Purnomo proposes hike in oil and gas contractor’s output share

Ministry of Energy and Mineral Resources Purnomo Yusgiantoro said his office will propose to the government regarding a change in the existing oil and gas production split between the government and the contractor. As per the proposal, the portion of the contractor will increase and the government’s share will decrease, the Investor Indonesia newspaper reported in its Wednesday edition.

At present, the import duty is being borne by contractor and there is a need to address this problem.

“If the split (production split) is not changed, the investment in oil and gas sector will be reduced and the income of the investors will fall drastically due to this import duty,” Purnomo said in Jakarta on Tuesday.

With the introduction of import duty, according to Purnomo , each and every oil and gas company including state-owned oil and gas company PT Pertamina will get additional burden worth of trillions of rupiah.

The oil and gas sector use several imported goods in their operations.

“With an assumption that the import duty was not levied on oil and gas sector companies, the 85:15 split in case of oil and 70:30 in case of gas was introduced. Therefore, the increase in contractor’s share is intended to reduce the burden of import duty, “ Purnomo said.

But he made it clear that the new split formula will be applicable only in case of new contracts, especially the 10 new contracts that were awarded this year. (*)