Cost recovery in production sharing contracts: a comparative review of Southeast Asian jurisdictions

Abstract

Abstract While the current macro factors (such as the COVID-19 pandemic’s impact on oil and gas demand and lower crude prices) suggest a challenging period lies ahead, the oil and gas industry remains important to a number of Southeast Asian countries, representing a focus area for foreign investment, a driver of domestic auxiliary industries and a source of government revenue. This article focuses on key oil and gas jurisdictions in the region—namely, Indonesia, Malaysia, Philippines, Thailand and Vietnam—and provides a comparative overview of the cost recovery mechanisms in each country. Despite the practical importance of understanding how the cost recovery regimes are intended to operate in each of the relevant jurisdictions, there remains a little detailed commentary on the relevant legislative and contractual frameworks. By tracking how each of the five jurisdictions has modified and adopted cost recovery provisions as it considers appropriate for its particular investment needs, and comparing the jurisdictions surveyed across a range of measures, as reflected in Table 8, this article aims to provide current and future market participants with insights on cost recovery, both to support investment decisions and provide context for disputes that may arise.