Requirements on Management Changes of Expiring Oil and Gas Working Areas

Regulation of the Minister of Energy and Mineral Resources (“MEMR”) Number 23 of 2018 on the Management of Oil and Gas Working Areas of which the Cooperation Contract are about to expire with its amendment Number 28 of 2018 on the Amendment of MEMR Regulation Number 23 of 2018 on Management of Oil and Gas Working Areas of which the Cooperation Contract are about to expire (the “Regulation”) is opposed by many parties because the Regulation is considered pro-foreigners.

The government stipulates that the management of such working areas can be in the form of: (a) extension of Cooperation Contract by Contractors; (b) management by PT Pertamina (Persero); or (c) joint-management between Contractors and PT Pertamina (Persero) in which MEMR can conduct the evaluation or auction of the expiring working areas before the existing Cooperation Contract expires. An extension of Cooperation Contract by Contractors may be given with the maximum of 20 (twenty) years for each extension. If contractor does not apply for an extension 2 (two) years before the expiration, the contractor is deemed uninterested.

If contractor or PT Pertamina do not apply for the extension, MEMR will offer the working areas in the auction. The winning bidder of the expiring working areas either a new contractor or PT Pertamina may sign the extension or new Cooperation Contract before the expiration of the existing Cooperation Contract. After that, the new contractors or PT Pertamina may prepare to submit the transfer of operation plans to SKK Migas including financing for the business operations. If the existing Cooperation Contract is expired while the new contractor still has yet to be appointed, MEMR may appoint the existing contractor to manage the working areas until the new contractor is appointed.

The existing contractor applying for the extension, the new contractors winning in the auction and PT Pertamina as a new manager of working areas shall pay the signing bonus of at least US$ 1,000,000,- which shall be paid before or when the new Cooperation Contract is signed . The new contractor shall accomodate the participation of Regional State-Owned Entity (BUMD) with a maximum of 10% (ten percent) of participating interest after signing the new Cooperation Contract.

Within 3 (three) years since the effective date of the extension of Cooperation Contract or the new Cooperation Contract, majority shareholders are prohibited from: (1) transfering the majority of the shares owned;and (2) transfering the majority of the interest to other party which is not its affiliation. (ppm)

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Dendi Adisuryo
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Liza Mashita
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