Gross split production sharing contracts in the oil and gas business creating imbalance and in justice

https://doi.org/10.35912/sepp.v1i2.3738
Published: Dec 15, 2025

Abstract:

Purpose: This study examines the implementation of Gross Split Production Sharing Contracts (PSCs) in Indonesia’s upstream oil and gas sector, with particular attention to whether the allocation of rights, obligations, and risks reflects the principles of balance and fairness in contract law.

Research/methodology: The research adopts a normative juridical approach using qualitative analysis. Secondary legal materials are analyzed, including oil and gas legislation, government and ministerial regulations, and the contractual provisions of Gross Split PSCs. The analysis focuses on contractors’ obligations related to signature bonuses, firm commitments, and operating costs.

Results: The findings indicate that Gross Split PSCs place excessive financial, operational, and technological burdens on contractors, while the government bears minimal risk. Contractors are fully responsible for signature bonuses, firm commitments, and operating costs without cost recovery mechanisms. This contractual structure creates an imbalance of rights and obligations and contributes to contractors’ difficulties in fulfilling firm commitments and achieving agreed production targets.

Conclusions: Gross Split PSCs, as currently regulated, do not adequately uphold the principles of balance and fairness. The unequal distribution of risks and obligations undermines contractual justice and the sustainability of upstream oil and gas operations.

Limitations: This study is limited to normative legal analysis and does not include empirical field data.

Contribution: This research provides theoretical insight into the application of balance and fairness principles in energy contracts and offers practical considerations for improving the Gross Split PSC framework.

Keywords:
1. Firm Commitment
2. Production Sharing Contract
3. Principles of Balance and Fairness
Authors:
1 . Rani Fadhila Syafrinaldi
Universitas Islam Riau, Pekanbaru, Riau, Indonesia
2 . Toto Tohir Suriaatmadja
Universitas Islam Bandung, Bandung, Jawa Barat, Indonesia
3 . Chepi Ali Firman
Universitas Islam Bandung, Bandung, Jawa Barat, Indonesia
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How to Cite
Syafrinaldi, R. F. ., Suriaatmadja, T. T. ., & Firman, C. A. . (2025). Gross split production sharing contracts in the oil and gas business creating imbalance and in justice. Studies in Economy and Public Policy, 1(2), 137–147. https://doi.org/10.35912/sepp.v1i2.3738
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Issue & Section
Vol. 1 No. 2 (2025): November
Articles
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References

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    Aprizal, M. F., Juanda, B., Ratnawati, A., & Muin, A. (2022). Indonesian Upstream Oil & Gas Governance for Sustainable Innovation. Jurnal manajemen dan organisasi, 13(1), 48-60. doi:https://doi.org/10.29244/jmo.v13i1.40427

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    Hasanov, F., Mammadov, F., & Al-Musehel, N. (2018). The effects of fiscal policy on non-oil economic growth. Economies, 6(2), 1-21. doi:https://doi.org/10.3390/economies6020027

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    Jaya, N. P. M. M., & Yoga, I. G. P. (2025). Analisis Legalitas Pemutusan Kontrak Dalam Proyek Konstruksi Berdasarkan Standar Operasional Prosedur Di Kementerian Pekerjaan Umum. Jurnal Media Akademik (JMA), 3(9), 1-20. doi:https://doi.org/10.62281/5ap2n348

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    Masua, S., & Mollet, J. A. (2025). Analysis of the impact of Hasanudin Petrosea Road infrastructure improvement on the economic activities (production, distribution, and income) of the surrounding community. Studies in Economy and Public Policy, 1(1), 19-31. doi:https://doi.org/10.35912/sepp.v1i1.3559

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    Permatasari, D., Ambia, F., Kusrini, E., & Zulkarnain, M. (2023). Comparison of Gross Split Production Sharing Contract and Taxation Aspects for Economic Incentives in Indonesia. International Journal of Technology, 14(2), 246-256. doi:https://doi.org/10.14716/ijtech.v14i2.5441

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    Rizal, M. N., & Murwani, S. (2025). Analysis of the Impact of Gross Split Production Sharing Contracts in the Upstream Oil and Gas Sector on State Revenue. Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik, 10(1), 24-38. doi:https://doi.org/10.33105/itrev.v10i1.1006

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    Sovacool, B. K. (2016). How long will it take? Conceptualizing the temporal dynamics of energy transitions. Energy research & social science, 13, 202-215. doi:https://doi.org/10.1016/j.erss.2015.12.020

    Stevens, P. (2016). International oil companies: The death of the old business model. Chatham House The Royal Institute of International Affairs. Journal of World Energy Law & Business, 8(1).

    Verma, A. K., Ajit, S., & Muruva, H. P. (2015). Risk management of non-renewable energy systems Springer Series in Reliability Engineering (Vol. 12): Springer.

    Versteeg, M., & Ginsburg, T. (2017). Measuring the rule of law: a comparison of indicators. Law & Social Inquiry, 42(1), 100-137. doi:https://doi.org/10.1111/lsi.12175

    Yu, C., Moslehpour, M., Tran, T. K., Trung, L. M., Ou, J. P., & Tien, N. H. (2023). Impact of non-renewable energy and natural resources on economic recovery: Empirical evidence from selected developing economies. Resources policy, 80. doi:https://doi.org/10.1016/j.resourpol.2022.103221

    Yuniza, M. E., Rebecca, A. G., & Ramadhaniati, R. C. (2020). A necessity or a premature move?: the shift of indonesian production sharing contract in the oil and gas industry. International Journal of Energy Economics and Policy, 10(4), 251-257.

  1. Al-Qarano, R. P. (2021). Asas Proporsionalitas Kontrak Standar Pada Perjanjian Waralaba. Glosains: Jurnal Sains Global Indonesia, 2(1), 1-12. doi:https://doi.org/10.59784/glosains.v2i1.10
  2. Anjani, B. R., & Baihaqi, I. (2018). Comparative analysis of financial Production Sharing Contract (PSC) cost recovery with PSC gross split: Case study in one of the contractor SKK Migas. Journal of Administrative and Business Studies, 4(2), 65-80. doi:https://doi.org/10.20474/jabs-4.2.2
  3. Aprizal, M. F., Juanda, B., Ratnawati, A., & Muin, A. (2022). Indonesian Upstream Oil & Gas Governance for Sustainable Innovation. Jurnal manajemen dan organisasi, 13(1), 48-60. doi:https://doi.org/10.29244/jmo.v13i1.40427
  4. Boadway, R., & Keen, M. (2010). Theoretical perspectives on resource tax design The taxation of petroleum and minerals (pp. 29-90): Routledge.
  5. Cotula, L. (2018). Reconsidering sovereignty, ownership and consent in natural resource contracts: From concepts to practice European Yearbook of International Economic Law 2018 (pp. 143-174): Springer, Cham.
  6. Ftiti, Z., Guesmi, K., Teulon, F., & Chouachi, S. (2016). Relationship between crude oil prices and economic growth in selected OPEC countries. Journal of Applied Business Research, 32(1), 11.
  7. Giranza, M. J., & Bergmann, A. (2018). Indonesia’s new gross split PSC: Is it more superior than the previous standard PSC. Journal of Economics, Business and Management, 6(2), 51-55. doi:https://doi.org/10.18178/joebm.2018.6.2.549
  8. Hasanov, F., Mammadov, F., & Al-Musehel, N. (2018). The effects of fiscal policy on non-oil economic growth. Economies, 6(2), 1-21. doi:https://doi.org/10.3390/economies6020027
  9. Hernoko, A. Y. (2019). Hukum Perjanjian. Jakarta, Indonesia: Prenada Media Group.
  10. Ikasari, I. H. (2019). Influence of PSC Changes in The Upstream Sector From Cost Recovery System into Gross Split Towards The Obligation to Pay Land and Building Tax. Mimbar Hukum, 31(1), 126-139.
  11. Jaya, N. P. M. M., & Yoga, I. G. P. (2025). Analisis Legalitas Pemutusan Kontrak Dalam Proyek Konstruksi Berdasarkan Standar Operasional Prosedur Di Kementerian Pekerjaan Umum. Jurnal Media Akademik (JMA), 3(9), 1-20. doi:https://doi.org/10.62281/5ap2n348
  12. Johnston, D. (2007). How to evaluate the fiscal terms of oil contracts. Escaping the resource curse, 53-88.
  13. Kagel, J. H., & Levin, D. (1986). The winner's curse and public information in common value auctions. The American economic review, 76(5), 894-920.
  14. Masua, S., & Mollet, J. A. (2025). Analysis of the impact of Hasanudin Petrosea Road infrastructure improvement on the economic activities (production, distribution, and income) of the surrounding community. Studies in Economy and Public Policy, 1(1), 19-31. doi:https://doi.org/10.35912/sepp.v1i1.3559
  15. Mohammed, H. J. (2023). Fiscal Regime in Petroleum Licensed Contracts. Journal of Petroleum Research and Studies, 13(2), 119-129. doi:https://doi.org/10.52716/jprs.v13i2.644
  16. Permatasari, D., Ambia, F., Kusrini, E., & Zulkarnain, M. (2023). Comparison of Gross Split Production Sharing Contract and Taxation Aspects for Economic Incentives in Indonesia. International Journal of Technology, 14(2), 246-256. doi:https://doi.org/10.14716/ijtech.v14i2.5441
  17. Ramadani, D. P., & Ismal, R. (2024). Analisa Peningkatan Kontribusi Migas Dalam Apbn Dengan Pendekatan Ekonomi Islam. Maqdis: Jurnal Kajian Ekonomi Islam, 9(1), 76-98. doi:https://doi.org/10.15548/maqdis.v9i1.1206
  18. Rizal, M. N., & Murwani, S. (2025). Analysis of the Impact of Gross Split Production Sharing Contracts in the Upstream Oil and Gas Sector on State Revenue. Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik, 10(1), 24-38. doi:https://doi.org/10.33105/itrev.v10i1.1006
  19. Roach, B., & Dunstan, A. (2018). The Indonesian PSC: the end of an era. The Journal of World Energy Law & Business, 11(2), 116-135. doi:https://doi.org/10.1093/jwelb/jwy001
  20. Sahara, A. R. R., & Martinelli, I. (2025). Penerapan Asas Keseimbangan Dalam Suatu Perjanjian. UNES Law Review, 8(1), 252-257. doi:https://doi.org/10.31933/6xfccc06
  21. Sovacool, B. K. (2016). How long will it take? Conceptualizing the temporal dynamics of energy transitions. Energy research & social science, 13, 202-215. doi:https://doi.org/10.1016/j.erss.2015.12.020
  22. Stevens, P. (2016). International oil companies: The death of the old business model. Chatham House The Royal Institute of International Affairs. Journal of World Energy Law & Business, 8(1).
  23. Verma, A. K., Ajit, S., & Muruva, H. P. (2015). Risk management of non-renewable energy systems Springer Series in Reliability Engineering (Vol. 12): Springer.
  24. Versteeg, M., & Ginsburg, T. (2017). Measuring the rule of law: a comparison of indicators. Law & Social Inquiry, 42(1), 100-137. doi:https://doi.org/10.1111/lsi.12175
  25. Yu, C., Moslehpour, M., Tran, T. K., Trung, L. M., Ou, J. P., & Tien, N. H. (2023). Impact of non-renewable energy and natural resources on economic recovery: Empirical evidence from selected developing economies. Resources policy, 80. doi:https://doi.org/10.1016/j.resourpol.2022.103221
  26. Yuniza, M. E., Rebecca, A. G., & Ramadhaniati, R. C. (2020). A necessity or a premature move?: the shift of indonesian production sharing contract in the oil and gas industry. International Journal of Energy Economics and Policy, 10(4), 251-257.