https://provisio-id.com/provisioconsulting Can oil and gas contractors change their investment scheme? Here are the conditions!
The oil and gas industry in Indonesia has a very strategic role in the national economy. As one of the sectors with a large contribution to state revenue, investment in the oil and gas industry always attracts the attention of many parties, both domestic and foreign investors. One important aspect of investment in the oil and gas sector is the applicable contract scheme, which directly affects the taxation aspects and fiscal incentives for oil and gas contractors.
In Indonesia, there is a new regulation that issues oil and gas contractor profit sharing with upfront calculation or gross split. Ministry of Energy and Mineral Resources Ariana Soemanto, Director of Upstream Oil and Gas Development, said that the regulation is contained in Ministerial Regulation (Permen) of ESDM Number 13 of 2024 concerning Gross Split Production Sharing Contracts, which replaces Permen of ESDM Number 8 of 2017.
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In Permen of ESDM 13/2024, in addition to regulating the gross split production sharing contract, it also regulates the unconventional oil and gas working area for the contractor to reach 93%-95% at the beginning which makes the contract more attractive. In addition, the gross split rules that have also changed are the 13 additional components of production sharing to be simplified to only 5 components consisting of the amount of reserves, field location, infrastructure availability, oil prices, and natural gas prices.
In the old scheme, gross split gave contractors very variable profit sharing, which could be very low or possibly up to 0% under certain conditions. However, the new scheme offers certainty of production sharing of around 75% to 95% for contractors, making unconventional oil and gas working areas more attractive and providing more flexible options according to the convenience of contractors.
For contractors who want to move to cost recovery from the previous gross split or vice versa, they can choose the type of contract according to their convenience, provided that the contract is signed after the Permen of ESDM 13/2024. However, for existing oil and gas contractors or those whose contracts were signed before Permen of ESDM 13/2024 can switch to the new gross split contract scheme with the following conditions:
Old gross split scheme contracts for unconventional oil and gas, including coalbed methane and shale oil/gas.
Cost recovery scheme contracts, as long as they are still in the exploration stage and have not received approval for the first plan of development (POD-I) from the government.
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Exceptions for old gross split scheme contracts that are already in the production stage, cannot change to the new gross split scheme, but can only change to the cost recovery scheme contract.
Finally, Ariana Soemanto said that there are at least five contractors/blocks that are interested in using the new gross split scheme in accordance with Permen of ESDM 13/2024. Contractors can choose which contract scheme is in accordance with the risk profile of each contractor.