Gross split policy faces challenge at House

Petromindo|Lucky

The government?s new gross split policy is being challenged at the House of Representatives as the scheme has been excluded from the final draft of the new oil and gas bill, Kontan reported.

The paper said that the House Commission VII on energy and mining submitted the final draft of its proposed revision of oil and gas law to the House Legislation Body (or Baleg) for harmonization prior to deliberation process with the government.

Commission member Kurtubi said that the new gross split scheme will eliminate the state control over oil and gas management. He added that the commission was also accommodating the aspiration oil and gas contractors who prefer the current cost recovery mechanism in their production sharing contracts, instead of the gross split scheme. He also said that the cost recovery mechanism will ensure the use of locally manufactured goods and services in oil and gas operations through the local content requirement. ?With the cost recovery system, expenses must be reported, and there will be increase in the local content,? Kurtubi said.

The Ministry of Energy and Mineral Resources has recently introduced the new gross split scheme, to be applied in new oil and gas contracts. Under the scheme, the oil and gas contractors will no longer get reimbursement from the government for their operating and production expenses, but will obtain a greater production split and freedom in running their operations as procurement of goods, services and technologies will no longer require approval from upstream authority.

Another commission member Hari Purnomo said that the gross split scheme has been excluded from new oil and gas bill to allow some flexibility. ?If the contractors do not want to use the gross split scheme, can oil and gas development be realized??

Some contractors have recently voiced concerns over the new gross split scheme saying it could undermine feasibility of upstream oil and gas projects.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar declined to comment on the latest move made by the House Commission VII. (*)