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Jakarta Post

Oil, gas firms to get flexibility over PSC

  • The Jakarta Post

Jakarta   /   Wed, August 5 2020   /  01:00 am
An offshore oil and gas rig in the Mahakam Block in East Kalimantan.(Pertamina/Pertamina)

Oil and gas companies in Indonesia may now choose to either use a cost recovery or gross split-based production sharing contract (PSC) thanks to a recently issued regulation. 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 a...