If Gross Split they are happy, especially the existing fields, because the source is clear, the potential is clear and the risk is lacking

A positive signal is increasing investment in upstream oil and gas. The reason, the Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif again considered the presence of a contract for the results of reimbursement of operating costs (Cost Recovery) for new and terminated work areas.

The scheme will be a joint option for the Gross Split fiscal system for oil and gas investors.

In a working meeting with members of the House of Representatives Commission VII, Arifin revealed, there needs to be an evaluation of business patterns and investment in the oil and gas sector. This evaluation is in accordance with President Joko Widodo's direction to immediately map regulations that impede the pace of investment.

"We conduct a dialogue with investors in the oil and gas sector. We ask, which one is preferable, there are two (Gross Split and Cost Recovery)," Arifin said recounting the results of a meeting with oil and gas sector business actors in front of members of the House of Representatives Commission VII council members in Jakarta,  Wednesday.

Actually the Gross Split scheme is promising.  The government itself requires oil and gas companies to apply the Gross Split scheme in new and terminated work areas since January 1, 2017.

Until now, there have been 45 oil and gas WKs using the scheme, namely 17 WK from auction results, 23 terminated WK and 5 amended WK.  Of this amount, the Government obtained exploration funds of USD 2.71 billion or around IDR 40.7 trillion. As for the signature bonus of USD1, 19 billion or around IDR 17.8 billion.

However, the two fiscal schemes, continued Arifin, have their respective advantages and disadvantages. There are investors who prefer the Cost Recovery contract scheme for fields located in difficult and high risk areas because the scheme is considered more rational.

"The more risk and remote areas, they choose PSC (Cost Recovery). PSC components can be reasonable. That is our PSC experience. Although PSC also has one complaint, every year it needs to be reviewed and the process is long," he explained.

In contrast, Gross Split is considered more suitable for existing work areas because it has a higher level of business certainty. "In Gross Split, they are happy, especially the existing fields, because the source is clear, the potential is clear and the risk is lacking," said Arifin.

Seeing these considerations, the Government is reviewing these two offers due to the large number of inputs from business players in order to improve regulations regarding open profit sharing calculation schemes.

"So in the future we will make improvements and we will be open with investors. We are currently discussing the revision of the ESDM Ministerial Regulation," Arifin said.