Government Revisits 'Gross Split' Mining Scheme: What Are the Risks?

JAKARTA, KOMPAS.com – The government is revisiting the gross split scheme for minerals and coal after President Prabowo Subianto and Energy Minister Bahlil Lahadalia discussed mining sector reforms at the presidential palace in Jakarta on Tuesday (5 May 2026). The government aims to optimise national revenue from natural resources through a new profit-sharing model, including adopting schemes used in the oil and gas sector. “In oil and gas, we have cost recovery and gross split; perhaps these models will be tested to build partnerships with private parties,” Bahlil said at the time. Edi Permadi, a professional expert in natural resource management at Lemhannas RI, cautioned that applying the gross split scheme to the minerals and coal sector requires careful consideration due to differing industry characteristics compared to oil and gas. “Since the implementation of gross split in 2017, Indonesia’s upstream oil and gas sector has not shown significant improvements. Oil production, which was around 800,000 barrels per day at the start of implementation, has steadily declined to approximately 580,000 barrels per day by 2024,” Edi wrote in his article on Sunday (24 May 2026). He noted that a key issue is weakened exploration activity due to increased contractor risks. Under the gross split system, contractors no longer receive cost recovery mechanisms, making high-risk exploration projects less appealing. “In the minerals and coal sector, each mineral has varying technological complexities, risks, and commercial sensitivities, let alone compared to coal,” he wrote. He added that a rigid application of gross split without considering cost structures could lead to marginal or high-risk projects being abandoned. The primary impact, he said, would not be on short-term production but on long-term exploration. Without risk-sharing mechanisms, investors are likely to avoid greenfield exploration and focus instead on existing mines. However, the future of commodities such as nickel, copper, tin, bauxite, gold, and coal depends on current exploration success. However, many oil and gas contractors have argued that gross split imposes excessive investment risks, particularly for high-risk exploration projects and frontier regions. Consequently, since 2020, the government has reintroduced flexibility in contract schemes, allowing both gross split and cost recovery models under Energy Minister Arifin Tasrif. Since 2025, the government has been revising tax regulations for gross split contracts in the upstream oil and gas sector. Last year, SKK Migas Chief Djoko Siswanto stated that the regulatory revisions aim to boost oil and gas investment enthusiasm. “We are currently revising the gross split tax regulations,” Djoko said during the Plenary Session IPA Convex 2025 at ICE BSD, Tangerang, on Wednesday (21 May 2025). According to Djoko, 46 oil and gas contracts have used the gross split scheme since 2019.