JAKARTA (TheInsiderStories) – Indonesian government through the Ministry of Energy and Mineral Resources (MEMR) handed over the management of Rimau block in South Sumatra to PT Medco E&P Indonesia, on Thursday (02/14).
The oil and gas block has an area of 1,103 square kilometers with a total investment value of US$41.33 million and a signature bonus of $4 million, said the ministry. It was reported that the Rimau block’ average oil production reached 8200 barrels a day and gas 3.6 million standard cubic feet per day.
Unlike the previous cost recovery contract, this one using the gross split scheme. The revenue sharing contract is an extension contract with Medco E&P’ 95 percent interest participation holders and 5 percent regional mining and energy company. This contract is valid for 20 years, effective from 2023 to 2043.
“Hopefully Rimau can be improved according to definite work commitments. Medco is also expected to be able to carry out all agreements, so that this block can meet our expectations,” said Deputy Minister Arcandra Tahar, while witnessing the signing of the contract in Jakarta.
Medco E&P Managing Director Ronald Gunawan said the company continued to commit to meet production targets set by the government. The company has also been able to withstand the natural decline in wells in the Rimau work area through various innovations while still prioritizing work safety and being environmentally friendly, he added.
Tahar hopes the process of signing other work area contracts can be completed immediately with a gross split scheme. This scheme began in 2017. Until now there have been 40 oil and gas contracts using gross split schemes.
This helped increase competitiveness in the interest of investing in the oil and gas sector which continues to show increasingly competitive charts. According to IHS Markit, in 2018, Indonesia was included in the category of countries capable of boosting oil and gas exploration and exploitation activities amid sluggish upstream oil and gas investment due to fluctuations in the global economy.
Indonesia’ ranking is ranked 25th out of 131 countries assessed. Indonesia has overwhelmed Algeria, Russia and Egypt, known as oil exporters. At the ASEAN level, Indonesia is in the top rank. Malaysia, for example, was ranked 23rd in 2017, 2018 dropped to 35th.
The vice minister said, this proves that the management of the oil and gas sector is able to attract investors into Indonesia. This is inseparable from the changes in the fiscal system for gross split results implemented by the government, replacing the previous fiscal regime, cost recovery.
The government managed to cut 56 regulations and licenses that hampered the course of oil and gas investments in Indonesia. In 2018, this new system succeeded in pocketing exploration funds of Rp31.5 trillion ($2.25 billion).
This figure has not been added to the signature bonus worth Rp13.5 trillion from 39 contractors. The total investment value entered in 2018 amounted to Rp187.5 trillion, an increase from the previous year which was only Rp165 trillion.
Written by Lexy Nantu, Email: email@example.com