JAKARTA (TheInsiderStories) - Indonesia government appointed PT Pertamina Hulu Energi (PHE), unit of state-owned energy company PT Pertamina, to manage a Production Sharing Contract Offshore North West Java (ONWJ) concession as part of the first implementation of gross split scheme. At the same time Minister of Energy and Mineral Resources (EMR) Ignatius Jonan released ministerial decree on gross split scheme No.08/2017.
The signing agreement conducted by Head of Special Unit Oil & Gas Agency (SKK Migas) Amien Sunaryadi and Director of PT Pertamina Hulu Energy Offshore North West Java (PHE ONWJ) Beni Jaffilius Ibradi witnessed by the minister and Vice Minister of EMR Archandra Tahar.
Jonan explained, PHE ONWJ will manage the entire working areas and give Pertamina chance to share down its ownerships to the existing partners or other parties with condition 10 percent must divest to regional government. According to President Director of Pertamina Dwi Sutjipto, the company will offer 25 percent of the ONWJ share for existing partners or other parties 25 percent for existing partners while 10 percent for regional state-owned enterprises.
Previous ONWJ concession 58.8 percent owned by PHE, PT Energi Mega Persada Tbk (IDX: ENRG) 36.72 percent and Kufpec EMP (ONWJ BV) 5 percent. The third parties signed the first time agreement on August 18, 1966 and then government over handed the project to Indonesian Independent Petroleum Company. The company has contract period since 1997 until now. ONWJ has reserve in place 309.8 million barrels of oil equivalent per day and 1,114 million standard cubic feet per day (MMSCFD) for gas.
Dwi Sutjipto adding, beside ONWJ, government also assigned Pertamina to managed eight termination oil & gas concession namely Attaka in East Kalimantan sea, Southeast Sumatra, East Kalimantan, North Sea Block A in the West Natuna Sea, North Sumatra Offshore, Ogan in South Sumatra, Sanga-Sanga, and Tuban, East Java. Government also over handed Jambara Tiung Timur and East Natuna concession to the company.
“In the framework of national interests we want to strengthen the national oil company. Malaysian Petronas contributed 55 percence of total national production. While Pertamina it only 24 percent of the total national production. Therefore if there concession depleted Pertamina given first preference,” Archandra stated.
By the end of 2016, PHE ONWJ has reached the level of oil production of 35.8 thousand barrels per day and gas production of 155 MMSCFD channeled entirely to the domestic demand. Since 2009 PHE ONWJ has invested $3.9 billion on the project and has increased the capacity production nearly doubling to 40,000 barrels per day.
Gross Split Rule
Based on the ministerial decree, gross split scheme only applies for a new contract oil and gas based on the principle of division of the gross production progressively each year without a mechanism to recover operating costs. This scheme applies only to new contracts the government to continue to honor oil contracts in progress.
Previously, Indonesia using a scheme of production sharing contracts or Production Sharing Contract (PSC) in which the operation is performed after the replacement cost of oil and gas production was cut First Tranche Petroleum.
Last year, the Ministry of Energy and Mineral Resources of Energy issued Decree No. 38 of 2015 on the acceleration of non-conventional oil and gas exploitation. In the rules there is an option scheme for the results of using a sliding scale gross split.
There are five criteria to determine the revenue share split gross scheme. First, the amount of oil and gas reservoirs contained in the bowels of the earth. Second, the location of oil and gas projects that will be managed by the contractor. Third, the field conditions.
Fourth, the level of difficulty based on the geological conditions. Fifth, the characteristics of the backup to be there, that is conventional or non-conventional oil and gas blocks and the use of technology that will be used contractors in a work area of oil and gas. The government is also considering local components as one determinant of the amount of gross revenue share split scheme.