Minister issues regulation to speed up non-conventional oil and gas development
Saturday, November 7 2015 - 03:47 AM WIB
Key points in the MEMR Regulation No. 38/2015 on the Acceleration of Non-conventional Oil and Gas Development are as follows:
The director general of oil and gas on behalf of the minister of energy and mineral resources determines working areas and terms and conditions for cooperation contracts in consideration of technical and economic aspects of each non-conventional working area. The types of contract are among others:
1. conventional production sharing contract (PSC)
2. Sliding Scale PSC,
3. and Gross Split Sliding Scale PSC.
The director general of oil and gas offers non-conventional working areas using one of the types of contract.
Contract is valid for a maximum of 30 years, extendable for a maximum of 20 years per extension in view of economic and technical aspects of field development.
Non-conventional contractors are obligated to deposit to the joint bank account of the contractors and SKK Migas as much as 10 percent of their firm exploration commitment or Us$1.5 million (whichever is larger) or 10 percent of budget commitment for first two years of exploration or $1 million (whichever is larger).
The calculation of the amount of reserve from exploration and exploitation activities for plan of development (PoD) is conducted based on proven reserve plus 70 percent of probable reserve. Certification of reserve is not necessary for the calculation.
The minister of energy and mineral resources determines whether the production from exploration and exploitation activities will be prioritized to meet the domestic demand. Contractors can sell their production prior to approval of first PoD with revenue sharing as follows:
1. For Sliding Scale PSC, revenue is shared in line with production sharing terms stated in the contract without prior first tranche petroleum and cost recovery
2. For Gross Split Sliding Scale PSC, revenue is shared in line production sharing terms stated in the contract
Transition clause in the regulation stipulates among others that coal bed methane (CBM) contractors, whose PSCs are still valid, have to calculate their reserves from exploration and exploitation activities for PoD on the basis of proven reserve plus 70 percent of probable reserve. Certification of reserve is not necessary for the calculation.
Upon the implementation of the ministerial regulation, CBM contractors whose contracts are still valid may propose
1. Amendment to contract or
2. Change in type of contract
Proposal for amendment to contract or a change in type of contract may be submitted to the minister of energy and mineral resources through the head of SKK Migas only after contractors have fulfilled at least 60 percent of their firm commitment. The rest of the firm commitment can be fulfilled after contract amendment or change.
The contractors are also obligated to deposit to the joint account of the contractors and SKK Migas as much as 10 percent of the commitment that is yet to be fulfilled.
In the event of the minister approving the proposals of the contractors, the minister will determine the terms and conditions for the cooperation contracts
Editing by Johannes Simbolon