Govt to give more income to PSC contractors

Government will give more income portion to onshore oil production sharing contractors (PSCs) from 15 percent in the current income split ratio of 85:15 - in which the government gets 85 percent of income - to 20 percent, and thus the income split ratio will be 80:20.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that the new income split would be implemented for oil and gas fields to be tendered after Jan. 1, 2001 when the government takes over the licensing authority over PSCs from state oil and gas firm Pertamina.

"This incentive is offered in the form of a change in the income split. Initially (for onshore), the split ratio is 85:15, later, we will give 80:20, because we realize that oil firms want a quick return on investment," he said on Thursday.

The income split would differ for offshore and deep-water oil explorations. But Purnomo did not explain on what percentage the government would give to offshore and deep water PSCs.

Purnomo noted that the government was ready to negotiate over the right percentage of income split with PSCs, especially those exploring oil in deep water or marginal or remote fields.

"Companies need return on their investment. The more difficult the oil fields, the more capital it would need, and the more income split it would demand," he added.

He noted that the agreement on income split with PSCs would still bind even the contractors find a huge oil fields.

For instance, the government and a contractor has agreed to a split ratio of 80:20, and then after exploration, the contractor finds a huge oil reserves, in which 10 percent of income would be enough to give profits flows to the contractor. But because the split ratio in the initial agreement is set at 80:20, the contractor will be entitled to the 20 percent, instead of 10 percent.

"Although with 10 percent of income, the contractor will already book profit, because of the initial agreement that states 80:20, then fine, their profits will be much higher," he said.

Meanwhile, Director General of Oil and Gas Rachmat Sudibyo said that six deep-water oil fields in the Makassar Straits that would be soon tendered to investors will use the 1994 income split formula.

"The six oil fields will remain using the 1994 incentives because the 1994 split incentives already govern income split for deep water oil exploration, tertiary geology sediment. We have made different classifications," he said without giving details of the 1994 incentives.

Rachmat said the tender committee for the six oil field would be formed next month or early 2001 at the latest. (godang)