Oil And Gas In Indonesia - PwC
Oil and Gasin IndonesiaInvestment and Taxation GuideSeptember 2019, 10th Editionwww.pwc.com/id
This page and cover photo courtesy of: PT Medco Energi Internasional Tbk.DISCLAIMER: This publication has been prepared for general guidance on matters of interestonly, and does not constitute professional advice. You should not act upon the informationcontained in this publication without obtaining specific professional advice. No representationor warranty (express or implied) is given as to the accuracy or completeness of the informationcontained in this publication and, to the extent permitted by law, KAP Tanudiredja, Wibisana,Rintis & Rekan, PT Prima Wahana Caraka, PT PricewaterhouseCoopers Indonesia Advisory,PT PricewaterhouseCoopers Consulting Indonesia, and Melli Darsa & Co., Advocates & LegalConsultants, its members, employees, and agents do not accept or assume any liability,responsibility, or duty of care for any consequences of you or anyone else acting, or refraining toact, in reliance upon the information contained in this publication or for any decision based on it.Regulatory information is current to 31 July 2019.
1ContentsGlossary4Foreword101Industry Overview122Regulatory Framework243(Conventional) Upstream Sector404Gross Split PSCs5Downstream Sector1186Service Providersto the Upstream Sector136Appendices142106About PwC PwC Oil & Gas ContactsInsertion - Indonesian Oil & GasConcessions and Major Infrastructure Map147
GlossaryTerm4DefinitionAFEAuthorisation for ExpenditureAPBNAnggaran Pendapatan dan Belanja Negara (State Budget)APMIAsosiasi Perusahaan Pemboran Minyak, Gas dan PanasBumi Indonesia (Association of Indonesian Oil, Gas andGeothermal Drilling Companies)ASCAccounting Standard CodificationATIGAASEAN Trade in Goods AgreementBBCBare-boat charterBIBank IndonesiaBiKBenefits in KindBKPMBadan Koordinasi Penanaman Modal (Indonesia’sInvestment Coordinating Board)BP MigasBadan Pelaksana Kegiatan Usaha Hulu Minyak danGas Bumi (Oil and Gas Upstream Business ActivitiesOperational Agency), now SKK MigasBPH MigasBadan Pengatur Hilir Minyak dan Gas Bumi (Oil and GasDownstream Regulatory Agency)BPKPBadan Pengawasan Keuangan dan Pembangunan (theFinancial and Development Supervision Agency)BPRBranch Profit RemittanceBPTBranch Profits Tax (i.e. on BPRs)BUMDBadan Usaha Milik Daerah (Regionally Owned BusinessEnterprise established by the Regional Government)BUMNBadan Usaha Milik Negara (State-owned Enterprise)C&D TaxCorporate and Dividend TaxCBMCoal Bed MethaneCDCommunity DevelopmentPwC
TermDefinitionCIFCost, Insurance, FreightCITRCorporate Income Tax ReturnCNGCompressed Natural GasCoDCertificate of DomicileDENDewan Energi Nasional (National Energy Council)DERDebt-to-Equity RatioDGBDirectorate General of BudgetDGoCEDirectorate General of Customs and ExciseDGOGDirectorate General of Oil and GasDGTDirectorate General of TaxesDMODomestic Market ObligationDPRDewan Perwakilan Rakyat (House of Representatives)DRMDaftar Rekanan Mampu (vendors qualified for Governmentprocurement bidding)EITEmployee Income TaxEOREnhanced Oil RecoveryEPCEngineering, Procurement, and ConstructionFCRForeign Currency ReportFDCForeign-owned Drilling CompanyFOBFree on BoardFPSO/FSOFloating Production Storage and Offload (vessel)/FloatingStorage and Offload (vessel)FPUFloating Production UnitFQRFinancial Quarterly ReportOil and Gas in Indonesia: Investment and Taxation Guide5
Term6DefinitionFSRUFloating Storage Regasification UnitFTPFirst Tranche PetroleumFTZFree Trade ZoneG&GGeological and GeophysicalGAAPGenerally Accepted Accounting Principlesthe GovernmentGovernment of IndonesiaGRGovernment Regulation (Peraturan Pemerintah)GSGross SplitGTLGas to LiquidsIASInternational Accounting StandardsICPIndonesian Crude PriceIFASIndonesian Financial Accounting StandardsIFRSInternational Financial Reporting StandardsIGAIndonesian Gas AssociationIMTAIzin Mempekerjakan Tenaga Asing (Work Permit for ForeignWorkers)IPAIndonesian Petroleum AssociationIPKAIzin Penggunaan Kapal Asing (Permit to Use ForeignVessels)IPPKHIzin Pinjam Pakai Kawasan Hutan (“Borrow-and-Use”Permit For Forest Area)ITOIndonesian Tax OfficeJCC/JOJoint Cooperation Contract/Joint OperationJOA/JOBJoint Operation Agreement/Joint Operating BodyKBLIKlasifikasi Baku Lapangan Usaha Indonesia (IndonesianStandard Industry Classification)KEKKawasan Ekonomi Khusus (Special Economic Zone)PwC
TermDefinitionKPBUKerjasama Pemerintah dan Badan Usaha (Cooperation ofGovernment and Business Entity)LNGLiquefied Natural GasLPGLiquefied Petroleum GasLSTLuxury-goods Sales TaxMBOEPDThousand Barrels of Oil Equivalent per DayMBOPDThousand Barrels of Oil per DayMIGASMinyak Bumi dan Gas Alam (Oil and Natural Gas)MMSCFDMillion Standard Cubic Feet per DayMoEMRMinistry of Energy and Mineral ResourcesMoFMinistry of FinanceMoTMinistry of TradeMoUMemorandum of UnderstandingNBVNet Book ValueNGRRNew Grass Root RefineryNJOPNilai Jual Objek Pajak (Tax Object Selling Value)Non-CRNon - Cost RecoverableNPWPNomor Pokok Wajib Pajak (Tax Payer Identification Number)NTBNomor Transaksi Bank (Bank Transaction Number)NTPNNomor Transaksi Penerimaan Negara (State RevenueTransaction Number)O&MOperation and MaintenanceOil and Gas in Indonesia: Investment and Taxation Guide7
Term8DefinitionOPECOrganisation of Petroleum Exporting CountriesPBBPajak Bumi dan Bangunan (Land and Building Tax)PBIPeraturan Bank Indonesia (Bank Indonesia Regulation)PCOParent Company OverheadPEPermanent EstablishmentPERPeraturan Dirjen Pajak (DGT Regulation)PGNPT Perusahaan Gas Negara (State Gas Company)PISPlaced Into ServicePMAPenanaman Modal Asing (Foreign Investment Company)PMKPeraturan Menteri Keuangan Republik Indonesia (Ministerof Finance Regulation)PoDPlan of DevelopmentPP&EProperty, Plant & EquipmentPSCProduction Sharing Contract, one of the types of JointCooperation Contracts (KKS - Kontrak Kerja Sama)PTPerseroan Terbatas (Limited Liability Company)PTKPedoman Tata Kerja (Standard Operating Procedure)R&DResearch & DevelopmentRDMPRefinery Development Master PlanRPTKRencana Penggunaan Tenaga Kerja (Manpower Plan)RPTKARencana Penggunaan Tenaga Kerja Asing (ForeignManpower Employment Plan)SESurat Edaran (Circular Letter)SFASStatement of Financial Accounting StandardsPwC
TermDefinitionSIUPALSurat Izin Usaha Perusahaan Angkatan Laut (ShippingCompany Business Licence)SKK MigasSatuan Kerja Khusus Pelaksana Kegiatan Usaha HuluMinyak dan Gas Bumi (Special Taskforce for Upstream Oiland Gas Business Activities)SKSSatuan Kerja Sementara (Temporary Taskforce)SKUPSurat Kemampuan Usaha Penunjang (Supporting BusinessCapacity Certificate)SPOPSurat Pemberitahuan Objek Pajak (Notification of PBBObjects)SPPTSurat Pemberitahuan Pajak Terutang (Official Tax PayableNotification)SSPSurat Setoran Pajak (Tax Payment Slip)TACTechnical Assistance ContractTCFTrillion Cubic FeetTDRTanda Daftar Rekanan (Registered Vendor ID)TKDNTingkat Komponen Dalam Negeri (Local Content Level)TPAATrustee Paying Agent AgreementUS GAAPGenerally Accepted Accounting Principles (in the UnitedStates)VATValue Added TaxWAPWeighted Average PriceWHTWithholding TaxWOPWrite-Off ProposalWP&BWork Program & BudgetWTIWest Texas Intermediate (Crude Oil Price)Oil and Gas in Indonesia: Investment and Taxation Guide9
“ForewordWelcome to the 10th edition of PwC Indonesia’s Oil and Gas in Indonesia – Investmentand Taxation Guide. This edition outlines the latest tax and regulatory changes that haveoccurred in the oil and gas industry over recent years, including our views on recentregulatory developments surrounding the new “Gross Split” PSCs, introduced in 2017.This publication has been written as a general investment and taxation guide for allstakeholders interested in the oil and gas sector in Indonesia. We have thereforeendeavoured to create a publication which can be of use to existing investors, potentialinvestors, and others who might have a general interest in the status of this importantsector for the Indonesian economy.As outlined in the contents page, this publication is broken down into chapters which coverthe following broad topics:1. Industry overview;2. Regulatory framework;3. (Conventional) upstream sector;4. Gross Split PSCs;5. Downstream sector; and6. Service providersAs most readers will know, oil and gas production has a long history in Indonesia, withIndonesia being an international pioneer in many areas, including the development of theProduction Sharing Contract (PSC) model and the commercialisation of Liquefied NaturalGas (LNG).However, the industry has not seen significant new developments for a number of years,with many existing contractors having lost interest in further exploration in Indonesia due toregulatory instability and an uncertain investment climate, and few new players are enteringthe market. Despite the Government’s efforts to stimulate exploration through offers of newacreage and a joint study facility, these initial incentives have not been particularly successfulin attracting new investors. More and more, the state oil and gas company, PT Pertamina(Persero) (“Pertamina”) is being tasked with managing the sector, including taking over theoperation of expiring production sharing contracts (“PSCs”) from international oil and gascompanies, which still produce the majority of the country's oil and gas.The introduction of the “Gross Split Scheme” in 2017, followed by the issuance ofregulations (including tax and accounting guidance) over the past two years, has beenheralded as a panacea to revive deteriorating investment in the oil and gas industry.However, many investors are taking a “wait and see” approach given the uncertaintiesinherent in the scheme, especially when compared with the existing cost recovery schemethat investors have grown accustomed to.10PwC
If Indonesia is to attract new investment into the oil and gas sector, these uncertaintiesmust be addressed. The paramount concern should be improving reserve replacement andincreasing production, to provide more energy security to the country as demand continuesto grow with the expansion of the economy, while production stagnates. The next few yearswill be critical, as many PSCs come to the end of their term. Time will tell whether the grosssplit concept is indeed the magic bullet.This publication aims to support investors in navigating the Indonesian oil and gasinvestment climate, and to support the growth of the industry. Readers should note that theregulatory content in this publication is current as at 31 July 2019. Whilst every effort hasbeen made to ensure that all information was accurate at the time of printing, many of thetopics discussed are subject to interpretation, and regulations are changing continuously.As such, this publication should only be viewed as a general guidebook and not as asubstitute for up to date professional advice. As such, we recommend that you contactPwC’s oil and gas specialists (see page 144) as you consider investment opportunities inthe Indonesian oil and gas sector.We hope that you find this publication of interest and of use, and we wish all readerssuccess with their endeavours in the Indonesian oil and gas sector.”Oil and Gas in Indonesia: Investment and Taxation Guide11
1IndustryOverview1.1 IntroductionThe oil and gas industry, both in Indonesia and globally, hasexperienced significant volatility in the last decade. Global geopoliticaland economic considerations play a significant role in driving thesensitivity of oil prices.The development of shale technology has reduced the oil and gasimport dependency of the United States, which was traditionally thebiggest net-oil importer. This has led to oil oversupply, and has beena key factor in falling oil prices in recent years, despite the continuedintervention of the Organisation of the Petroleum Exporting Countries(OPEC) in an attempt to stabilise supply and bring some moderationto global oil prices. Oil prices saw some recovery in 2018, supportedby Venezuela’s decline in oil production, and concerns about sparecapacity in OPEC countries, combined with robust demand from nonOECD (Organisation for Economic Cooperation and Development)countries, particularly China. Meanwhile, gas consumption also rosedue to its increasing share in electricity generation throughout 2018.Some softening of prices has been seen in the first half of 2019, withWest Texas Intermediate (WTI) below US 60/barrel at the end of July.1.2 Indonesian ContextIndonesia has been active in the oil and gas sector for more than 130years, after the first oil discovery in North Sumatra in 1885.A member of OPEC from 1961, Indonesia suspended its membershipin 2009 after years of declining production, rejoined in January 2016,but suspended its membership again in November 2016.According to the BP Statistical Review of World Energy 2019,Indonesia holds proved oil reserves of 3.2 billion barrels at the end of2018.12PwC
Photo source: PwCOil andMiningGas in Indonesia: Investment and Taxation Guide1313
Significant events in the history of Indonesia’s Oil and Gas t commercial oildiscovery inNorth SumatraThe biggestdiscovery beforeWW II (Talang akarField)Government signedfirst PSC in Acehand Indonesiajoined OPECPERTAMINA wasformedOil and Gas lawNo. 22/2001introduced,revoking lawNo. 44PT Pertamina(Persero)establishedList of 17 Negativecost recovery items(Ministerial RegulationNo. 22/2008)GR 79implementingregulations- PMK 256- PMK 257- PMK 258Indonesia brieflyrejoins OPECPertamina becomesholding companyfor oil and gasState-OwnedEnterprises(SOEs)Indonesia withdrewfrom OPEC191219441962197820022004201020132017Standard Oilcommencedexploration inSouth SumateraCaltex Minas largest oil fieldin Southeast AsiadiscoveredPan AmericanOil Company signedthe first contractof work withPertaminaFirst LNG plantentered productionUpstream andDownstream bodiesBP MIGAS andBPH MIGAS wereestablishedGovernmentRegulationNos. 35 & 36Regulation forupstream &downstreambusiness activitiesGR 79 on costrecovery and incometax for upstreamsectorSKK Migasestablishment toreplace BP MigasGross Split PSC isintroducedThe declining oil production and increased consumption have resulted in Indonesia beinga net oil importer since 2004. This factor, along with high oil prices before 2015, led theGovernment to gradually but substantially scale-back the domestic fuel subsidy during2009-2014.Investment in the oil and gas industry in Indonesia was around US 10.9 billion in 2018, asthe rise in oil and gas prices triggered some investment interest from the previous US 10.3billion in 2017, which was the lowest in decades. However, the industry’s contribution to thestate revenue has fallen sharply from 14% in 2014 to 2.8% in 2016, before recovering to4.9% in 2017 and 7.4% in 2018. The Government also set a target of 7.4% for 2019 (referto Chapter 1.5 for details).Oil prices have shown fluctuation since the last quarter of 2018 due to geopolitical issues,while gas prices steadily declined during the first half of 2019 due to mild weather andJapan’s decision to restart its nuclear power reactors. This has not helped Indonesiaredress the problem of a lack of new reserve discoveries and reserve depletion; as theIndonesian upstream regulator, SKK Migas, notes, investment in exploration areas was amere US 122 thousand in 2018, compared to the US 10.92 billion invested in exploitationareas. These factors also contributed to the relinquishment of numerous oil and gasworking areas from the 312 working areas in 2015 to 216 working areas in 2018, thelowest in a decade. The Directorate General of Oil and Gas (DGOG)’s 2018 Annual Reportnotes only 13 new contracts were signed in the last three years, which may in part be aconsequence of investors taking time to consider the change in the contract system fromthe traditional cost-recovery model to the new gross-split methodology. The first 2019oil and gas tender resulted in two new oil and gas working areas, while the second 2019tender with four working areas offered, was still ongoing at the end of July 2019.Aside from the changes in the PSC system, March 2018 also saw the Government revoke18 regulations and 23 requirements for certifications, recommendations, and permits, in anattempt to reduce duplication in certification, shorten bureaucracy and simplify business.The effectiveness of this reform remains to be seen.14PwC
Indonesian Oil Production and Consumption1800Thousand Barrels per 16002000800ConsumptionSource:*Oil Production and Consumption 2000-2005: BP Statistical Review of World Energy 2011*Oil Production and Consumption 2006-2017: SKK Migas, Ministry of Energy and Mineral Resources (MoEMR), Fitch Connect - Business MonitorInternational*Oil Production and Consumption 2018 : DGOG, BP Statistical Review of World Energy 2019Indonesia is ranked 11th in terms of global gas production, with proven reserves of 96trillion cubic feet (TCF) in 2018. On a reserve basis, Indonesia ranks 13th in the world andthe second in the Asia-Pacific region (following China). Indonesia’s relevance in seaborneLiquefied Natural Gas (LNG) is more critical.Indonesia’s gas industry is being pressured by more competitive LNG markets, newpipeline exports, and increasing domestic gas demand. Indonesia’s natural gas productionmarket share actually decreased in recent years (from 2.6% of the world’s marketedproduction of natural gas in 2010, to 1.9% in 2018) coupled with a declining global LNGmarket share particularly due to new LNG production coming on-line in Qatar and Australia.After announcing its 2006 policy to realign natural gas production to domestic needs,Indonesia dropped from the ranks of the world’s largest exporters of LNG in 2005 to theworld’s seventh largest exporter in 2018, behind Qatar, Australia, Malaysia, US, Nigeria, andRussia.Indonesia’s existing LNG facilities are based in Bontang in East Kalimantan, Tangguh inWest Papua and Donggi Senoro in Sulawesi. Arun LNG, which was one of the world’s firstLNG facilities and one of the biggest LNG exporters in the 1990s, has been converted into astorage and re-gasification terminal due to declining gas reserves. Additionally, Abadi LNG andSengkang LNG facilities are currently being constructed. The Abadi LNG contractors recentlysigned Heads of Agreement with SKK Migas and revised its Plan of Development (PoD) in June2019. Meanwhile, the Sengkang LNG Project has temporarily been halted by the Governmentsince April 2018 due to the absence of a “borrow-and-use” permit for forest area (IPPKH - IzinPinjam Pakai Kawasan Hutan) for construction in a mangrove forest reserve area.Oil and Gas in Indonesia: Investment and Taxation Guide15
World’s Top LNG Exporters 2018QatarAustraliaNigeriaMalaysiaUnited States of AmericaRussiaIndonesiaTrinidad & .8%6.8%22.0%7.1%Source: EIA/BMI 30 April 20197.4%Share of World Gas rwayOmanQatarRussiaSaudi ArabiaUnited Arab EmiratesUnited StatesVietnam0%5%10%ConsumptionSource: Fitch Connect - Business Monitor International16PwCProduction15%Reserves20%25%
1.3 Resources, Reserves and ProductionIndonesia has a diversity of geological basins that continue to offer sizeable potential foroil and gas exploitation. Indonesia has 60 sedimentary basins, including 36 in WesternIndonesia that have already been thoroughly explored. Fourteen of these are producing oiland gas. In under-explored areas of Eastern Indonesia, 39 tertiary and pre-tertiary basinsshow rich promise in hydrocarbons.About 75% of exploration and production is located in Western Indonesia. The four oilproducing regions are Sumatra, the Java Sea, East Kalimantan and Natuna. The three maingas-producing regions are East Kalimantan
This edition outlines the latest tax and regulatory changes that have occurred in the oil and gas industry over recent years, including our views on recent . According to the BP Statistical Review of World Energy 2019, Oil and Gas in Indonesia: Investment and Taxation Guide. Oil and Gas in Indonesia Investment and Taxation Guide. Indonesia
1.Engine Oil SABA 13 1.Engine Oil 8000 14 1.Engine Oil 6000 15 1.Engine Oil 3000 16 1.Engine Oil Alvand 17 1.Engine Oil Motor Cycle Engine Oil M-150 18 1.Engine Oil M-100 19 1.Engine Oil Gas Engine Oil CNG-BUS 20 1.Engine Oil G.I.C.X.LA 21 1.Engine Oil G.I.C.X. 22 1.Engine Oil Diesel Engine Oil Power 23 1.Engine Oil Top Engine 24
STATE OIL AND GAS BOARD OF ALABAMA Berry H. (Nick) Tew, Jr. State Geologist and Oil and Gas Supervisor S. Marvin Rogers General Counsel STATE OIL AND GAS BOARD OF ALABAMA ADMINISTRATIVE CODE OIL AND GAS REPORT 1 RULES AND REGULATIONS GOVERNING THE CONSERVATION OF OIL AND GAS IN ALABAMA and OIL AND GAS LAWS OF ALABAMA with OIL AND GAS BOARD FORMS
where R s solution gas oil ratio, scf/stb V gas gas volume in standard condition, scf V st oil volume in stock tank condition, stb oil gas s V V R Solution Gas Oil Ratio - GOR The solution gas-oil ratio (GOR) is a general term for the amount of gas dissolved in the oil.Solution GOR in black oil systems typically range from 0 to approximately 2000 scf / bbl. 2022-2023 Nabaz Ali Reservoir .
Dr. Didik Wahjudi (Indonesia) Dr. Oki Sunardi (Indonesia) Dr. Ishak Ramli (Indonesia) Dr. Moeljono Widjaja (Indonesia) Dr. Iwan Aang Soenandi (Indonesia) Ignasia Yuyun, M.Pd. (Indonesia) Dr. Evans Garey (Indonesia) Yuseva Ariyani Iswandari, M.Pd. (Indonesia) PUBLISHED FIRST TIME BY: UKRIDA PRESS
V-5 and V-10 pumps are shipped from the factory with the speed reducer filled with the proper amount . Amoco Oil Co. Worm Gear Oil Cylinder Oil #680 . Shell Oil Co. Valvata Oil J460 Valvata Oil J680 Sun Oil Co. Gear Oil 7C Gear Oil 8C Texaco Honor Cylinder Oil 650T Cylinder Oil Union Oil
Oil and Gas are subject to GCP-Oil and Gas terms and conditions. source may No construct or operate under GCP-Oil and Gas unless the Department has approved its Registration Formin writing . No source may operate under GCP-Oil and Gas unless such operation meets all the requirements of GCP-Oil and Gas.
BLM also manages some aspects of oil and gas developed on lands owned by Indian tribes and individual tribal members. Oil and gas operators produced oil and gas from about 96,000 wells on about 26 million acres of leased federal land in fiscal year 2018, according to BLM. Oil and gas operators that want to develop oil and gas resources on
accounting requirements for preparation of consolidated financial statements. IFRS 10 deals with the principles that should be applied to a business combination (including the elimination of intragroup transactions, consolidation procedures, etc.) from the date of acquisition until date of loss of control. OBJECTIVES/OUTCOMES After you have studied this learning unit, you should be able to .
