The four blocks proposed for migration to cost recovery include the Offshore Southeast Sumatra (OSES), Offshore North West Java (ONWJ), Attaka, and Tuban East Java blocks.

PHE's President Director, Chalid Said Salim, said that the proposal for the contract scheme change had been discussed with the government since last year. However, the formal proposal was only submitted at the beginning of this year.

"The discussion has been ongoing for a while, but the formal submission was made at the beginning of the year," Chalid said at the House of Repreentatives (DPR) compound in Jakarta on Wednesday, March 13, 2024.

He cited that the request to change the profit-sharing contract scheme was made to support the mature field's economy.

"There are many economic considerations involved," Chalid remarked. The Ministry of Energy and Mineral Resources (ESDM) noted that several oil and gas fields could not be developed due to economic issues. Investment constraints arise because the profit-sharing contracts, or production-sharing contracts (PSC), are deemed unfavorable for contractors under the cooperation contract (KKKS).

Previously, the Directorate of Upstream Oil and Gas Business Development at ESDM, Noor Arifin Muhammad, said that more than five PSCs were stalled due to these economic issues. Noor mentioned that some KKKS were applying for additional incentives and the possibility of transitioning contracts from the old gross split regime to cost recovery.

"They cannot proceed due to lack of economic viability," Noor said during the 4th International Convention on Indonesian Upstream Oil and Gas Industry 2023 (ICIUOG) in Badung, Bali, last September.

Meanwhile, the Upstream Oil and Gas Regulatory task Force (SKK Migas) has allocated a total cost recovery fund of USD 8.3 billion, equivalent to IDR 129.23 trillion for this year. The cost recovery allocation is higher than the actual cost recovery realization provided by the government to contractors throughout 2023, amounting to USD 7.7 billion or approximately IDR 119.88 trillion.

However, the cost recovery allocation for this year remains unchanged from the 2023 target at USD 8.3 billion. Head of SKK Migas, Dwi Soetjipto, stated that the cost recovery budget for this year is expected not to exceed the set government ceiling. However, some KKKS have proposed transitioning from the gross split to cost recovery contracts at present.

"Several KKKS are planning to propose a change from the gross split to cost recovery, but we will still target not to exceed the budget allocated of USD 8.3 billion," Soetjipto said during a hearing with the House of Representatives (DPR) Commission VII in Jakarta on Wednesday, March 13, 2024.

It has been assumed that this year, the gross revenue or gross revenue of the upstream oil and gas industry can reach USD 33.7 billion, lower than the revenue throughout the previous year at USD 34.3 billion. Through this assumption, the state's revenue is locked at USD 12.9 billion, and the contractor's share is USD 12.5 billion. The remainder, USD 8.3 billion, is allocated for cost recovery.