Minister of Energy and Mineral Resources Ignasius Jonan made evaluating the cost recovery of upstream oil and gas operations (cost recovery) a priority policy. According to him, the cost recovery scheme must be able to benefit both the government and the contractor. "Cost recovery must be fair," Jonan said during the ceremony.
Deputy Minister of Energy and Mineral Resources Arcandra Tahar said the opportunity to reduce cost recovery lies in the efficiency of production activities and increased use of domestic components.
Arcandra also said that cost recovery for projects that are not yet productive can be reduced, such as the development of the Masela Block and the East Natuna Block.
But the government will be careful because the project value is large. In addition, savings in cost recovery must be sought in such a way that does not prevent the increase in oil and gas production or the discovery of new reserves.
According to him, projects in the upstream oil and gas sector began with exploration, which required a lot of costs and were later claimed as cost recovery.
"How can this exploration activity increase because it has been declining since 2014," Arcandra said.
At the end of September, the Ministry of Energy and Commission VII of the House of Representatives set a 2017 cost recovery budget of US55 10.4 billion. The value of the cost recovery is increased from the allocation in this year's Revised State Budget of US $ 8 billion.
Commission VII member Harry Poernomo said the government could target opportunities to reduce cost recovery to below US $ 10 billion. The pressure for the government to evaluate cost recovery arose from various parties.
One of them was from the Managing Director of PT Pertamina (Persero) Dwi Soetjipto, who asked Jonan to use his ability in the financial sector to evaluate cost recovery. The Supreme Audit Agency (BPK) suspects that there is a mark-up of costs in cost recovery.
In the Summary of Results of Financial Examination for the first semester of 2016, the BPK stated that the mark-up was Rp 2.56 trillion because there were undue costs included in the cost recovery calculation. At present, the government is revising Government Regulation No. 79 of 2010 concerning refundable operating costs and income tax in the upstream oil and gas sector.
In addition to tax incentives, this rule discusses plans to apply the concept of gross split sliding scale for state revenue sharing. With this scheme, there will be no cost recovery, but the government will only get more revenue sharing if the price of oil rises very high or when it gets a windfall profile. Director-General of Oil and Gas I Gusti Nyoman Wiratmaja said the revision of Government Regulation number 79 of 2010 had been submitted to the Coordinating Ministry for the Economy.
He hoped the revision of this regulation would soon be completed because several project contracts such as the East Natuna Block could not be signed. Likewise with the Masela Block development decision.
"The sooner the better," Wiratmaja said.
But the Director of the Indonesia Petroleum Association, Marjolijn Wajong, said that the revision of the regulation was not in accordance with the contractor's wishes. One of them is the application of the principle of assume and discharge for legal and fiscal certainty.
"The economies of scale are determined by many things. And obedience to the contract, if we sign it must be consistent.
Koran Tempo, Page-13, Tuesday, Oct 18, 2016.
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