ASEAN KEY DESTINATIONS
Energy firms reject Indo “new” deals
“I think most of the contract signatories believe that their contracts need to be honored because they were agreed upon in the past,” Jim Taylor, a vice president at the Indonesian Petroleum Association, said on Thursday.
Renegotiation of contracts would be bad for the investment climate in Indonesia, said Taylor, who is also general manager of ConocoPhillips Indonesia, the country’s second-largest gas producer. The IPA represents the 52 oil and gas companies that operate in Indonesia, including ExxonMobil, Chevron Pacific Indonesia, and French Total E&P Indonesie.
In a hearing on Wednesday with the Tax Office, the upstream oil and gas regulator BP Migas and the State Development Finance Comptroller (BPKP), lawmakers demanded that the government renegotiate deals with oil and gas companies following revelations that many were not paying the full amount of tax as stipulated in their contracts.
Legislators also urged the government to explain why 15 oil and gas companies had not paid taxes valued at Rp 1.6 trillion.
Fuad Rachmany, director of the tax office, said at the hearing that the government was getting less than its share from sales of natural resources.
Oil and gas production sharing contracts usually stipulate an 85 percent share of profit for the government, with the remainder going to contractors. However, according to Fuad, oil and gas companies take up to 21.5 percent, leaving the government with 78.5 percent, because of international taxation treaties relating to double taxation.
IPA’s Taylor said that no oil and gas contractors had agreed to renegotiate the contracts. “I don’t think everyone will agree to renegotiate the PSC [production sharing contract],” said Taylor.
Representatives from ExxonMobil, Chevron Pacific Indonesia and Total E&P Indonesia said on Thursday that they would not consider renegotiating. They also expressed concern that renegotiation could harm investment in Indonesia.
Meanwhile, Raden Priyono, chairman of BP Migas, said the government must honor contracts. “Because as soon as we do not honor contracts, we [Indonesia] will be disrespected by the world,” he said.
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