Govt considers paying PSC for their production shares

By Febry Silaban

The government is reviewing the possibility of renegotiating the Production Sharing Contract (PSC) to allow the government to take all the oil and gas output and the contractors to receive their production share in cash rather than in kind.

The review is carried out by the Ministry of Energy and Mineral Resources (MEMR) together with the Ministry of Finance and upstream authority SKK Migas, Director of oil and Gas Upstream Development at MEMR Hendra Fadly said on Tuesday.

?The plan is to insert a point (in the PSC) which stipulates the PSC holders will receive their margin in cash, rather than in the form of oil (and gas) production as they do now,? he said.

He said the new scheme has been applied for Wailawi field in East Kalimantan.

?The contractor (of Wailawi) is paid for their service. They don?t get oil. The amount of service payment is set in the contract,? Hendra said.

SKK Migas?s Secretary I Gde Pradnyana said the renegotiation could be tough since some of the contractors need the oil production to meet the needs of their refineries. PT Chevron Pacific Indonesia, for instance, has a refinery outside the country which at present gets crude supplies from the firm?s oil fields in Indonesia.

He said as a consequence of such policy, there will be plentiful additional supplies of oil in the country. The question is: Are the local refineries capable to absorb them?

He said if the government wants to take the contractors? production shares, they should be paid for on market prices.

?The oil belongs to them (the contractors), not to the state. Thus, they will sell the oil at market price,? he said.

Editing by Johannes Simbolon