Energy and Mineral Resources (ESDM) Ministerial Regulation No. 12/2020, signed on July 15, revokes a rule that had made use of a gross split scheme mandatory for new or renewed PSCs over the past three years.

In a cost recovery-based PSC, the government reimburses companies for upstream-related costs in exchange for a higher share – up to 85 percent – for each company’s earnings from exploiting domestic oil and gas blocks.

Meanwhile, in the so-called gross split scheme, companies bear upstream costs themselves, but the government receives a smaller cut of the revenue – up to 57 percent – determined in advance.

“These changes are to intended to provide legal certainty and improve investment in the oil and gas industry,” the ministry statement released on Saturday reads.

The energy ministry made gross split schemes compulsory under regulation No. 8/2017 to cut reimbursement spending, which reached into the billions of US dollars. However, the decision received a lukewarm response from investors.

Read also: Gross split scheme to stay — with slight improvements

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