Publications

In January 2017, Indonesia; Ministry of Energy and Mineral Resources introduced the new Gross Split Production Sharing Contract, with the objective to increase the efficiency of splitting gross production between the state and contractors. The government hopes that with the Gross Split PSC in which the split factors are dependent on variable and progressive components, the change will result in higher exploration activity and an improved level of project sanctioning. This paper presents a historical overview of the PSC models in Indonesia, and a comparative analysis on development activities during each of these phases. We analyse the features of the new Gross Split model and issues with the now-scrapped conventional cost recovery PSC model in Indonesia. Based on the details of Gross Split terms awarded to the operators, the authors assume that the new PSC will be more attractive from the contractor perspective. The current hydrocarbon production decline in Indonesia, major delays in projects, and scarce exploration activity all put additional pressure on policy makers and the gross split model to boost the performance of Indonesia; upstream energy sector. The terms of the Gross Split model have high expectations to restore upstream investment trends and to accelerate the development of existing reserves and exploration activities by easing the regulatory controls over contracting procedures.