BP

Indonesia allows oil and gas investors to pick their own contract options

Credit: REUTERS/DARREN WHITESIDE

Indonesia announced over the weekend that it had made revisions to a 2017 law that will give oil and gas investors more flexibility when choosing their contract options for exploration.

JAKARTA, Aug 3 (Reuters) - Indonesia announced over the weekend that it had made revisions to a 2017 law that will give oil and gas investors more flexibility when choosing their contract options for exploration.

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.

"The government, through the Ministry of Energy and Mineral Resources, is officially allowing flexibility for investors to choose the form of oil and gas cooperation contracts," the energy ministry said in a statement on Saturday.

"This change is to provide legal certainty and increase investment in upstream oil and gas business activities," it added, referring to the exploration and drilling of new wells.

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.

(Reporting by Fathin Ungku and Bernadette Christina Munthe; Editing by Ana Nicolaci da Costa)

((fathin.ungku@thomsonreuters.com; +65 8578 6640;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

BP XOM COP

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More