The energy and mineral resources (EMR) ministry targeting the new investment in the oil and gas sector to rises around 45 percent from US$12.1 billion to $17.6 billion in this year - Photo by the EMR Ministry Office

JAKARTA (TheInsiderStories) – Indonesian government frees the manager of oil and gas working area to determine a business scheme that is believed to provide confidence for business expansion, said the Energy and Mineral Resources (EMR) on Sunday (08/02). The new oil and gas gross split production sharing contract (PSC) reflected in the EMR minister regulation Number 12 of 2020 signed by the minister, Arifin Tasrif, on July 15.

This change is to provide legal certainty and increases an investment in upstream oil and gas business activities. Some of the amended articles are Articles 2 and 4, which regulate the form and main provisions of the gross split PSC.

In Article 2 paragraph (2), said that the form and cooperation contract may use a gross split, cost recovery or other cooperation contract. The government also removed the provisions if the manager of the working areas ended the contract period and the gross split was applied for the next period.

The government also abolished the provisions of Article 24 which regulates the implementation of gross split PSC of working areas that will expire and not be extended also the working areas that will expire and be extended. The provisions of Article 2 have changed.

It stated that the establishment of the cooperation contract that will be applied to a working areas by considering the level of risk, investment climate and maximum benefits for the country. In Article 2 paragraph 3, the ownership of natural resources remain in the hands of the government until the point of delivery, operational management control is in SKKMigas, and the entire capital and risk borne by the the contractor.

“The Gross Split PSC uses a mechanism for the base split which can be adjusted based on variable components and progressive components,” reads Article 4.

While, Article 25 become a cooperation contracts that have been signed before this ministerial regulation is stipulated are declared to remain valid until the expiration date of the relevant contracts. Then, paragraph b deleted and c stated a contrac has been signed before this regulation is stipulated, may propose a change in the form of the cooperation contract to a gross split PSC.

And paragraph d said, in the event that the contractor proposes a change in the form of a cooperation contract as referred to in letter c, the operating costs may be calculated to be an additional split for the contractor’ share as referred to in Article 7 paragraph 1.

While, for the state-owned energy producers, PT Pertamina or its affiliates as managers of new working areas whose cooperation contracts have not been signed, the minister has determined the form of the cooperation contracts. This rule removes Article 25A.

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