Ministry sets five principles for contract extension
Friday, October 25 2013 - 12:05 PM WIB
Vice Minister of Energy and Mineral Resources Susilo Siswoutomo said in a statement n Friday that holders of production sharing contract (PSC) should meet the five principles in order to have their contracts extended by the government.
The vice minister made the statement following a statement released by the MEMR on Thursday that it is drafting a ministerial regulation that will set rules for contract extension. The ministry said it is expected to officially issue the regulation ?as soon as possible? before the contract on Siak block in Riau operated by PT Chevron Pacific Indonesia (CPI) comes to expire on Nov. 27, 2013.
The vice minister said the first principle is that once the contract expires, the block will automatically belong to the state. ?As such, the state should get more than it did in the past,? he said.
The second principle, he said, is that the block still has value even if the contract has expired, because the expiring block still contain proven reserve, and have facilities and human resources. ?Thus, it still has some value. Imagine we have 10 cars and have leased them for 10 years. When they are returned to us, they will still have some value,? Susilo said, adding ?Whoever is the operator (of the block), they already got what they deserved (once the block expires). The production share will remain 80 percent for the government and 20 percent will be up for grab (for companies which want to become the operator,? he said.
?The third principle is that Pertamina is the state. Pertamina is a state owned firm. The government should favor Pertamina to help it become a world-class company,? he said.
The fourth principle is that the operations of the expiring block should continue and production should not be halted due to contract extension issues. ?As such, we shall make evaluation of all aspects (before deciding on contract extension),? he said.
?The fifth principle is that whoever will become the operator (of the block after contract extension) should provide something for the government, for instance signing bonus. This also applies for Pertamina,? the vice minister said.
Editing by Johannes Simbolon