The Net Cash Flows Measurement of The Conventional Oil Production Sharing Contract (PSC) Fiscal Systems

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Daryanto, Wiwiek Mardawiyah (2017) The Net Cash Flows Measurement of The Conventional Oil Production Sharing Contract (PSC) Fiscal Systems. International Journal of Business Studies, 1 (1). pp. 22-31. ISSN 2580-0132

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Abstract

Indonesia is the pioneer of the Production Sharing Contract (PSC),the first contract was signed in 1960. It is the standard of comparison for all PSCs (Johnston, 1994). According to the Executive Agency for Upstream Oil and Gas Business Activities in Indonesia (SKK Migas,2014), PSC is a Petroleum Exploration and Production Agreement between the Authority Body and the Oil Contractor (OC). This study focuses on the oil industry, covering a PSC oil field which has been operating in Indonesia since 1998. The primary data of 2016 is used. The purpose of this study is to measure the yearly net cash lows received by the Government of Indonesia (GOI) and the OC during exploitation period, and to examine the attractiveness of the terms and conditions of the PSC. The basic features of PSCs are: first tranche petroleum (FTP), cost recovery (CR), profit oil (PO), domestic market obligation (DMO), and taxes. The financial issue of PSC is how costs are recovered and profits divided. The finding shows that from 100% Gross Revenue (GR) of the oil field in 2016; 35.43% of it is allocated to the GOI, and only 2.28% to the OC. Meanwhile, the CR for the year is 62.29% of the GR. Therefore, it is needed to manage the CR efficiently and effectively of both parties. It is recommended to limit the CR. Moreover, with the oil price that tends to decrease. The study will be beneficial for GOI and potential OCs to carry out a fair negotiation. This study will also facilitate the students and academicians to assess the correlation of variables of the PSC Fiscal Systems to be used in the decision-making process. Keywords: Production sharing contract, Cost recovery, First tranche petroleum, Profit oil, Domestic market obligation.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HJ Public Finance
Divisions: Research And Community Empowerment > Journals
Depositing User: Rizky Amalia
Date Deposited: 17 Jan 2020 03:36
Last Modified: 22 Dec 2021 07:17
URI: http://repository.ipmi.ac.id/id/eprint/24

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