Indonesia revises its future oil and gas production sharing agreements

Indonesia has adopted a new scheme amending the terms of future oil and gas production sharing contracts (PSCs).



In the new contract model, contractors will support the cost of exploration and production, rather than be reimbursed by the government. In turn, they will retain a higher share of the oil and gas produced; under the existing PSCs - that will not be changed - the government received 70% of the gas produced and 85% of oil. Various criteria, will enter into account to set the split in revenues between the government and contractors, such as field location to reflect higher production costs or the amount of local content used for the project. PT Pertamina has just signed the first contract under the new scheme for the Offshore North West Java (ONWJ) block: the government will get only 37.5% of any gas and 42.5% of oil.



The country expects to attract new investors to boost the development of new fields. Indeed, Indonesia's crude oil production has been declining since the mid-1990s, posting a decrease of more than 40% between 2000 (72 Mtoe) and 2015 (40 Mtoe). Gas production, which grew between 2000 and 2005, has been contracting since then, down to 42 Mtoe in 2015. In addition, the new scheme should lower the burden on Jakarta's budget: in 2016, oil and gas contractors active in Indonesia asked for more than US$11bn in reimbursement, compared to an expected level of US$8.4bn.