Govt drafting regulation on cost recovery

The government is drafting a regulation on cost recovery for the oil and gas industry as required by the Law No. 41/2008 on 2009 State Budget.

Director General of Oil and Gas Evita H. Legowo said during the meeting to draft the regulation at the Migas building in Jakarta on Wednesday that the 2009 State Budget Law assigned the government to issue a governmental regulation on cost recovery by Jan. 1, 2009, review cost recovery references on the Exhibit C of the cooperation contracts in compliance with the existing regulations, and strengthen the supervision of cost recovery in order to maximize the government's revenue.

"The draft governmental regulation on cost recovery will among others specify expenses that can be categorized or considered as cost recovery elements as well as universal standards and norms to determine whether an expense is appropriate to be included in tax cost and cost recovery counting," Evita said.

The ministry has asked inputs from various parties, including the Indonesian Petroleum Association (IPA), for the drafting of the regulation, she said.

Under the production sharing contract system, the government takes a large portion of contractors' oil and gas output but have to proportionately reimburse the operation costs spent by the contractors.

Several parties have raised concerns over the rising costs claimed by the contractors under the cost recovery scheme. (Godang)