The Indonesian Production Sharing Contract:An Investor's Perspective

The model contract for oil and gas development known as the Production Sharing Contract (PSC) originated in Indonesia in 1966 and enjoyed over a decade of successful implementation, with minor adjustments, in several oil-producing countries. In more recent years, however, numerous problems have arisen as changes in economic realities have driven the level of private investment down. This penetrating study, the only one of its kind, uses legal analysis as well as historical data to pinpoint the reasons for the initial success of the PSC and for its subsequent and persistent frustrations for investors. The author first examines the original Indonesian contract, along with the variants adopted in Malaysia and the People's Republic of China, and then proceeds to an in-depth analysis of the main clauses and their amendments and execution in all three countries. Taking into account various commissioned surveys and emerging policies and strategies espoused by both governments and industry representatives, he concludes with a detailed proposal for an overhauled contract that allows for meaningful adjustments, or even renegotiation, when the balance of interests between parties changes substantially. Focusing as it does on some central issues in global economic development, The Indonesian Production Sharing Contract will be of great value to lawyers, multinational corporate executives, and policymakers far beyond the Asia-Pacific region.

COMPARATIVE ANALYSIS OF MAIN TERMS IN INDONESIA, MALAYSIA, AND
THE PRC 5.1 General The Indonesian Production Sharing Contract undoubtedly
provided a model that was followed by both Malaysia and the People's Republic
of China, albeit with certain modifications. Malaysia made it a matter of policy in
1974 to adopt the Indonesian model, as became apparent from the policy speech
made by the Honorable Minister of Primary Industries in parliament in 1 974,
when ...