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Indonesia govt to auction new oil-gas WKs this month with new scheme

JAKARTA ( – The Energy and Mineral Resources Ministry (ESDM) plans to auction oil and gas Working Areas (WKs) this month that will allow oil and gas companies to adopt new contract scheme, other than production sharing contract (PSC) scheme.

The ruling about this new scheme is being finalized, said Director for Upstream Oil and Gas Business at the Energy and Mineral Resources Ministry Djoko Siswanto said during the 4th United-States-Indonesia Energy Investment Roundtable in Shangri-La Hotel on Monday.

The new contract scheme, said Djoko Siswanto, is aimed at boositing explorations and production of oil and gas.

The new scheme to be proposed is gross split or sliding scale. Under the new scheme, the government will no longer replace the costs spent by oil and gas contractors during the exploration through the cost recovery scheme.

Instead, in the first years of the production, the contractor will get larger portion of the output proceeds, the portion of which is to cover the earlier costs. As the costs are nearly recovered, the split for the government will be getting larger.

“Each scheme (PSC or gross split) has benefits and disadvantages. It is up to production sharing contractors to choose. With the new system, PSCs will automatically be working hard to adopt cost efficiency as much as possible,” he said.

A number of countries have adopted the gross split scheme, including Australia. The new scheme, other than PSC, is possible under the Oil and Gas Law No. 22, 2001. The new scheme will be implemented once the ministerial decree on this is completed this month.

The Indonesian government is trying to boost investment in oil and gas explorations to increase oil and gas reserves. Discovery of new reserves is crucial given that the existing oil reserves will only last for about 12 years if there will be new discoveries. (*)

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