Objective: This study aims to identify the empirical influence of the assessment criteria for Indonesian oil and gas auctions on total oil and gas block production. The role of remaining concession time, contract policy and block size are considered.
Theoretical Framework: In this topic, the concepts and agency theories underlying the research are presented, providing a strong basis for understanding the context of the influence of oil and gas block policies in Indonesia.
Method: This research uses an exploratory quantitative approach. The research sample consisted of 157 petroleum and 140 natural gas blocks that had carried out production activities. Ordinary least square (OLS) regression used to empirically test the hypothesis.
Results and Discussion: The results show that the ranking of oil and gas companies has a significant positive effect on the productivity of blocks. Meanwhile, remaining concession time has a significant positive relationship only for the natural gas. This research also found a significant negative effect of the gross split contract on block production. Finally, it was found that company ranking had a positive and significant effect on production both in large and small blocks. However, the relationship between ranking and productivity is stronger and more consequential for large-scale blocks compared to small-scale blocks.
Research Implications: Contract policymakers need to review the gross split policy because it is not in line with the initial goal of increasing efficiency. The results clearly show that strict government policies can reduce agency costs while encouraging oil and gas production, however, this can hinder the competitiveness of the sector. The government does not need to give excessive priority to high-ranking companies in managing small-scale blocks in order to attract new investors.
Originality/Value: To the best of our knowledge, this research is the first study to develop a ranking method for oil and gas companies in Indonesia.