Publications

The amendments of existing PSC policies were made to adapt with the current situation and done comprehensively in term of economic, social, political, and security perspectives. These amendments were expected to increase the attractiveness of the PSC mechanism to Contractors to attract new investment. The Indonesian government has been using PSC-Cost Recovery since 1971. 4 generations of Modifications to the PSC-Cost Recovery have been made. In 2017 (4th generation), the government modified the PSC-Cost Recovery to PSC-Gross Split. This modification is intended to level up the attractiveness of upstream oil and gas investment climate in Indonesia by increasing the share of PSC-Gross Split contractors compare to PSC-Cost Recovery. This study aims to calculate whether the contractor’s share of the PSC-Gross Split is higher than the PSC-Cost Recovery. The definition of the contractor share in this research is Net Contractor’s Income for PSC-Gross Split and Net Contractor Take for PSC-Cost Recovery. Descriptive statistic shows that, during observation period (2015-2020) for 14 working areas, the average Contractor Net Income for PSC-Gross Split (-1,78%) is lower than average Net Contractor Take for PSC-Cost Recovery (9,47%). However, by using the Welch test, the result indicates that there are no statistical differences (α = 10%) between the Net Contractor’s Income (PSC-Gross Split) and Net Contractor Share (PSC-Cost Recovery). In short, the modification to PSC-Gross Split has not been able to improve the contractor’s share as projected. Therefore, the author recommends the Government of Indonesia to escalate incentive to elevate the share of contractors, at least similar with PSC-Cost Recovery.