T

he Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) has confirmed the government is discussing the possibility of a shift from its production sharing contract (PSC) to a revenue-sharing scheme.

The idea was proposed mainly because the country'€™s growing oil demand eventually boosted the import volume, according to SKKMigas secretary Gde Pradnyana.

'€œTherefore, we put on the table a discussion about the possibility of sharing the revenue instead of the oil. The amount of revenue being shared is in accordance with the production sharing proportion,'€ he said on Tuesday.

So far, the PSC has been believed to be the most suitable model and has benefited the government.

According to research by global energy think tank Wood Mackenzie, the current PSC scheme in Indonesia has allowed the government to enjoy a high take from oil compared to other countries. In 2008, according to the research, the government'€™s take from oil was at 86 percent, ranked at 24th among 95 other countries that had an average take of 63 percent.

In 2012, the oil take reached 90 percent, making Indonesia the fifth biggest taker among 85 countries in the world.

Under the current PSC scheme, the government is the owner of the resources and gives mandates to national and foreign oil and gas companies, which have the capital and equipment to manage the resources.

The scheme gives the government full control as all the companies'€™ expenditure must be approved by the owner of the resources, because companies will receive reimbursements when oil and gas activities are profitable, which is commonly known as a cost recovery.

Furthermore, under the scheme, the government is not exposed to exploration or exploitation failure risks, for which the oil and gas industry is well known.

Prior to the PSC scheme, Indonesia used to adopt concession and contract of work regimes in the oil and gas sector. Under the concession scheme, which was adopted from the Dutch system, companies were seen as the owner of the resources and the government only received royalties. Meanwhile, under the contract of work scheme, oil and gas companies were seen as contractors but the government'€™s role was limited to supervisory matters.

Gde said, however, that the talk on the possibility of shifting from the PSC to a revenue-sharing scheme is still in its early stages. It has received a negative response from oil and gas companies operating in the country.

'€œIt is still tough, particularly with companies that already have refineries to process their oil overseas. If they cannot send their oil abroad, their refineries there won'€™t get the supply. We'€™re still discussing whether they can process the oil domestically if they are not allowed to export,'€ Gde said.

However, the readiness of infrastructure in terms of refinery capacity is a challenge for the plan.

Indonesia, a former member of the Organization of Petroleum Exporting Countries (OPEC), has not built a new refinery since the Soeharto era, when Pertamina built one in Balongan, West Java, in 1994,

Pertamina currently has six refineries nationwide that produce between 600,000 and 700,000 barrels per day (bpd) of refined fuel.