Fossil Fuels - At What Cost? Government support for upstream oil and gas activities in Indonesia

The GSI estimates that, globally, subsidies provided to the producers of fossil fuels—oil, gas and coal—could total as much as US$100 billion per year, but nobody knows the real figure as there is no international framework for regularly monitoring and reporting fossil-fuel subsidies.

Fossil-fuel producers can benefit from many different types of subsidies, including tax breaks, discounted royalty payments, low-interest loans and access to precious natural resources. Identifying these subsidies and quantifying their value requires in-depth studies of government accounts and the application of complex methodologies for calculating subsidy values. The GSI aims to forge a new global understanding about fossil-fuel subsidies by undertaking detailed country case studies to identify, quantify and assess subsidies provided to upstream oil, gas and coal activities.

The GSI's first report in this series, "Fossil Fuels - At What Cost?" studies the subsidies provided to fossil-fuel producers in Indonesia. The report details Indonesia's system of Production Sharing Contracts, providing new insights that have not been previously published, thanks to the research team's access to commerically-senstive documents. The study concludes that three subsidies can clearly be identified, totalling US$1.8 billion in 2008. The study estimates that this is a lower-bound figure, as at least seven other potential subsidies were identified that were unable to be assessed or quantified based on the available information.

The researchers recommend that further work could usefully undertake a full assessment of the economic, environmental and social impacts of these subsidies in order to further inform a public debate on whether the subsidies should be kept or considered for reform.