New Incentives Plan for Oil and Gas‏

The government has endorsed a new plan of tax incentives proposed by Petronas which will be incorporated in the Petroleum Income Tax Act, Prime Minister said today.

“By lowering risks and increasing the rewards for investment, this initiative will potentially lead to additional petroleum-generated revenue of more than RM50 billion for Malaysia over the next 20 years” he said when announcing 9 new developments and Entry Point Projects of the Economic Transformation Program.

Najib said there would be a notional trade-off of about RM8 billion in the form of revenue foregone from investment tax allowances, reduced tax and the export duty waiver for marginal fields.

The 5 new incentives are:-

1. Investment tax allowance of capital expenditure.
2. Reducing tax rate from 38% to 25% for marginal oil field development
3. Accelerated capital allowance of up to 5 years from 10 years.
4. Qualifying exploration expenditure transfer between non-contiguous petroleum agreements with the same partnership or sole proprietor
5. Waiver of export duty on oil produced and exported from marginal field development

Source: Bernama

Finance Malaysia (FM):-

"This is definitely a good perks for the oil & gas sector. The main objective here is to encourage deep water exploration, which is capital intensive and requiring more technical know-how."

"MHB which was listed recently could be the main beneficiary, judging by its expertise and available resources and technical in this field."

"Following the listing of MHB and Petronas Chemical Group, any good news announced would definitely excite the market. FM believe this is just one of the good news prior to the next general election, reportedly early next year".