Contractors may negotiate production split next year

By Bernard Loebs

Starting next year, Production Sharing Contract (PSC) holders may propose to negotiate production split in the oil and gas blocks auctioned by the government, a senior official of the Ministry of Energy and Mineral Resources said.

Until now, production split for each block has been determined by the government during tender. Contractors can only negotiate with the government on the amount of signature bonus and firm exploration commitment. During the tender of blocks next year, the production split will be also negotiable, Djoko Siswanto, Director for the Management of Upstream Activities at the Directorate General of Oil and Gas said recently.

The new rule will be applied for both conventional and non-conventional blocks, Djoko said.

?Contractors may propose the production split they want. We shall only make an owner?s estimate. Contractors that propose the largest production split for the government will win the tender,? Djoko said.

?This is one of the incentives offered by the government for investors at the current market downturn. We hope this incentive can become a solution,? he said.

He said the ministry is revising the existing regulation and standard operating procedures to allow the application of the new rule.

He said this year, a total of 12 oil and gas blocks comprising eight conventional blocks and four unconventional blocks have been auctioned. Next year, the ministry targets to auction a similar amount of blocks.

Editing by Johannes Simbolon