Govt audit agency finds irregularities in cost recovery claim

Cost recovery claim mark-up practices by Production Sharing Contract (PSC) contractors had caused Indonesian crude production costs to soar to up to US$9 per barrel, higher than that of Malaysia, which costs of production was only $3.7 per barrel. Chief of the development and finance control board (BPKP) said.

Cost recovery mark-up was one of the findings made by the body from 2002-2005 audit conducted on PSC contractors. Among the findings that affected cost recovery mark-up were irregularities in corporate tax, royalty and dividend that amounted to Rp.6.24 trillion, investment credit Rp 2.47 trillion and home office charges Rp 1.62 trillion, BPKP chief Didi Widayadi said in Jakarta Tuesday.

Didi elaborated that of the Rp 18 trillion, as of December 2006, Rp 8.695 trillion had been confirmed by the contractors, who mostly returned the funds to the government.

"We have still Rp 9.372 trillion, which haven't been verified yet by the government," Didi said, refusing to disclose the names of the operators because his team must coordinate with the government to ask confirmation to those operators regarding theirclaims.

Based on PSC in Indonesia, every company can recover all the production costs used for their operation in getting crude oil by submitting the costs into cost recovery.(*)