Oil and gas contracts can be extended 10 years before expiry

Oil and gas producers will be allowed to request for an extension of their production sharing contracts 10 years before the expiry of their contract under a new regulation being prepared by the government, Bisnis Indonesia daily reported on Friday.

Director General of Oil and Gas Iin Arifin Takhyan said in Jakarta on Thursday that the new ruling on contract extension, which is part of the implementing regulation on the new oil and gas law, was expected to give certainty to existing oil and gas producers.

Under the previous oil and gas law, oil and gas producers were allowed to seek for extension only after the expiry of their contract. This has caused uncertainty because existing oil and gas producers do not know whether or not their contracts will be extended beforehand.

Some oil and gas producers such as ExxonMobil (for its Cepu oil block), BP Indonesia (for its Terang Sirasun gas field) and Total have asked for an early extension of their contracts but their request was turned down because the existing regulation could not accommodate such a practice.

"As investors they need certainty that they can recover their investment," Iin said.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that the extension of the contracts of ExxonMobil, BP Indonesia and Total should wait for the issuance of the new ruling. (*)