Publications

The concepts of government share and contractor share are fundamental issues in the allocation of petroleum economic rent, as both parties are concerned about their share in oil and gas projects. The evaluation of the Indonesian PSC is conducted here by testing the terms and incentives available in the PSC scheme in small, medium, and large reserve sizes that represent potential Indonesian reserves. A sensitivity analysis approach compares the shares of profit oil for the host government and the investor towards changes in the unit development cost and oil/gas prices.The results in development economics show that oil fields are economically attractive for the contractor following the government take, while gas fields will be attractive only at the high gas price. The nominal and the real present value of the government take in oil and gas fields presents a regressive fiscal regime in the relationship between the NPV and the increase in the unit development costs. The FTP contributes in this plot. The results of exploration economics recommend the Indonesian oil field as an attractive investment. This does not prove, however that the explorations in Indonesian gas fields are attractive.This study suggests that the Indonesian government should review the fiscal terms of gas fields in order to attract investment in gas projects, since it is currently considered to be uneconomic under the Indonesian PSC terms.Keywords: Indonesia, Production Sharing Contract, PSC, Sensitivity Analysis