Oil, gas contractors to get additional output split

Oil and gas contractors adopting the gross split production sharing contract will be entitled to additional output split as compensation for payment of indirect taxes.

Secretary of the Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources, Susyanto said on Tuesday that the government is expected to soon issue a new government regulation on the tax mechanism of the gross split oil and gas contract.

Contractors will be exempted from the indirect taxes such as value added tax, land and building tax, and import duty during exploration phase, but will have to start paying the taxes after entering production stage. As compensation, the contractors will be entitled to additional output split equal to the size of the tax payment.

Susyanto, however, said the size of the extra output split will be based on the discretion of the Minister of Energy and Mineral Resources. As such, the current Minister of Energy and Mineral Resources Regulation No 52/2017 on gross split mechanism will be revised to accommodate the proposed additional output split for the contractors as compensation for the tax payment.

He added that each contractor will receive different size of additional output split, depending on the size of the tax payment, and the level of economic feasibility of their respective projects. (*)