Arcandra Tahar

JAKARTA (TheInsiderStories) – 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.

Acting Director General for Oil and Gas Ego Syahrial at the ministry said that 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. Syahrial said the remaining blocks will be offered in the second round of tender in the middle of this year.

A clarification forum will be held on Feb. 22 to March 29 for direct offer tenders and Feb. 22 to Jun. 9, for regular tenders. Bid documents for direct offers should be submitted by Apr. 4 and regular tenders by Jun. 19.

On Jan. 31, the EMR Ministry announced the winners of its conventional oil & gas Working Areas or ‘block auction’.  Of the ten working areas offered, only five aroused investors’ interest.

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.

Deputy Minister for EMR Arcandra Tahar commented that he expects more participants will be interested in a coming auction, as they will have a better understanding of the gross-split PSC scheme.

Early last month, 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.

Following is the conventional oil and gas working areas that are being offered:

Regular tender:

  1. Nibung located in onshore Riau
  2. South PP located in onshore Jambi
  3. Batu Gajah Dua located in onshore Jambi
  4. Air Komering located in onshore South Sumatera
  5. Bukit Barat in offshore Natuna
  6. East Sokang in offshore Natuna
  7. Banyumas in onshore Central Java
  8. East Muriah in offshore East Java
  9. North Kangean in offshore East Java
  10. Andika Bumi Kita in offshore East Java
  11. Belayan in onshore East Kalimantan
  12. West Sanga-Sanga in onshore East Kalimantan
  13. Suremana I in offshore Makassar Strait
  14. South East Mahakam in offshore East Kalimantan
  15. Manakarra Mamuju in offshore West Sulawesi
  16. Karaeng in onshore/offshore South Sulawesi
  17. Ebuny in offshore Southeast Sulawesi
  18. West Berau in offshore West Papua
  19. Cendrawasi Bay II in offshore West Papua

Direct Offer Mechanism:

  1. South East Jambi in onshore Jambi
  2. Citarum in onshore West Java and Central Java
  3. East Ganal in offshore Makassar Strait
  4. East Papua in onshore Papua
  5. East Seram in onshore/offshore Maluku

Following is the non-conventional oil and gas working areas that are being tendered out:

  1. GMB Sumbagsel in onshore South Sumatera
  2. MNK Sumut Tenggara in onshore North Sumatera.