Increase Oil And Gas Production, The Government Proposes A Modification Of The Gross Split Scheme

Illustration. (Photo: Doc. Antara)

JAKARTA - To increase oil and gas production for national energy security, the Government encourages the development of non-conventional oil and gas (MNK), among others, through the modification of the Gross Split scheme to a New Simple Gross Split PSC scheme or a simplified Gross Split sharing scheme.

"The government plans to modify the Gross Split cooperation contract (KKS) scheme currently in the Minister of Energy and Mineral Resources Number 8 of 2017 concerning the Gross Split Result Sharing Contract," said Director General of Oil and Gas Tutuka Ariadji in a Hearing Meeting with Commission VII DPR RI quoted Wednesday, December 14.

Tutuka explained that the government proposed a New Simple Gross Split PSC because of the development of MNK in Indonesia, currently there is no proven reserves of MNK, still technically recoverable. "MNK development requires new technology that has never been done in Indonesia," he continued.

In addition, he continued, naturally the MNK project requires a large amount of money and a large number of wells, so it needs fast and easy procurement. Also, it is necessary to create attractive fiscal regimes to attract shale oil players to Indonesia.

Tutuka explained, in the Minister of Energy and Mineral Resources Regulation Number 8 of 2017, the profit sharing is based on base splits, variable components and progressive components. In this scheme, there is no need for cost approval, but only work program approval (WP). This is considered to be a consequence for verification.

Currently there is Gross Split, the calculation can have consequences for verification. For example, what depth is added to the split. There is CO2, that added. That encourages verification and this is what we are trying to encourage to be simplified," explained the Director General of Oil and Gas.

In the new Gross Split, a fixed split is proposed along the contract, the profit sharing before tax is determined at the beginning of the contract and is fixed/static and without adjustment to the variable and progressive components as in the previous Gross Split KKS scheme. In addition, it offers flexibility in the procurement of goods/services.

This Gross Split scheme resembles the R/T model in the United States or the proven shale oil development scheme, concluded Tutuka.