Summary
Indonesia has introduced gross split PSAs for investment in its upstream oil and gas sector. Following the regulatory overhaul, the government is looking to promote exploration through new licensing rounds. In August 2018, the second conventional regular tender bid round opened, which for the first time includes production acreage. Going forward, Pertamina intends to increase its role as an upstream operator in the sector, this may introduce new third-party opportunities.
“Indonesia Upstream Fiscal and Regulatory Report - 2nd 2018 Bid Round Opened under Gross Split Terms”, presents the essential information relating to the terms which govern investment into Indonesia’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Indonesia’s upstream oil and gas investment climate.
Scope
- Overview of current fiscal terms governing upstream oil and gas operations in Indonesia
- Assessment of the current fiscal regime’s state take and attractiveness to investors
- Charts illustrating the regime structure, and legal and institutional frameworks
- Detail on legal framework and governing bodies administering the industry
- Levels of upfront payments and taxation applicable to oil and gas production
- Information on application of fiscal and regulatory terms to specific licenses
- Outlook on future of fiscal and regulatory terms in Indonesia.
Reasons to buy
- Understand the complex regulations and contractual requirements applicable to Indonesia’s upstream oil and gas sector
- Evaluate factors determining profit levels in the industry
- Identify potential regulatory issues facing investors in the country’s upstream sector
- Utilize considered insight on future trends to inform decision-making.
'
1 Table of Contents
1 Table of Contents 1
1.1. List of Tables 3
1.2. List of Figures 4
2. Regime Overview 5
3. State Take Assessment 8
4. Key Fiscal Terms 9
4.1. Bonuses 9
4.2. Gross Split Production Sharing (Contracts from 2017 Onwards) 10
4.2.1. Variable Adjustment Factors 10
4.2.2. Progressive Adjustment Factors 13
4.3. First Tranche Petroleum (Pre-2017 Contracts) 15
4.4. Investment Credit (Pre-2017 Contracts) 15
4.5. Cost Recovery (Pre-2017 Contracts) 16
4.5.1. Cost Recovery Limit 16
4.5.2. Recoverable Costs 16
4.5.3. Marginal Field Uplift (2005-2018) 18
4.5.4. Treatment of Unrecovered Costs upon Transition to Gross Split Regime 18
4.6. Production Sharing (Pre-2017 Contracts) 19
4.6.1. Conventional PSAs 19
4.6.2. Unconventional PSAs 20
4.6.3. TACs and KSOs 20
4.7. Direct Taxation 21
4.7.1. Corporate Income Tax 21
4.7.2. Deductions and Depreciation 21
4.7.3. Withholding Tax 22
4.8. Indirect Taxation 22
4.8.1. Value Added Tax 22
4.8.2. Land and Building Tax 22
4.8.3. Customs Duties 23
4.9. Domestic Market Obligation 23
4.9.1. Unconventional and Coal Bed Methane 23
4.10. State Participation 24
5. Regulation and Licensing 25
5.1. Legal Framework 25
5.1.1. Governing Law 25
5.1.2. Contract Type 26
5.1.3. Title to Hydrocarbons 26
5.2. Institutional Framework 27
5.2.1. Licensing Authority 27
5.2.2. Regulatory Agency 27
5.2.3. National Oil Company 27
5.3. Licensing Process 28
5.3.1. Licensing Procedure 28
5.3.2. 2018 Conventional Licensing Round 28
5.4. License Terms 29
5.4.1. Duration 29
5.4.2. Relinquishment 29
5.5. Local Content 30
5.5.1. Title to Equipment 30
6. Outlook 31
7. Appendix 32
7.1. References 32
7.2. Contact Us 35
7.3. Disclaimer 35
1.1 List of Tables
Table 1: Regime Overview 5
Table 2: Indonesia, Production Bonuses (US$ mil), Selected Contracts 9
Table 3: Indonesia, Base Gross Split Ratio 10
Table 4: Indonesia, Gross Split, Field Development Status Adjustment Factor 10
Table 5: Indonesia, Gross Split, Field Terrain Adjustment Factor 11
Table 6: Indonesia, Gross Split, Reservoir Depth Adjustment Factor 11
Table 7: Indonesia, Gross Split, Supporting Infrastructure Availability Adjustment Factor 11
Table 8: Indonesia, Gross Split, Reservoir Type Adjustment Factor 11
Table 9: Indonesia, Gross Split, CO2 Content Adjustment Factor 12
Table 10: Indonesia, Gross Split, H2S Content Adjustment Factor 12
Table 11: Indonesia, Gross Split, Crude Oil Gravity Adjustment Factor 12
Table 12: Indonesia, Gross Split, Local Content Adjustment Factor 13
Table 13: Indonesia, Gross Split, Production Phase Adjustment Factor 13
Table 14: Indonesia, Gross Split, Crude Oil Price Adjustment Factor 13
Table 15: Indonesia, Gross Split, Gas Price Adjustment Factor (Introduced by Regulation 52/2017) 14
Table 16: Indonesia, Gross Split, Cumulative Oil and Gas Production Adjustment Factor 14
Table 17: Indonesia, First Tranche Petroleum, 1988-2016 Contracts 15
Table 18: Indonesia, Third-Generation Production Sharing Contract Investment Credit 16
Table 19: Indonesia, Depreciation Rates and Useful Lives by Asset Type under GR 79/2010 17
Table 20: Indonesia, Methods of Reimbursement for Unrecovered Costs Under Older PSAs 18
Table 21: Indonesia, Contractor Post-Tax Profit Oil Share (%), Third-Generation PSA Incentive Packages (1988-2001) 19
Table 22: Indonesia, Sliding-Scale Unconventional PSA, 2015 20
Table 23: Indonesia, Corporate Tax Rates (%) 21
Table 24: Indonesia, DMO Prices 23
Table 25: Indonesia, Current Relinquishment 29
Table 26: Indonesia, Previous Relinquishment, 1981 29
Table 27: References 32
1.2 List of Figures
Figure 1: Regime Flow Chart - Gross Split PSA 6
Figure 2: Regime Flow Chart - Cost Recovery PSA 7
Figure 3: Indonesia, Indicative NPV10/boe, IRR and State Take Comparison, Regional 8
Figure 4: Indonesia, Legal Framework 25
Figure 5: Indonesia, Institutional Framework 27
