Fiscal Reform in Indonesia’s Upstream Oil & Gas: Gross‑Split

The Indonesian government announced in 2025 a major overhaul of upstream oil‑gas fiscal policy by replacing Production Sharing Contracts (PSC) that use cost recovery with a gross‑split scheme. The new regime applies to fresh contracts and selected existing ones. It aims to improve the certainty of state revenue.

Under the gross‑split model, the state’s share is calculated as a fixed percentage of gross production, eliminating cost‑recovery adjustments. At the same time, taxation follows the prevailing principle, meaning rates and taxable items may be altered as policies evolve. This creates uncertainty for operators who must revise fiscal assumptions over long investment cycles.

Such uncertainty could affect investment decisions and reduce foreign capital inflows. Consequently, coordination among SKK Migas, the Directorate General of Taxes (DJP), and the Ministry of Energy and Mineral Resources (ESDM) is essential to preserve revenue stability and sector attractiveness. Consistent policy is expected to balance national fiscal interests with investor needs.