Government applies gross split scheme in new ONWJ block contract
Thursday, January 19 2017 - 01:54 AM WIB
Petromindo|Khalsa
The government signed on Wednesday a new production sharing contract of the Offshore North West Java (ONWJ) block, assigning the entire contract to the block?s previous operator PT Pertamina Hulu Energi ONWJ (PHE ONWJ), an indirect subsidiary of state-owned oil and gas firm PT Pertamina.
The government also applies for the first time the newly-introduced gross split scheme in the new ONWJ block contract, meaning that the operator will no longer get reimbursement from the government for its operating and production costs.
?Pertamina is ready to implement the government policy. With the new gross split scheme, Pertamina as a contractor is challenged to manage oil and gas working areas efficiently,? Pertamina President Director Dwi Soetjipto said in a press conference.
According to the new contract, which is valid until 2037, the final split from oil for the government is set at 47.5 percent, and 52.5 percent for PHE ONWJ. Meanwhile, the government?s split from gas is set at 37.5 percent, and 62.5 percent for the contractor.
Dwi said that PHE ONWJ will have to improve efficiency in the block?s operation to compensate for the expected lower revenue under the new gross split scheme. The operator is also allowed to seek partners (share down) including by inviting its former partner in the block.
The government announced in November of last year it would transfer the entire ownership of ONWJ block to Pertamina when the contract expires on January 18, 2017. Pertamina through PHE ONWJ previously owned an interest of 58.27 percent in ONWJ block in West Java as operator, while Kuwait Foreign Petroleum Exploration Company (Kufpec) owned 5 percent interest, and PT Energi Mega Persada (EMP) has more than 36 percent. Kufpec has decided not to continue with the ONWJ project after the contract expires, while EMP said it was still interested to continue investment in the block.
PHE ONWJ has set 2017 oil and gas production target from the ONWJ block, respectively, at 36,000 bopd and 172 mmscfd.
Editing by Reiner Simanjuntak