Compensation Arrangements in Expropriating Goods and Equipment: An Indonesian Experience

Abstract

After the change of oil and gas production sharing contract scheme in 2017, the expropriation of goods and equipment has become the main clause in the Production Sharing Contract (PSC) contract. As a substantial production subsidiary, oil and gas exploitation is controlled by PSC. This paper aimed to examine the PSC contract, Oil and Gas Law, and upstream oil and gas business ordinance to expropriate goods and equipment. The PSC outline contains ownership of natural resources, the working area of ​​oil and gas operations, oil and gas reserves, capital, and sophisticated supporting goods and equipment. However, the problem in the contract dealt with the ownership of goods and equipment purchased by the contractor. The cooperation contract regulated that goods that support oil and gas operations were included in the category of State Property without compensation. The provisions in the contract tended to be detrimental to the contractors who have carried out the exploration stage but did not find oil and gas reserves until the specified time limit. This paper used normative legal research to analyze the regulation of clause the expropriation of goods and equipment and statute approach to explore the clause from various regulations. The result showed the acquisition of ownership of goods and equipment in the PSC, upstream oil and gas business regulation was not regulating the compensation arrangements.

KEYWORDS: Natural Resources Law, Upstream Activities, Compensation Arrangements.