Posco International and Indonesia’s state-run Pertamina Hulu Energi (PHE) signed a production-sharing agreement with the Indonesian government for an offshore oil and gas field in the country on Tuesday.

A production-sharing agreement is a contract signed between a resource extraction company and a local government through which the parties split the oil or gas produced.

With the signing of the latest contract, Posco International was granted both a six-year exploration period and 30-year development and production period for the Bunga gas field lot by the Indonesian government.

The agreement between the government and the contractors — Posco International and PHE — decided on a production-sharing ratio of 60:40 for crude oil and 55:45 for natural gas. Posco International and PHE hold 50 percent stakes each in the project, with the former operating the field.

The massive Bunga block, located off the eastern coast of Java Island, measures 8,500 square kilometers (3,281 square miles) and goes down as deep as 500 meters (1,640 feet) from the sea surface.

The signing of the contract comes after Posco International and PHE won the bid to explore, develop and produce the Bunga gas lot in February. The companies plan to begin the exploration of the Bunga block and decide on exploration drilling in 2027 soon.

During the signing ceremony on Tuesday, the duo also entered a memorandum of understanding for the exploration and production of the Bunga project.

Posco International, an energy and trading company, currently operates gas fields in Myanmar and Australia.

The company’s share price increased 12.73 percent to close at 74,400 won ($58) on Tuesday, riding on the recent share price hike of Posco subsidiaries driven by electric car battery demand. Posco International posted an expectation-beating operating profit of 357.2 billion won, up 11.4 percent on year for the second quarter.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]