On April 13th 2017, the Indonesian government through the Energy and Natural Resources Ministry issued a new regulation to amend existing upstream PSC contract model. This is aimed at making the country  to be attractive again for investment in lieu of current low oil price. Albeit quite late, the move should be applauded as it took potential investors’ objectives into mind. The new model is based on a gross-split scheme which will result in better risk management for investors. The new model will speed up procurement and development process and will replace the former PSC cost recovery model.

In the PSC cost recovery model, typically there will be PQ (Pra-qualification) followed by AFE (Authorisation for Expenditure) to be approved by SKK Migas (the country’s upstream regulator). Afterwards, there will be FEED evaluation and EPC tenders which could take tremendous amount of time making it difficult for capital recovery. On the other hand, in the gross split model, FEED and EPC will be packaged and tendered together, saving significant time and according to an estimation, by eliminating separate pre-FEED, FEED, and EPC tenders, investors could speed up field development by up to 3 years.

In the past, there were 107 regulations for the upstream industry alone, however, from year 2017 onwards, the government claimed to have reduced the regulations down to just six in which they hope that it could help to improve the investment climate in the country’s upstream oil and gas sector.

EditorOil & GasIndonesia,skk migasOn April 13th 2017, the Indonesian government through the Energy and Natural Resources Ministry issued a new regulation to amend existing upstream PSC contract model. This is aimed at making the country  to be attractive again for investment in lieu of current low oil price. Albeit quite late, the...