Legal Certainty in Gross Split Contracts for Upstream Oil and Gas Investment
DOI:
https://doi.org/10.30996/jhbbc.v9i1.133004Keywords:
legal certainty, production sharing contract, gross split, upstream oil and gas, resource governanceAbstract
This article examines whether Indonesia’s gross split production-sharing contract provides an adequate degree of legal certainty for upstream oil and gas investment. While the gross split regime was introduced to simplify fiscal administration and eliminate disputes over cost recovery, its broader juridical implications have remained insufficiently explored. Using a normative legal research design combined with comparative doctrinal analysis, the study evaluates the regime through three dimensions of legal certainty clarity of rules, stability of norms, and credibility of enforcement drawing on statutory materials and peer-reviewed scholarship from the last five years. The analysis shows that the gross split model enhances operational clarity but leaves juridical stability vulnerable because material fiscal provisions are mainly anchored in ministerial regulations rather than primary legislation. The transfer of financial and operational risk from the state to contractors further heightens the premium investors place on predictability. Yet, stabilization mechanisms and structured change-in-law protections remain limited. Comparative insights from Malaysia, Thailand, Brazil, Norway, and Nigeria demonstrate that contractual stability is most effectively achieved when fiscal innovation is coupled with strong legal anchoring, disciplined administrative procedures, and credible dispute-resolution channels. The article argues that reform should prioritize institutional consolidation rather than wholesale redesign of the regime. Four complementary policy options are proposed: statutory elevation of core fiscal terms, structured stabilization mechanisms, improved institutional coordination and dispute resolution, and phased, transparent policy transitions. Together, these measures would align the gross split PSC with rule of law principles while preserving necessary policy flexibility. The findings contribute to ongoing debates on resource governance by showing that fiscal efficiency and legal certainty are not competing objectives, but mutually reinforcing pillars of sustainable investment.
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