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Jakarta Post

Options for oil contractors

  • The Jakarta Post

  /   Wed, December 11 2019   /  01:15 am

Energy and Mineral Resources Minister Arifin Tasrif’s recent statement at the House of Representatives that oil companies would be allowed to choose either cost-recovery or the fixed gross-split scheme for their production sharing contract (PSC) will go a long way toward reinvigorating investment in exploration.Most oil companies have criticized the gross-split scheme, which was introduced in 2017 to replace the cost-recovery scheme, as they claim the new arrangement places much greater risk on investors. Many analysts also view the gross-split scheme as unattractive for new oil blocks because the costs and split are fixed up front. No wonder that most of the contracts signed over the past two years have been extensions of expiring concessions given that the proven reserves are by and large known. Consequently, exploration spending fell sharply to about US$600 million in 2017 and less ...