Govt to make clear-cut ruling on contract extension

The government would set out a clear-cut ruling on contract extension in the oil and gas industry to avoid potential dispute in the future, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said Thursday.

Purnomo said the ruling would be inluded in the Upstream Governmental Regulation which is currently under the drafting process.

"The ruling on contract extension will be included in the Upstream Government Regulation, whose draft is almost completed," Purnomo told Petromindo.Com after a hearing with the House of Representatives' Commission VIII for energy and mineral resources, environment and science and technology.

Thus far, there is no clear-cut ruling on the contract extension but in the past the government usually granted any requests from contractors for the extension of their contracts. Under the production sharing contract (PSC) system, an oil and gas investor has the right to explore and develop its contract areas for 30 years and he can ask the government to extend his contracts for another 20 years.

Recent cases however indicated that contractors can no longer take for granted that the government will easily extend their contracts.

For instance, PT Caltex Pacific Indonesia, which is owned by American energy giant ChevronTexaco, failed to extend its PSC on the Coastal Plains Pekanbaru (CPP) block. The government awarded the block to a joint venture between state oil and gas company Pertamina and the Riau province in August this year.

Anglo-American energy giant BP PLC has for several years asked the government extend its PSC on the Kangean Block in East Java, which expires in 2010. But, the government has yet to make a decision on the matter. (godang)