JAKARTA (TheInsiderStories) – Director General of Oil and Gas for Minister of Energy and Mineral Resources (MEMR) Djoko Siswanto said, the government plans to auction Tarakan oil and gas block to investors.
Tarakan Offshore PSC is onshore and offshore block located in Tarakan Basin, North Kalimantan which covering area 127.38 sq km has been relinquished from the original contract area of 638.77 square kilometers.
The block signed on Oct. 14, 2003 to Provident Energy Indonesia LLC. In December 2005, the ownership was change to Manhattan Kalimantan investment Pte. Ltd (MKI).
The block is in development full contain with gas and condensate. MKI has signed a gas sales and purchase agreement with PT PLN Tarakan for 4.3 MMCFD effective on quarter 2015. MKI intend to develop gas production facilities consist of gas plant, receiving terminal, metering station and condensate storage facility.
The oil and gas blocks were originally managed by PT Medco Energi Internasional Tbk (IDX: MEDC) but according to Siswanto does not offer sufficient attractive investment deals.
This year the Indonesian Energy and Mineral Resources Ministry (EMR Ministry) has opened its tender process for 26 oil and gas working areas, comprised of 24 conventional and two non-conventional oil and gas blocks. All the working areas are being offered based on gross-split production sharing contracts (PSC), instead of cost-recovery-based.
It said five of the 24 working areas are to be available through a ‘direct offer’ mechanism, while 19 are offered through a regular tender process. Meanwhile, the two non-conventional oil and gas working areas are also going to be offered through direct offer.
The number of oil and gas working areas that are tendered are lower than the initial plan of 43 blocks. The ministry said the remaining blocks will be offered in the second round of tender in the middle of this year.
The announcement heralded the first auction of working areas based on the much-debated ‘gross-split production sharing’ scheme or ‘gross split PSC’, instead of the previously-applied cost recovery-based PSC.
In January, the Government issued a favorable tax ruling to be applied to oil and gas PSC, based on a gross split scheme, as a move to attract more investors into the oil and gas sector.
The tax code is labeled ‘Government Regulation No. 53/2020 on Tax Treatment for Upstream Oil and Gas Business Activities and Gross Split-based Production Sharing Contracts’. The new rule took effect Dec. 28, 2017.
The gross split scheme will be applied to new oil and gas production-sharing contracts, including oil and gas blocks being auctioned off by the Energy and Mineral Resources Ministry.
Tahar explained how the content of the regulation has changed little from the draft of the Government Regulation on Gross Tax Split. The tax rules will contain a loss carry forward for 10 years and indirect tax exemptions until the initial oil and gas production.
He is confident that these taxation rules will find acceptance among upstream oil and gas business players.
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