Jakarta – On Saturday morning (25/02), 21 participant with multiple background are enthusiasts gathered in ConocoPhillips meeting room to learn together about exploration contract system and PSC (production sharing contract) in ISPG 4th Technical Session. The session speaker is Mr. Sunjaya Eka Saputra (SKK Migas), that one of the expertise in the oil and gas contract subject. The theme became interesting and relevance in the midst of Indonesia’s contract system shift towards the gross split.
Mr. Sunjaya begins the presentation with a quote from Wallace Everette Pratt, who was a legendary petroleum geologist from the US that is regarded as the first person that elevates the status of petroleum geologist profession in the in the industry. The infamous quote is that oil is found in the minds of men. Then, Mr. Sunjaya explained the overview of economic evaluation in oil and gas exploration, from play concept to field development.
Technical Session atmosphere
Mr. Sunjaya also explained the philosophy and theory of oil and gas contract, types of the contract from various nations and regions, common jargons, and the comparison of Indonesian system towards other countries. In Malaysia for instance, even though the penalty is also given to operators that do not fulfill commitment, they offer two options – whether to pay the rest of the contract or to pay the rest of activities, in terms of remaining well depth and/or remaining seismic units to be acquired
Exploration commitment from various countries
Interestingly, in this session, we also had an exercise to calculate cash flow, take, share, entitlement, and R factor in “Garnet” onshore field. Participants are asked to apply PSC system and calculate the parameters mentioned.
After that, Mr. Sunjaya further discussed PSC system and the reason Indonesia choose the system. It turns out that PSC concept in Indonesia was first initiated by Teuku Mohammad Hassan in 1951, with the name “Maro System” which came from the local language, meaning “being halved”. This system was set in regulation UU no.8/1971, which later being modified several times until the latest one becoming gross-split. The PSC system itself is decided to be implemented to make sure productions are in and to control operation and management, especially in local content and local companies involvement. The system has been revised thrice up to Gen 3, which then revised again by minister regulation and government regulations.
The latest system, gross split, in essence splitting the gross production without operation costs reimbursement mechanism.
Gross split system mechanism
And then, Mr. Sunjaya got into the introduction to cash flow analysis as the last part of the technical session. This is useful to account the time value of money since oil and gas contract system normally is multi-decades thus being affected by interest rate and inflation.
The session is closed by question and answer, then followed by momento giving by Mr. Budi Permana as ISPG representative, and finally picture together with participants and committee.
A picture with participants and committee