Govt to Formulate New Contract for Non-Conventional Oil and Gas Blocks

The government is considering making a new type of contract for the upstream oil and gas industry. The idea came from investors, requesting similar work contracts with those in the mining sector. For the record, in the contracts of work, the prevailing systems are taxes and royalties. Meanwhile, the existing oil and gas cooperation agreements, both cost recovery and gross split ones are part of the production sharing contract (PSC).

The Energy and Mineral Resources (ESDM) Ministry is currently coordinating with the Finance Ministry on the oil and gas contracts. Komar Hutasoit, ESDM Ministry’s head of the Sub-directorate of Oil and Gas Exploration Supervision, said that the new contract will be for non-conventional oil and gas blocks. In order not to contradict Finance Ministry’s regulations, the ESDM Ministry is still discussing the mechanism. "For the new contract, it still needs to adjust to regulations, such as the tax law," he explained.

However, the non-conventional oil and gas blocks in Indonesia are still very new. Technically, the government needs to conduct a deeper study. One of the unconventional blocks that Indonesia can produce is shale gas, located in North Sumatra. "But, it is also not a development well," said Komar.