REPUBLIKA.CO.ID, JAKARTA - Indonesian Petroleum Association (IPA) asked government to review fiscal policy related to taxes on land and building to contractors of Production Sharing Contracts (PSCs) in upstream oil and gas exploration. President of IPA, Lukman Mahfoedz said that the policy counterproductive to government's plan to boost exploration projects in Indonesia. 

"It concerns us who are doing business in upstream oil and gas sector," Mahfoedz said earlier this week.

Mahfoedz said in the end of June 2013, Directorate General of Taxation issued tax bills for 2012 and 2013. The tax bills are charged to 15 contractors working in 20 offshore exploration blocks. The taxes value reaches 2.6 trillion IDR in total or 40 billion to 190 billion IDR per block.

"So the tax is even bigger than the budget for exploration," Mahfoedz added.

The tax calculation is implemented to companies underway exploration projects, especially for companies which signed their contracts after the implementation of governmental regulation number 79/2010.

"We admit that the block sizes can reach thousands of kilometers or sometime bigger than the islands nearby. But it is unfair to pay the taxes for all those area regardless the exploration result -either successful or failed. Or sometime the exploration project only covers small portion of the whole block," Mahfoedz said.  

He mentioned that during 2009-2012 there were 12 companies failed to find oil and gas in some offshore deep water projects, despite the projects had been spent 2 million USD. While the oil reserve replacement ratio in Indonesia in 2012 was only 52 percent. 

"It means the oil reserve found in 2012 can only replace 52 percent of oil production in 2012," he explained.

Hence, IPA expects the government to review its fiscal policy on exploration project. "Government must improve the investment climate and create condusive environment to support upstream oil and gas businessmen," Mahfoedz said.

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