Indonesia lets oil, gas investors choose contract scheme

Jakarta (Indonesia Window) – The Indonesian government gives options to oil and gas investors to choose production sharing contract (PSC) schemes between gross profit-sharing PSC or cost recovery PSC.

So far, oil and gas investors consider the risks in exploration activities to be quite high, especially regarding financial aspect, according to Indonesian Minister of Energy and Mineral Resources Arifin Tasrif in a statement received by Indonesia Window here on Sunday.

“They also need a security guarantee. It is like when someone make a guess. If the guess is wrong, then he loses. But if it is right, he gets profits. Considering this situation, we open two options (cost recovery or gross split),” Arifin said.

The policy was made after receiving direct inputs from oil and gas contractors.

According to the minister, the two contract schemes have advantages and disadvantages.

The contractors considered that the gross split is appropriate to be applied to the existing oil and gas fields because the scheme makes the cost calculation easier and the business process simpler than the cost recovery.

Meanwhile, the cost recovery contract scheme can be applied to new fields, because, according to investors, it makes the risk smaller.

In addition to cooperation contract, the government also receives inputs related to taxation and oil and gas data access.

“We hope that requirements on the oil and gas (exploration and exploitation) can be improved to make the investment more attractive to the business players,” Arifin said.

Reporting by Indonesia Window