New Regulation Issued to Allow For Earlier Investment in Oil And Gas Blocks

In trying to reduce Indonesia’s decade-long oil trade deficit, the government is facilitating oil and gas companies that have won contracts to accelerate their investment in their blocks even before the transfer of operation.

Energy and Mineral Resources Minister Ignasius Jonan has issued Ministerial Regulation (Permen ESDM) No. 3/2019 on the operation of oil and gas blocks in which the production sharing contracts (PSCs) are due to expire.

The Energy and Mineral Resources Ministry Oil and Gas Director General Djoko Siswanto explained that the regulation was issued to ensure the legality of new contractor’s actions in investing in the blocks to prevent any production decline.

“[With the regulation], new contractors can invest earlier [in the blocks they have been given] after they have signed the PSC,” he said.

The new regulation is a revision to Permen ESDM No. 23/2018 that regulated that the disbursement of the working commitment (KKP) funding could only be used for exploration in an open area.

Article 13A of the new regulation stipulates that a contractor can propose a revision in the use of its KKP funding to the minister through the Upstream Oil and Gas Regulatory Task Force (SKK Migas) with technical and economic considerations.

“The alteration of the [exploration] location can be done after the PSC is signed or before the contract takes effect.” the regulation states.

Up to December last year, the government secured Rp 31.5 trillion (US$2.2 billion) in KKP funding that was collected from mining companies that won oil and gas blocks and had altered their contracts.

–The Jakarta Post

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