Cost recovery funds for oil and gas rise 53% to $7.5billion in 2005

The amount of cost recovery funds for oil and gas exploration and production that have to be reimbursed by the government to production sharing contractors (PSCs) increased by 53 percent to about US$7.53 billion in 2005 from only about US$4.99 billion in 2004, the regulatory body for oil and gas exploration and production BP Migas has said.

The chairman of BP Migas Kardaya Warnika told the Commission VII of the House of Representatives in a hearing Monday that the increase in the cost recovery funds was not in line with the oil and gas production which showed a significant decline during the year.

"Unlike the cost recovery funds, oil production dropped to 1.062 million barrels per day in 2005 from about 1.094 million barrels per day in 2004," Kardaya said.

According to Kardaya, the surge in the cost recovery was mainly caused by the sharp increase in the prices and rental rates of exploration and production equipment.

The rise in the crude oil prices in the international market during the past two years had resulted in the sharp increase in the prices and the rental fees of the exploration and production facilities as more and more companies entered the exploration activities to take the advantage of higher oil prices, he added.

"For an example, the rental rate for an offshore rig has risen by 300 percent during the past two years," he said. (godang)