GROSS SPLIT PSC

AIPN Asia Chapter Event "Indonesia's New Gross Split PSC Regime
March 9th, 2017

Benny Lubiantara
Executive Advisor, SKK MIGAS

Disclaimer: Some views expressed in this presentation represent personal views, do not necessarily represent the perspectives of the Institution

SATUAN KERJA KHUSUS

PELAKSANA KEGIATAN USAHA HULU MINYAK DAN GAS BUMI
(SKK MIGAS)
 WHY GROSS SPLIT ??

Slow Approval Process

Cost Inefficiency

Cost Recovery Debate/Discussion/Misunderstanding

Has Become Contra-Productive
Cartoon: Courtesy Google
Sumber: Benny Lubiantara, Ekonomi Migas - Tinjauan Aspek Komersial Kontrak Migas, Penerbit Grasindo, 2012
 The Gross Split is a PSC type, not a Concession type
even though the construction of the flow chart is similar

GROSS SPLIT PSC

 SPLIT DETERMINATION

Contractor Split
Before Tax
=
Oil - 57% : 43% (Gov : Contractor)
Base Split Gas - 52% : 48%
+/-

Variable Split
+/-

Progressive Split
 VARIABLE AND PROGRESSIVE SPLIT
No: Variable Split Adjustment
1 Block Status Plan of Development (POD) (5%) 5%
2 Field Locations Onshore or Offshore, Water Depth 0 m 0% 16%
> 1000 m)
3 Reservoir Depth X <= 2,500m and X > 2,500 m 0% 1%
4 Infrastructure Well Developed, New Frontier 0% 2%
5 Reservoir Conditions Conventional or Non-Conventional 0% 16%
6 CO2 Content X < 5% up to X >= 60% 0% 4%
7 H2S Content X < 100 ppm up to X >= 500 ppm 0% 1%
8 API Gravity X < 25 and X > 25 0% 1%
9 Local Content X < 30% up to X > 70% 0% 4%
10 Production Phase Primary, Secondary, Tertiary 0% 5%

No: Progressive Split Adjustment

1 Oil Price X < 40 $/bbl up to X >= 115 $/bbl (7.5%) 7.5%
2 Cumulative X < 1 MMBOE, X > 150 MMBOE 0% 5%
Production
 ILLUSTRATION
No: Variable Split Adjustment
1 Block Status POD 1 5%
2 Field Locations > 100O m 16%
3 Reservoir Depth X >2,500 m 1%
4 Infrastructure New Frontier 2%
5 Reservoir Conditions Conventional 0%
6 CO2 Content 10% < X < 20% 1%
7 H2S Content 100 < X <300 ppm 0.5%
8 API Gravity X > 25 0%
9 Local Content 50% < X < 70% 3%
10 Production Phase Primary 0% 28.5%

No: Progressive Split Adjustment

1 Oil Price X = 50 $/bbl 5%
2 Cumulative X = 20 MMBOE 3% 8%
Production

Contractor Split Before Tax:

Oil = 43% + 28.5% + 8% = 79.5% IF Oil Price 70 $/bbl = 74.5%
Gas = 48% + 28.5% + 8% = 84.5%
 ILLUSTRATION
No: Variable Split Adjustment
1 Block Status POD 1 5%
2 Field Locations Onshore 0%
3 Reservoir Depth X >2,500 m 1%
4 Infrastructure Well Developed 0%
5 Reservoir Conditions Conventional 0%
6 CO2 Content 10% < X < 20% 1%
7 H2S Content X < 100 ppm 0%
8 API Gravity X > 25 0%
9 Local Content 50% < X < 70% 3%
10 Production Phase Primary 0% 10%

No: Progressive Split Adjustment

1 Oil Price X = 50 $/bbl 5%
2 Cumulative X = 20 MMBOE 3% 8%
Production

Contractor Split Before Tax:

Oil = 43% + 10% + 8% = 61% IF Oil Price 70 $/bbl = 56%
Gas = 48% + 10% + 8% = 66%
 GROSS SPLIT PSC
(Update)

1. Indonesian PSC have been used since mid-1960s. One size fits all
model does not exist Gross Split PSC may be seen as a new
alternative to conventional PSC.

2. Minister Regulation (Permen ESDM No.8/2017) on Gross Split PSC

effective : January 16th, 2017

3. The first Gross Split PSC Contract ---> PHE ONWJ

4. The successful implementation of the Gross Split PSC requires more

cost efficient contractor and less complicated government business
process.

5. The Devil is in the Detail

6. Lesson learnt from similar model Indian Revenue Sharing Contract?

7. At the end, How attractive is the GS Model? Market will tell We

will know it when we see it.
Thank You

11
 10 Variable Components:

Type of Incentive Additional Contractor Split

POD I 5%
Block POD II dst 0%
1
Status POFD 0%
No POD -5%
Onshore 0.0%
Offshore (0<h<=20m) 8.0%
Field Offshore (20<h<=50m) 10.0%
2 Offshore (50<h<=150m) 12.0%
Location
Offshore (150<h<=1000m) 14.0%
Offshore (>=1000m) 16.0%
 Type of Incentive Additional Contractor Split

3 Reservoir <= 2500 m 0

Depth > 2500 m 1%
4 Supported Well develop 0
Infrastructure New Frontier 2%
5 Reservoir Conventional 0
Type of Incentive
Condition Additional Contractor Split
Non Conventional 16%
<5% 0.0%
5%=<x<10% 0.5%
10%=<x<20% 1.0%
6 CO2 (%)
20=<x<40% 1.5%
40%=<x<60% 2.0%
x>=60% 4.0%
<100 0.0%
100=<x<300 0.5%
7 H2S (ppm)
300=<x<500 0.75%
x>=500 1.0%
Oil Specific API<25 1%
8
Gravity (API) API>25 0
 Type of Incentive Additional Contractor Split

<30% 0%
30%=<x<50% 2.0%
9 Local Content
50%=<x<70% 3.0%
70%=<x<100% 4.0%
Primary 0%
Production
10 Secondary 3%
Phase
Tertiary 5%
 2 ofProgressive
Type Incentive Components:
Additional Contractor Split

<40 7.5%
40=<x<55 5.0%
55=<x<70 2.5%
11 Oil Price 70=<x<85 0.0%
85=<x<100 -2.5%
100=<x<115 -5.0%
>=115 -7.5%
<1 mmboe 5.0%
1-10 mmboe 4.0%
Cumulative 10-20 mmboe 3.0%
12
Production 20-50 mmboe 2.0%
50-150 mmboe 1.0%
>150 mmboe 0.0%