a dinner speech Indonesia needed foreign oil investors to operate in the country. He added: "In the upstream oil and gas sector, BPMigas...will closely monitor investment levels to ensure that terms are internationally competitive". (BPMigas is Indonesia's watchdog observing the E&P operations). "The government will strengthen regulation and improve legal certainty to create a more conducive businesses climate for the private sector", Yudhoyono said, adding: "I know a lot of you have tax issues in your mind. On this issue I have acted to review and study the existing tax and custom policy to find a more sound (one) that I hope will boost more investment in the years to come".

Indonesian Vice President Jusuf Kalla on Dec. 13 said the government planned to modify the country's taxation system to attract more foreign investment in the gas and oil sectors. "We need to review and improve our taxation system", he told reporters on the sidelines of an international energy conference in Jakarta. Jusuf said the government was considering scrapping import duties for equipment used in developing gas and oil blocks jointly operated by the government and foreign partners. This is because under an existing cost-recovery scheme for foreign investors, the equipment will eventually be owned by the government. Jusuf said the government was to free companies exploring in Indonesia from the value-added tax. He did not provide a timeframe for the implementation of these measures. Increasing foreign investment in the petroleum sector is crucial to Indonesia's efforts to boost its dwindling oil output.

Indonesia became a net crude oil importer for the first time in March as unclear regulations governing the domestic industry discouraged investment, particularly from foreign players.