JAKARTA Dec 19 Indonesia plans to change future
production sharing contracts in its upstream oil and gas sector
so that contractors shoulder the cost of exploration and
production, rather than be reimbursed by the government.
Energy Minister Ignasius Jonan said on Monday that the
government plans to issue a new regulation in January so that
such costs would be reflected by a more flexible split in
revenue from production.
Such a system, instead of the existing cost-recovery system,
would be fairer and more efficient, and likely to increase
proven reserves, he said.
Big global resource firms such as Chevron, Exxon
Mobil> and Total operate in Indonesia, but the country
has struggled to attract fresh investment and to develop new
Indonesia's chamber of commerce said it was waiting for more
clarity on the plans and the Indonesian Petroleum Association
said it was still in discussions with the government.
"It will be applied for future PSCs (production sharing
contracts), and it will not disturb existing PSCs," Jonan told a
Arcandra Tahar, the deputy energy minister, said Indonesia
would determine a base split in revenue between the government
and contractors, but this could be tweaked to act as an
incentive for companies.
The split could vary according to criteria such as whether a
field being exploited was offshore or lay in deep water making
work on it more difficult and expensive.
In addition, it could change depending on the amount of
local content used by a contractor in a project.
Indonesia's crude oil output peaked at around 1.7 million
barrels per day in the mid-1990s. But with few significant oil
discoveries in Western Indonesia in the past 10 years,
production has fallen to roughly half that as old fields have
matured and died.
The industry is a vital part of the Indonesian economy, but
its contribution to state revenue has dropped from around 25
percent in 2006 to an expected 3.4 percent this year, according
to data compiled by consulting firm PricewaterhouseCoopers.
(Reporting by Wilda Asmarini; Editing by Susan Fenton)