From Government of Indonesia

Incentives for Gas Industry

President Susilo Bambang Yudhoyono told the opening of a natural gas seminar on Tuesday (16/1/07) that the government will further ease investment procedures and offer more incentives to attract investment in the sector.

The government was prepared to offer tax and production sharing incentives to help meet rising domestic demand at home and existing export commitments, The Jakarta Post reported.

"The government will consider various new fiscal incentives such as value added tax (VAT) and import duties, as well as tax reforms to lure more investors to the country's gas sector," Dr. Yudhoyono said.

Minister for Mines and Energy Purnomo Yusgiantoro said the government would consider applying a new production split ratio of 51% for the government and 49% for producers. At present, producers receive 30% of net production, while the other 70% goes to the government.

He added that the amount of LNG exported would be cut by 8% to 50%. "Our new policy is to maintain a balance between gas export and domestic use," Yusgiantoro said.

The government is completing a study into the country's gas supply and projected demand, and the results will determine how much gas Indonesia can export, the minister said.

Meanwhile Vice President Jusuf Kalla said the amount allocated for fuel and power subsidies would be cut to Rp10 trillion in 2009 from this year’s figure of Rp20 trillion.

Kalla said this could be done by getting power companies to use more coal and less oil to generate electricity and by getting households to use more liquefied petroleum gas and less kerosene for cooking.

The government is also aiming to boost oil and gas output by 30%, he said. Oil output is now about 1 million barrels per day and gas output at 7.5 trillion cubic feet per day.

Chief economics minister Boediono, meanwhile, said 10 infrastructure tenders valued at Rp39 trillion ($4.3 billion) would be completed this year, allowing the projects to go ahead in 2008.

The projects include two power plants, two toll roads, a ferry terminal, a seaport, three water treatment plants and a telecommunications project.

In other sectors, cement sales for December were reported to have risen by 12.3%, producing a rise of 1.8% for the full year.
Strong sales growth in November and December took the total annual sales to 32.1 million tons.

On the macroeconomic front, Bank Indonesia said it expects the rupiah will continue to strengthen in line with an expected improvement in the economy.

"Fundamentally, the rupiah should continue to strengthen," central bank's deputy governor Aslim Tadjuddin told reporters.
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