The Directorate General of Oil and Gas (Migas) of the Ministry of Energy and Mineral Resources has imposed a Gross Split Profit Sharing Contract since 2018.
To further encourage the development of upstream oil and gas business to make it simpler, faster, competitive, effective and accountable, the government revised Gross Split's contract to New Simplified Gross Split.
"The government is making efforts to revise the Regulation of the Minister of Energy and Mineral Resources Number 8 of 2017 concerning the Gross Split Revenue Sharing Contract. In its development, this contract has undergone several changes in the hope that Gross Split contract goals can be achieved, namely creating a Cooperation Contract Contract Contractor (KKKS) and its supporting business to become global and competitive, as well as encouraging more effective and faster exploration and exploitation efforts," said Director of Upstream Oil and Gas Business Development Noor Arifin Muhammad quoted on Tuesday, May 23.
Noor Arifin explained that another goal to be achieved is for KKKS to be more efficient so as to be able to overcome the turmoil in oil prices over time, encourage the business process of KKKS and SKK Migas to be simpler and more accountable, as well as encourage KKKS to manage its operating costs and investments based on the corporate financial system, not the state financial system.
In addition to Gross Split's contract, he said, Indonesia also has another form of contract, namely the Cost Recovery Revenue Sharing Contract which has been in effect for decades.
With these two forms of contracts, the KKKS has a choice of contract form.
"Contrak bagi hasil oil and gas di Indonesia terus mengalami perubahan untuk menakomodir kebutuhan industri. pemerintah selalu berusaha mempurna kontrak menjadi lebih baik. Interest calon investor terhadap dua bentuk kontrak baik Cost Recovery dan Gross Split tetap ada sehingga pemerintah tetap membuka opsi bentuk kontrak tersebut dalam setiap Penawaran Wilayah kerja (WK) baik untuk WK yang ditawarkan melalui Penawaran Langsung maupun melalang Regular," tutur Noor Arifin.
He explained, there are four urgencys in the improvement of Gross Split's contract, namely first, providing certainty of a more competitive profit-sharing value for KKKS.
"The preparation of a more competitive profit-sharing system with other countries with a total target of profit-sharing before the KKKS tax in the range of 80-90 percent which is determined based on the field risk profile to increase upstream oil and gas investment activities and climates," said Arifin.
Second, minimize the dependence of the KKKS economy on the Minister's additional discretion split.
"The analysis of the target sharing of the results of the KKKS, which requires additional sharing of the results of the Minister, is for a new profit-sharing system design that can minimize the need for a split of the Minister's discretion and guarantee the economy for the KKKS contract of Gross Split," he said.
Third, simplification and improvement of components and parameters for profit sharing.
"The simplification of the number of components of profit sharing based on technical parameters does not cause debate in its determination and effective implementation. The selection is based on a primary parameter that provides a major split correction to the existing Gross Split contract," Arifin added.
Fourth, the design of fiscal policies suitable for Non Conventional Oil and Gas (MNK).
"Fiscal policy plans for non-conventional oil and gas entrepreneurship. The granting of a new scheme of GS contract for fixed yield sharing (fixed split) on risk profiles, new technology needs, and the emphasis of Non-Conventional Oil and Gas entrepreneurship costs," he explained.
On that occasion, Noor Arifin reiterated that the government was open to input from various parties so that the purpose of the Gross Split contract could be achieved.
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