GOVERNMENT ENDORSES PETRONAS' NEW TAX INCENTIVES PLAN

KUALA LUMPUR, Nov 30 (Bernama) -- The government has endorsed a new plan of tax
incentives proposed by Malaysia's national oil company Petronas which will be
incorporated in the Petroleum Income Tax Act, Prime Minister Najib Razak said
Tuesday.

He said five new incentives were proposed to promote the development of new oil
resources, facilitate the exploitation of harder-to-reach oil fields and
stimulate domestic explorations.

"By lowering risks and increasing the rewards for investment, this
initiative will potentially lead to additional petroleum-generated revenue of more
than RM50 billion (US$15.873 billion) for Malaysia over the next 20 years," he said
when announcing nine new developments and Entry Point Projects of the Economic
Transformation Programme here.

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.
(US$1=RM3.15)

"But the benefits far exceed this trade-off and these measures mark the kind of
rational policy changes that will enable the private sector to play a greater
role in our economic development," he said.

The five new incentives are:
* Investment tax allowance of up to 60 to 100 per cent of capital
expenditure to be deducted against statutory income to encourage the development
of capital-intensive projects that is in the area of enhanced oil recovery, high
carbon dioxide gas fields, high pressure high temperature, deepwater and
infrastructure projects for petroleum operations;
* Reduced tax rate to 25 per cent from the current 38 per cent for marginal
oil field development to improve commercial viability of the development;
* Accelerated capital allowance of up to five years from 10 years, where
full utilisation of capital cost deducted could improve project viability;
* Qualifying exploration expenditure transfer between non-contiguous petroleum
agreements with the same partnership or sole proprietor to enhance contractors'
risk-taking attitude, which could encourage higher levels of exploration
activity; and
* Waiver of export duty on oil produced and exported from marginal field
development to improve project viability.
-- BERNAMA