The New Gross Split Production Sharing Contract of 2024 of Indonesia
Indonesia enacted the New Gross Split Production Sharing Contract on 6 August 2024.
This new framework is designed to streamline operations and increase competitiveness as it offers better fiscal terms and is much simpler compared to the previous version of the Gross Split scheme and the traditional cost recovery model.
Here are the analysis and insights posted on LinkedIn by Ali Nasir, VP of Legal, Commercial & Planning, Premier Oil Indonesia – a Harbour Energy company.
In essence, the regulation doesn’t deviate much from the May 2023 draft, with some minor adjustments.
Here are the key highlights of the new Gross Split PSC:
- Contractor’s favorable split – Contractors now receive a split as high as 95%, with a minimum of 75%.
- Autonomy in Procurement – Contractors are granted the autonomy to independently procure goods, services, and manpower. This should accelerate project timelines while significantly reducing administrative bottlenecks.
- Flexible contract switching – Cost Recovery PSCs can switch to the Gross Split model, and vice versa, allowing operators to adapt their strategies based on the evolving landscape.
- CCS/CCUS and EOR incentives – Carbon Capture and Storage and Enhanced Oil Recovery projects will be considered for discretionary ministerial splits, though this discretion will likely be applied with caution.
One notable change from the initial draft is in the variable component. Partially available infrastructure now offers up to an 11% additional split.
Also, existing Gross Split PSCs can only transition to the new system if they haven’t submitted their first Plan of Development (POD).
