GOVERNMENT REGULATION 79/2010 BOOSTER OR RESISTOR ON INDONESIAN OIL AND GAS FIRM’S PRODUCTIVITY ?

Abstract

The purpose of this paper is to perform an in-depth analysis of a strict liability law, Indonesia Government Regulation No 79/2010. The enactment of new oil and gas law brings a new chapter for oil and gas reform in Indonesia. The new tax law serves as a foundation for the work of cost recovery in order to maintain the stability of government revenue, which will provide a solid basis for oil and gas businesses in the long run. This idea comes up from the best practice in the oil and gas business that extraction of oil which means “There are better, cleaner, more efficient ways to extract and produce oil and gas” (http://www.earthworksaction.org). I look at the relationship between oil lifting, tax revenue, cost recovery, and Indonesia Crude Price (ICP). I find that there is significant relationship between these three variables, in other words the tax revenue collected by the government, cost recovery given to the Contractors, also the ICP will give impact to the oil and gas productivity.
This paper also briefly explains the externalities and socio-environmental cost which might arise as a result of oil and gas extraction. I conclude that GR 79/2010 has a significant impact on oil and gas productivity. Thus, I suggest that Government of Indonesia must be effectively making better regulation in the sense of removing ambiguity on its application. Moreover, it should also encourage oil and gas companies’ willingness to fairly disclose an oil spill.