Indonesia allows oil and gas investors to choose contract options

The revisions, which came into effect on July 16, allow contractors to choose between different sharing contracts including the “cost recovery” and “gross split” systems in an effort to boost investment.

Indonesia adopted the “gross split” scheme for oil and gas production deals in 2017, in which contractors shoulder the cost of exploration and production in exchange for retaining a bigger portion of the oil and gas they recover.

That represented a shift from the “cost recovery” scheme used previously, in which the government reimbursed the exploration and production costs borne by the contractors in exchange for a higher share of companies’ oil and gas earnings.

Under the revised law, expiring contracts no longer have to be converted to gross split production sharing contracts from cost recovery contracts.

In the case where state oil company PT Pertamina or its affiliates are appointed, the ministry will determine the cooperation contract./.