Indonesia’s New Oil & Gas Regime: Analysis of Cost Recovery PSC and Gross Split PSC Economic Analysis on Field X

• Main Author: Oktoria Winasta, Gresia
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/41295
• Institution: Institut Teknologi Bandung

The oil and gas industry are one of high risk and competitive industry sector requiring big investment and has to comply with many regulations wherever they operate. Simplification, innovation, and certainty in terms of regulation and the economic spilt would be crucial for both government and operators (company). Indonesia that is currently looking for foreign and domestic investment in oil and gas sectors are more than ever to make incentives so that the industry is able to meet the ever-increasing demands of supply of its market. Despite having increasing production throughout the years of production, still struggles to meet both domestic and international demands. In its efforts to fulfill the demands, Indonesia has decided to establish a new form of production sharing in 2017, The PSC Gross-Spilt Model. Resulting in the abolishment of the previous model, the Indonesian PSC Cost Recovery. This contract became the world’s first pioneered model for other governments in constructing their contract with future investors in extracting the countries natural resources. Paper aims to study the salient features of both PSC models and its economic evaluation towards both takes of the government’s and contractor. Criteria exercised in this study are the revenue-raising potential, sensitivity analysis, contract risks, and administration evaluation of contracts. Study assessed the economic valuation of both contracts in which contract’s doesn’t have a condescending amount of differences between one another. Though, gross-split is more effective and efficient towards project execution, it increases the contracts risk measures in project execution. Resulting in slows down of oil and gas exploration. Contractors prefer having certainty and sustained long-term economic valuation towards their investments. A method to overcome this case would be a continuous and increasing incentives with contractors that enables them to have increasing investors towards the new PSC Gross Split regime.