Posco International announced Tuesday that it has inked a production sharing contract with the Indonesian government and its state-run oil company Pertamina Hulu Energi, in a move to secure the share of oil produced from the Bunga gas block located off Indonesia's eastern Java island.

The signing event was held at Tangerang, Indonesia, earlier on the day with top executives including Posco International CEO and Vice Chairman Jeong Tak and PHE CEO Wiko Migantoro in attendance.

A production sharing contract, signed between the government and resource extraction companies, determines the ratio of production to be shared between the two parties after the participating companies recover their costs and expenses.

The latest deal comes after Posco International won the gas mine exploration rights to the Bunga gas block alongside PHE in February. The block is estimated to hold 1.3 billion barrels of natural gas, according to Reuters.

Under the agreement, the sharing ratio is set at 60:40 and 55:44 for oil and gas, respectively, between the Indonesian government and the two companies.

The two companies each hold a 50 percent stake for their participation in the project, while Posco International holds the operational rights.

With the latest contract, Posco International has also secured a six-year exploration period and 30-year development and production period.

If the exploration of the gas block is successful, Posco International could secure additional stable supplies of natural gas and liquefied natural gas. It has been operating gas fields in Myanmar, Australia and Malaysia.

Following the agreement, the company aims to ramp up exploration efforts of the Bunga gas block. It plans to send its headquarters' specialized personnel to its new subsidiary in Jakarta to evaluate the potential of the block through 3D seismic investigations and make the final decision on its planned exploration drilling in 2027.

On the same day as the agreement, Posco International CEO Jeong and Pertamina's President Director Nicke Widyawati also signed a memorandum of understanding for carbon capture storage, under which they will jointly explore and promote business opportunities in blue hydrogen and ammonia to contribute to carbon reduction in the industry.

"By continuously securing new energy sources, the company will leap forward as an advanced eco-friendly energy company to further contribute to the national energy security," said Posco International CEO Jeong.