Govt Offers Incentives to Spur Gas Investment

JAKARTA ~ President Susilo Bambang Yudhoyono has promised to offer incentives to attract more foreign investment to develop Indonesia’s gas reserves.

Rising oil prices have seen the country focus on gas production for domestic needs rather than for export.

This has worried overseas customers and discouraged foreign investment in the sector amid confusion over how much gas companies would have to sell at lower prices for the local market rather than to meet more profitable export demands.

Yudhoyono told the annual IndoGas conference on Tuesday the government was determined to improve the investment climate by, among other things, reviewing the regulations and the tax system to attract more investment in the sector.

He said Indonesia aimed to boost its crude oil output to 1.3 million barrels per day in 2009 from 1.1 million barrels at present.

To increase investment in gas exploration, Energy and Mineral Resources Minister Purnomo Yusgiantoro said the government would consider raising the producers’ share of production to 49 percent.

Producers currently receive 30 percent of production with the rest going to the government.

On Tuesday, the government signed 16 new production-sharing contracts for oil and gas exploration valued at US$201.04 million.

The government said it would offer another 30 new oil and gas blocks this year in the under-explored eastern part of the archipelago.

Officials said the government would also offer more flexible commitments for investors, allowing companies to return exploration rights after two or three years if they proved unpromising instead of the current six-year term.

Indonesia is one of the world’s leading exporters of liquefied natural gas and its clients have been alarmed at reports that it would slash its exports to meet growing domestic demand.

With current production at 7.5 billion cubic feet per day, Indonesia is having difficulties meeting its commitments to Japan, South Korea and Taiwan as well as surging domestic industrial demand, according to officials.

Concern among foreign investors over involvement in oil and gas projects in Indonesia, Southeast Asia’s only member of the Organisation of Petroleum Exporting Countries, has been a factor in the country becoming a net oil importer in recent years.

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