Ministry finalizing draft regulation on contract extension

The Ministry of Energy and Mineral Resources is finalizing the draft regulation on contract extension, Acting Director General of Oil and Gas IGN Wiratmadja said in a statement on Tuesday.

Wiratmadja said during the Work Meeting of the Forum Oil and Gas Producing Regions in Kupang, West Nusa Tenggara province last week the main point in the new regulation is that the government should decide on contract extension requests no later than one year prior to the contract?s expiry.

Other points of the regulation are as follows:
1. After expiry, a contract may be extended, or the block is transferred to state owned oil and gas firm PT Pertamina (Pesero) or be tranferred to the joint venture between Pertamina and the contractor.
2. If the minister of energy and mineral resources reject a contract extension request, the minister will put the block into auction prior to the expiry of the contract.
3. The director general of oil and gas is tasked with assessing the PSC extension proposal after being assessed by SKK Migas; assessing Pertamina?s request for block development with prior advice from SKK Migas.
4. The director general of oil and gas will set up the Team for PSC Extension and Working Area Development tasked with setting up standards of evaluation.
5. The government must get favorable production share
6. In case a block is owned by two or more business entities, request for contract extension may be submitted by interested entity. If more than one entities are interested, request for contract extension should be submitted based on their agreement.
7. Request for contract extension may be submitted no earlier than 10 years and no later than two years prior to contract expiry
8. A contract may be extended for a maximum of 20 years for every extension
9. The minister will determine the format and condictions of PSC block developed by Pertamina
10. In case a contractor asks for contract extension and Pertamina is also interested in the expiring block, the mnister may decide to transfer the block to Pertamina, or extend the contract or allow both the contractor and Pertamina to jointlly develop the block.
11. Within three years since the extension of the contract, the majority shareholder of the block is not allowed to transfer a majority of their ownership to other parties, except their affiliates; contractors or Pertamina as participating interest (PI) holders are not allowed to transfer a majority of their ownership to other parties, except their partners.
12. Regional state owned enterprises (BUMD) may obtain a maximum of 10 percent PI.

Editing by Johannes Simbolon