Abstract
Indonesia is the pioneer of the Production Sharing Contract (PSC),the irst contract was signed in 1960. It is the standard of comparison for all PSCs (Johnston, 1994). According to the Executive Agency for Upstream Oil and Gas Business Activities in Indonesia (SKK Migas,2014), PSC is a Petroleum Exploration and Production Agreement between the Authority Body and the Oil Contractor (OC). This study focuses on the oil industry, covering a PSC oil ield which has been operating in Indonesia since 1998. The primary data of 2016 is used.The purpose of this study is to measure the yearly net cash lows received by the Government of Indonesia (GOI) and the OC during exploitation period, and to examine the attractiveness of the terms and conditions ofthe PSC. The basic features ofPSCs are: irst tranche petroleum (FTP), cost recovery (CR), proit oil (PO), domestic market obligation (DMO), and taxes. The inancial issue of PSC is how costs are recovered and proits divided. The inding shows that from 100%Gross Revenue (GR) ofthe oil ield in 2016; 35.43% ofit is allocated to the GOI, and only 2.28% to the OC. Meanwhile, the CR for the year is 62.29% of the GR. Therefore, it is needed to manage the CR eficiently and effectively of both parties. It is recommended to limit the CR. Moreover, with the oil price that tends to decrease. The study will be beneicial for GOI and potential OCs to carry out a fair negotiation. This study will also facilitate the students and academicians to assess the correlation of variables of the PSC Fiscal Systems to be used in the decision-making process.
Highlights
Indonesia’s economy has experienced steady growth emerging from the Asian inancial crisis of 1997-1999, averaging stable 5 – 6 % annual growth rate, and the strength of the country’s economy was formerly based on its considerable oil exports (Tharakan, 2015)
This study is focusing on the oil industry, covering one oil ield under Production Sharing Contract (PSC) Fiscal System which has been operating in Indonesia since the period of 1998, using the primary data of 2016
The purpose of this study is to measure the yearly net cash lows received by the Government of Indonesia (GOI) and the Oil Contractor (OC) under PSC Fiscal Systems during exploitation period for the period of 2016, and to examine the attractiveness of the terms and conditions of the PSC
Summary
Indonesia’s economy has experienced steady growth emerging from the Asian inancial crisis of 1997-1999, averaging stable 5 – 6 % annual growth rate, and the strength of the country’s economy was formerly based on its considerable oil exports (Tharakan, 2015). There are many countries that depend on the income of oil exports such as Iraq, Kuwait, Saudi Arabia, Libya, Angola, Oman, Brunei, Kazakhstan, Russian, and much more (Hazarika, 2016). The MEMR (2015) estimates that domestic demand for energy will rise by around 7 % per year, with electricity demand alone projected to nearly triple between 2010 and 2030. According to National Energy Council (DEN, 2016), electricity consumption/capita was estimated to 2,500 KWh in 2025, and increase to 7,000 in 2050
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