Government Clarifies Provisions on the Management of Oil-and-Gas Working Areas

The Ministry of Energy and Mineral Resources (“Ministry”) has issued Regulation No. 30 of 2016 (“Amendment”), which amends Ministry Regulation No. 15 of 2015 on the Management of Oil-and-Gas Working Areas During Final Cooperation Contract Periods (“Regulation 15/2015”) [1] .The Amendment is aiming to realize smoother transition periods when the management of oil-and-gas working areas is transferred between existing oil-and-gas contractors (“Contractors’) and any newly appointed Contractors. Smoother transition periods should ultimately mean that production levels in a given working area can be maintained.Working Areas in GeneralOil-and-gas working areas (“Working Area”) are granted by the government to Contractors based on Cooperation Contracts. A Cooperation Contract sets out the period of time in which the Contractors can undertake exploration and exploitation activities. Upon the Cooperation Contract period maturing, Contractors are required to handover the Working Area in question to the government.Four schemes are available to be utilized at the end of a given Cooperation Contract period. Firstly, the government may appoint PT Pertamina to take over the Working Area. Secondly, the government may extend the Cooperation Contract period, if the existing Contractors submit an application for such an extension. Thirdly, the Working Area can be managed jointly by PT Pertamina and the existing Contractors. And finally, the government may offer the Working Area to new Contractors through a tender process, if the Ministry ultimately turns down any request which is made by PT Pertamina and/or existing Contractors. [2] A tender can be held prior to a given Cooperation Contract period maturing. After the new Contractor has been appointed, the former Contractor must enter into cooperation with the new Contractor, so that the new Contractor may take any necessary action during the transition period. Any such cooperation should encompass access to data, assets and employees. [3] Transition ProcessRegulation 15/2015 allows PT Pertamina and/or a new Contractor to sign a new Cooperation Contract before the existing Cooperation Contract has expired. [4] After the new Cooperation Contract has been signed, PT Pertamina and/or the new Contractor are also allowed to offer financing for the required operational activities in the Working Areas before the new Cooperation Contract comes into force. [5] Such financing is undertaken in order to maintain oil-and-gas production levels in Working Areas and must be executed by the former Contractor. Moreover, the Special Unit for Upstream Oil-and-Gas Activities (SKK Migas) will set out guidelines for the implementation of the financing in question, which should at least address: [6]