SINGAPORE - Singapore-listed RH Petrogas Limited, an independent upstream oil and gas company, said it has obtained approval from Indonesia to enter into new 20-year contract terms for two production sharing contracts upon the expiry of their current contract terms in 2020.
These contracts pertain to the projects in Kepala Burung (Basic PSC) and Salawati Kepala Burung (Island PSC), the company said on Monday (June 25).
Under the decrees of Indonesia's Minister for Energy and Mineral Resources, the company, through its subsidiaries Petrogas (Basin) Ltd and Petrogas (Island) Ltd, has been awarded a 70 per cent participating interest in each of the Basin PSC and the Island PSC.
The remaining 30 per cent participating interest has been awarded to Pertamina, the national oil company of Indonesia.
The existing Basin PSC and Island PSC will not be extended beyond their current expiry dates and the new terms have been offered under new production sharing contracts (the New PSCs) based on the gross split model implemented by the Indonesian Government in 2017 to replace the cost recovery terms in existing PSCs.
The group currently holds a majority 60 per cent participating interest in and operates the Basin PSC and holds a non-operated 33.2 per cent participating interest in the adjacent Island PSC. The two PSCs currently produce some 3,940 barrels of oil equivalent per day net to the group's participating interests.
Under the existing cost recovery regime, PSC contractors are entitled to recover their cost of operations in-kind out of gross production before any remaining "profit" production is shared with the Indonesian Government, and PSC contractors are liable to pay tax on their share of such "profit".
Under the gross split regime of the New PSC, the Indonesian government and PSC contractors shall share the gross production based on an agreed split, and PSC contractors are liable to pay tax on any profit after deducting the cost of operations incurred from their share of gross production.
In addition, the participants in the New PSCs will be committed to carry out an agreed set of firm work programmes during the first five contract years that include geological and geophysical studies, seismic acquisition and processing, exploration well drillings and pilot enhanced oil recovery projects. The financial commitment for the firm work programmes are US$61.2 million and US$36.3 million for the Basin and Island blocks respectively under the New PSCs.
The final award of the New PSCs to the group is conditional upon agreement of their terms and signing.