Government scraps cost recovery ruling

The government has apparently dropped plans to cap costs recoverable by oil and gas investors as it has removed an article in the final draft governmental regulation that stipulates the cost recovery cap.

"Originally there was an article stipulating a cap on cost recovery. But, with approvals from the chief economics minister, finance minister and energy minister, we eventually revoked it," Evita Legowo, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources said.

The government planned to set a cap on cost recovery following suspicions of several parties that oil and gas contractors tend to mark up the costs that they claim for reimbursement from the government.

The plan to set a cap on cost recovery has, however, drawn protests from most stockholders of the oil and gas industry who deem the move contraven the contract and could discourage them from increasing production.

Evita said the move to remove the capping artile was taken in line with the effofts to reach oil production target of 965,000 barrels per day (bpd) this year.

Meanwhile, head of fiscal policy at the Finance Ministry Anggito Abimanyu said that for 2010 the cost recovery had been set at US$12 billion. "This is our provisional figure pending the issuance of the cost recovery regulation," he said. (godang)