What is the Contractor's Revenue Share under a Gross Split Scheme?

The Indonesian government has finally revised the regulations for the gross split scheme, which was previously considered less attractive to oil and gas players compared to the cost recovery scheme in Production Sharing Contracts (PSCs). One of the changes introduced is a stimulus for investors through incentives during the development of oil and gas fields in Plan of Development (POD) II, which was not previously regulated.

The Ministry of Energy and Mineral Resources enacted Ministerial Regulation Number 52 of 2017 on August 29th, amending Ministerial Regulation Number 08 of 2017 concerning gross split production sharing contracts. This amendment follows input from the Contractor Contract of Work (KKKS) partners.

In the gross split scheme, the basic component of the production sharing for oil is 57 percent for the government and 43 percent for the contractor. For gas production, the sharing is 52 percent for the government and 48 percent for the contractor. However, following the revision of the ministerial regulation, variable split and progressive split will now be implemented. This change is expected to stimulate oil and gas investment, as the previous two years saw consistently low bidder participation in oil and gas block auctions.