On 24 April 2018 the Minister of Energy and Mineral Resources of the Republic of Indonesia (“MEMR”) issued MEMR Regulation No. 23 of 2018 (“MEMR Regulation 23/2018”), as further amended by MEMR Regulation No 28 of 2018 dated 7 May 2018 (“MEMR Regulation 28/2018”).
Below are the highlights of MEMR Regulation 23/2018:
- MEMR Regulation 23/2018 repeals the previous regulation set by MEMR Regulation No. 15 of 2015 as amended by MEMR Regulation No. 30 of 2016 (“MEMR Regulation 15/2015”).
- One notable change under MEMR Regulation 23/2018 is that the new regulation changes the sequence of possible options for managing an oil and gas working area with an expiring Production Sharing Contract (“PSC”). Under MEMR Regulation 15/2015, the option of management takeover by PT Pertamina (Persero) (“Pertamina”) is the first on the list, followed by the existing PSC
Contractor’s option to extend the expiring PSC. MEMR Regulation 23/2018, however, reverses the sequence by placing the existing PSC Contractor at the top of the list for the management of oil and gas working areas with expiring PSCs. Please note that since MEMR 23/2018 does not expressly mention about the priority system despite changing the sequence as described above, it should not, without further clarification, be interpreted that the government is giving priority to existing PSC Contractors.
- MEMR 23/2018 also removes the required timeframe for Pertamina to submit its application to manage the working area with an expiring PSC when the existing PSC Contractor has already submitted the extension application. Previously, under MEMR Regulation 15/2015, Pertamina was required to submit its application either at the latest 1 year after the existing PSC Contractor’s application (if the PSC Contractor’s application is submitted more than 3 years prior to the expiration of the relevant PSC) or at latest 6 months after the existing PSC Contractor’s application (if the PSC Contractor’s application is submitted less than 3 years prior to the expiration of the relevant PSC).
- While MEMR Regulation 15/2015 stipulates that the MEMR shall either approve or reject the application within 1 year prior to the expiration of the relevant PSC, MEMR Regulation 23/2018 is silent on this matter.
- MEMR Regulation 23/2018 sets the signing bonus in the minimum amount of USD 1,000,000 and in the maximum amount of USD 250,000,000 to be paid to the Indonesian Government by the party appointed to continue the management of the oil and gas working area with the expiring PSC. MEMR Regulation 28/2018 now removes the provision for the upper ceiling of USD 250,000,000 of such signing bonus requirement.
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