Formulation of Oil and Gas Production Sharing Contracts and Their Implementation in Foreign Investment in the Upstream Oil and Gas Sector
A study in the Pase Block, North Aceh
DOI:
https://doi.org/10.22373/1fxkn671Keywords:
Contracts, Production Sharing, Oil and gas Management, international lawAbstract
The formulation of oil and gas Production Sharing Contracts (PSCs) in Aceh differs greatly from those in other regions of Indonesia. This process shall adhere to the Government Regulation No. 23 of 2015 on the Joint Management of Oil and Gas Natural Resources in Aceh, as the legal foundation for the Aceh Government’s authority in managing these resources. Accordingly, the Aceh Government shall be involved in the drafting, amendment, and termination of the PSCs, which also includes issues related to data management, payment of signature and production bonuses, audits, transfer of participating interests, involvement of Aceh-owned enterprises, and determination of CSR funds. However, there is only one oil and gas PSC in the Pase Block, signed between the Aceh Regional Development Company and Triangle Pase Inc. on May 22, 2015. This study explored the implementation of the PSC in the context of foreign investment in the upstream oil and gas sector in Aceh. Employing a normative juridical method, the study collected data by means of interviews and literature reviews, and analyzed the data based on oil and gas regulatory frameworks. The findings revealed that the implementation of the PSC indicated several contractual obligations that were not fulfilled or were violated by Triangle Pase Inc., causing financial losses to the Aceh Regional Development Company. As a result of these violations, the Aceh Regional Development Company filed a legal claim through the Indonesian National Arbitration Board, whose decision was to reject all of the Company’s claims and to require it to pay arbitration costs. Therefore, the Aceh Regional Development Company promptly filed for the annulment of the decision issued by the Indonesian National Arbitration Board.
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Laws and Regulations
Law of the Republic of Indonesia Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution
Law Number 2 of 1960 concerning Production Sharing Agreements
Law of the Republic of Indonesia Number 22 of 2001 concerning Oil and Natural Gas
Law of the Republic of Indonesia Number 1 of 1967 concerning Foreign Capital Investment
Law of the Republic of Indonesia Number 11 of 2006 concerning the Government of Aceh
Law of the Republic of Indonesia Number 25 of 2007 concerning Investment
Law Number 40 of 2007 concerning Limited Liability Companies
Government Regulation Number 34 of 2004 concerning Upstream Oil and Gas Business Activities
Government Regulation Number 35 of 1994 concerning Upstream Oil and Gas Activities
Government Regulation Number 23 of 2015 concerning Joint Management of Oil and Natural Gas Natural Resources in Aceh
Government Regulation Number 79 of 2010 concerning Recoverable Operating Costs and the Application of Income Tax
Qanun of Aceh Number 5 of 2018 concerning Investment
Regulation of the Minister of Energy and Mineral Resources Number 8 of 2017 concerning Gross Split Production Sharing Contracts
Regulation of the Minister of Trade Number 08/M-DAG/PER/2/2017 concerning the Second Amendment to Regulation of the Minister of Trade Number 37/M-DAG/PER/9/2007 concerning the Implementation of Company Registration
Interviews
Nurdhani, Notary in Banda Aceh, February 21, 2019
Hasballah, Director of Oil, Gas, and Mining for the Aceh Regional Development Company, in Banda Aceh, February 25, 2019
Tarmizi Basyaroen, Operations Manager of Triangle Pase Inc., in North Aceh, February 23, 2019
Ismail Saleh, Pase Field Coordinator, in North Aceh, February 23, 2019
Mawardi Nur, President Director, PT Pembangunan Aceh, in Banda Aceh, February 22, 2020
Zaini Zubir, Member of the Board of Commissioners of PT Pembangunan Aceh, in Banda Aceh, February 22, 2020
Faisal Ilyas, Business Development Director of PT Pembangunan Aceh, in Banda Aceh, February 22, 2020
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