New PSC Mechanism: Gross Split - The Challenge of Its Implementation in Indonesia

January 2017

Abstract

In 2015, the Ministry of Energy and Mineral Resources of the Republic of Indonesia (the “Ministry”) issued a new Ministry Regulation Number 38 of 2015 regarding the Acceleration of Exploitation of Non-Conventional Oil and Natural Gas introducing the three new concepts of cooperation contract: 1) Production Sharing Contract (“PSC”); 2) Sliding Scale PSC; and 3) Gross Split Sliding Scale PSC. This new regulation is addressed to regulate the exploitation of oil and natural gas from low permeability reservoirs such as shale oil, shale gas, tight sand gas, coal based methane, and methane-hydrate. However, in October 2016, the new Minister of Energy and Mineral Resources (the “Minister”) announced that the gross split mechanism will be implemented to the mature PSC blocks that produce conventional oil and natural gas. This plan raised pro and contra from the Indonesian oil and gas industry.

Author

Krishna Agithama Wartadiredja

Legal Counsel, PT. Pertamina Hulu Energi Offshore North West Java, Indonesia

Krishna Agithama Wartadiredja was born in Bandung, Indonesia, 1984. He received the S.H. (Sarjana Hukum) or equal to Bachelor of Laws degree in Business Laws from Trisakti Universty in 2006 and LL.M degree in Oil and Gas Laws from the University of Aberdeen, Scotland, in 2012. In 2004, he joined MMS Consulting as Trainee and in 2005, he joined Nurhadian Kartohadiprodjo Noorcahyo (NKNLegal) where he was an Associate. In 2011, he went to The University of Aberdeen to study Oil and Gas Laws and after he went back to Indonesia, he joined with PT Pertamina Hulu Energy Offshore North West Java as Legal Counsel. During his time in Aberdeen, he was a President of Indonesia Student Association for Aberdeen Chapter. He is also a holder of Indonesian Bar Association since 2010. Education Credentials Indonesian Bar Admission: Bandung, Indonesia LL.M., University of Aberdeen, School of Law, 2012 S.H., (equal to Bachelor of Laws), Trisakti University, 2006

Company

PT. Pertamina Hulu Energi Offshore North West Java

PT Pertamina Hulu Energi Offshore North West Java (PHE ONWJ) is a subsidiary of Indonesia State Owned Enterprise, PT Pertamina. PHE ONWJ has it own business line in upstream activities in oil and gas. PHE ONWJ previously was British Petroleum (BP) West Java. PHE ONWJ has operated in Indonesia since 1967 and has became top 5 oil and gas producer in Indonesia with the number of production is 35.000 bopd.

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