The Gross-Split Production Sharing Contract: The End of an Era for Indonesia’s Upstream Oil and Gas Industry and Traditional PSC Model

May 31, 2017

On 13 January 2017, the Ministry of Energy and Mineral Resources of the Republic of Indonesia issued Regulation No. 18 of 2017, which introduces a new form of gross-split production sharing contract and abolishes the cost recovery system, which has been a feature of Indonesia’s production sharing contracts since their inception in 1966.

In this alert, we analyse the context and background of the regulation, provide an overview of its key provisions and express our views on areas that will require further clarification. Government officials hope the regulation will reinvigorate the oil and gas sector in Indonesia by drastically reducing the time for development plans to be implemented by allowing Contractors much greater control over their procurement activities. We examine this contention and review the effect of the regulation on the economics of Contractors and consider what is necessary to ensure that the Government’s objectives are met.

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Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding these issues. For further details, please contact the Gibson Dunn lawyer with whom you usually work or the authors in the firm’s Singapore office:

Brad Roach
+65 6507 3685
broach@gibsondunn.com

Alistair Dunstan
+65 6507 3635
adunstan@gibsondunn.com


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