A Necessity or a Premature Move? The Shift of Indonesian Production Sharing Contract in the Oil and Gas Industry (original) (raw)
Related papers
2021
This study aims to: 1) analyze empirically and test the effect of cost recovery in the Production Sharing Contract (Oil and Gas Production Sharing). 2) empirically analyze and test the effect of cost recovery in the upstream Oil and Gas Industry on State Revenues. The unit of analysis of this research is the upstream oil and gas industry managed by the Indonesian government with a Production Sharing Contract system with 44 companies or contract operator cooperatives. The population includes those who work as operators of cooperation contract contractors and SKK MIGAS with 62 manager levels, 51 professionals and 18 university researchers. And the researchers also used secondary data in SKK MIGAS in the 1984-20019 period. This research uses a qualitative approach, and the analysis of the data used is descriptive analysis, because the data analysis is done not to accept or reject hypotheses, but in the form of descriptions of observed symptoms, which are not always in the form of numbe...
Keywords Abstract PSC Gross split Net Present Value (NPV) Internal Rate of Return (IRR) This research explores two schemes of oil and gas PSC. First, Cost Recovery (old scheme) that the investor earned a production cost refund. While the second scheme is Gross Split (new scheme), which is the production sharing system without cost of recovery. The Gross Split scheme was implemented by the Minister of Energy and Mineral Resources, Ignatius Jonan in early 2017 in response to the concerns of People's Representative Council (DPR) Commission VII that the Cost Recovery scheme was no longer prooitable for the government. Thus, there should be a new one which is better, beneeicial, yet attractive to investors to entrust Indonesian oil and gas business. The study was conducted at PT XYZ, the irst PSC Company which implemented Gross Split scheme after its contract period under the Cost Recovery scheme ended in January 2017. The study focuses on two cases of offshore oil and gas development projects, X and Y, by using economic capital budgeting indicators, such as NPV, IRR, and Pay-back Period. In addition, oil and gas iscal calculations are done equally with Net Contractor Take and Government Take, then analyzed the sensitivity of the variable that affects its economic project. The results showed that Gross Split scheme projects have better NPV and IRR values than the Cost Recovery scheme. As for Payback Period, both schemes had the same value. This means that the economic value of Gross Split scheme project is better. However , it turns out that the Government Take value is much smaller. While from the sensitivity analysis, the amount of production and price is very sensitive to both economic projects as well as the widespread on the Gross Split scheme. It can be concluded that the PSC Gross Split scheme will beneeit the Contractor if it is accomplished with good planning of Work Program & Budgeting (WPB), accurate calculation of oil and gas reserve, timely development of oil and gas facilities, along with the efficient use of production costs. For the government, although the income is smaller, on the other hand, it is no longer burdened with cost recovery of production which has been disrupting state's inance in the development of exploration and domestic oil and gas production.
Compatible Concept of Contract Law with Oil and Gas Production Sharing Contract in Indonesia
IOSR Journal Of Humanities And Social Science (IOSR-JHSS), DOI : 10.9790/0837-2409031021 Series. 3 (September. 2019) 10-21 e-ISSN: 2279-0837, p-ISSN: 2279-0845. www.iosrjournals.org, 2019
The practice of Gross Split and Cost Recovery contracts for oil and gas production sharing results in inconsistency in the concept of oil and gas production sharing contract. This inconsistency will contribute to inability to reach the natural resource management as mandated by the fourth paragraph of the preamble of the 1945 Constitution, related to Article 33, point (3) of the 1945 Constitution, related to Article 1 and 2 of the Agrarian Law, related to Article 4 of oil and gas law, related to Article 25 in point (1) of Government Regulation No 55 of 2009. The regulations for oil and gas production sharing contract which is public and private have not been integrated into one guideline, and thus private, and public laws are often used as the guideline. Based on the comparison of the two types of oil and gas production sharing contracts, Gross Split contract might degrade the principle of ownership by the state in managing oil and gas compared to Cost Recovery contract. This disadvantage is evident from the lack of government role in supervising and monitoring the management of oil and gas, and this lacking government role can reduce the chain effect of the national economy. Key words : contract, oil and gas production sharing contract, Gross Split and Cost Recovery contracts
Lentera Hukum
Indonesia has the potential to manage natural resources in such a way that social justice, public welfare, and the prosperity of the people is also realized. Contract law is the primary legal umbrella used in efforts to protect natural resources from exploitation. This study uses normative juridical methods that prioritize secondary data as the primary sources. This study shows the form of the legal protection of state assets related to oil and gas management including the government has the right of immunity, the existence of provisions regarding state revenue, state levies, and bonuses and the existence of provisions for contractors to distribute a portion of the production share. Thus, the government uses Production Sharing Contracts (PSC) to enter into oil and gas management agreements with contractors, specifically regarding upstream business activities. The Oil and Gas Law does not elaborate on the meaning of the PSC. Rather, it only states that the PSC is one form of the cont...
Capital Budgeting of Mandala Block Under Indonesia’s Gross Split Production Sharing Contract
2020
Mandala Block is one of the oil and gas working area terminated in 2018. In the Production Sharing Contract (PSC) extension, the government has stated Mandala Block to apply the Gross Split PSC based on Minister of Energy and Mineral Resources Regulation No.52/2018 and the Operator has been granted to PT NOC as National Oil Company. Change in PSC regime from Cost Recovery to Gross Split in Mandala Block should ensure the investment activities and oil & gas operation remain profitable so that the oil and gas production will not decline after contract termination. The purpose of this study is to evaluate the investment feasibility in Mandala Block under the Gross Split scheme during its PSC extension. As comparison, we also assess an economic performance of Mandala Block when the Cost Recovery PSC is applied. This is to understand whether change in PSC regulation from Cost Recovery to Gross Split is more attractive for the Contractor or it makes profitability of the Contractor worse t...
The Legality of Oil & Gas Production Sharing Contract Gross Split Scheme
Indonesian Journal of Energy
As an oil producing nation, Indonesia embodied its authority to manage its oil resources through article 33 paragraphs 3 of The Republic of Indonesia Constitution 1945. Regarding the article, this means that the state has the authority to manage Indonesian natural resources, directly or indirectly, through other public and/or private institutions and the profit of such activity shall be for the benefit of the people. This granted the state to appoint other institution, including a National/International Oil Company (NOC/IOC), to manage the exploration and production of oil, as that particular activity is regarded as a high risk and high capital business. In order to do so, according to Law no. 22 2001, the state may appoint a NOC/IOC through a production sharing contract. In this research, it is founded that the regulation that governed a production sharing contract with the gross split mechanism—Ministry of Energy and Mineral Resources Regulation No. 8 2017 jo. Ministry of Energy a...
Effect Of Investment In Contract Extension On PSC Cost Recovery And Gross Split
2020
The study was conducted to analyze and compare the economic results of the current oil and gas Production Sharing Contract (PSC) systems of Cost Recovery and Gross Split in Indonesia. This was due to the introduction of a new regulation passed through ESDM Regulation No. 08 of 2017 and revised with Permen No.52 Year 2017. Based on data processing and calculations, the economy of the Y field, PSC Gross Split was found to be better with net income contract amounting to 206.42 million US Dollars compared to PSC Cost Recovery of 107.74 million US Dollars with a total investment of 258,41 million US Dollars. Besides, the Net Present Value (NPV) was 107,85 MMUSD and 54,28 MMUSD, Internal Rate of Return (IRR) was 62,24% and 46,82%, and Pay Out Time (POT) was 3,11 years and 3,31 years for Gross Split and Cost Recovery respectively.
Comparative Analysis of Nigeria and Malaysia’s Production Sharing Contract (PSC)
European Journal of Business and Management, 2021
The oil and gas industry is governed by policies with the aim of smoothening the business relationship between the Government, the International Oil Companies (IOC’s) and the Host communities. Different oil producing countries have their own laws governing petroleum activities and these laws vary from country to country based on the B-PEST factors which are Biological, Political, Environmental, Social and Technology. However, reserve size and oil type can also influence petroleum laws. Countries like Nigeria relies strongly on petroleum bills such as the PIB in which this research will be analyzing the Production Sharing Contract (PSC) which is a significant subset of the PIB. Comparison between the existing PSC of Malaysia and that of Nigeria was captured in this research and the analysis of the PSC was done based on the Government Take, National Oil Company (NOC) and the Contractor’s benefits. 26.67% and 56.58% recovery cost, 28.67% and 26.28% Government revenue, 23.14% and 7.64% ...
The Role of the State in Upstream Oil and Gas Gross Split Contracts
Proceedings of the Proceedings of the 1st International Conference on Business, Law And Pedagogy, ICBLP 2019, 13-15 February 2019, Sidoarjo, Indonesia, 2019
The enactment of the Republic of Indonesia Minister of Energy and Mineral Resources Regulation Number 08 of 2017 regarding Gross Split Production Sharing Contracts marks a new era for Indonesia's Upstream Oil and Gas Industry. Gross Split was introduced as the government's answer to the dissatisfaction with the Cost Recovery scheme that has been going on for decades. Without making changes to Law No. 22 of 2001 concerning Oil and Gas, the Government considered it necessary to immediately issue regulations related to the Gross Split scheme in order to increase state revenues in the upstream oil and gas sector. Gross Split contracts also offer bureaucratic cuts in investment procedures expected to attract investors. This research aimed to analyse the legal aspect related to Gross Split regulation and to determine the extent of the government's role in implementing control and supervision of contractor activities in the Gross Split Scheme.