Govt, House agree on cost recovery for next year

The House of Representatives (DPR) has approved of the government?s proposal to allocate about US$12.3 billion in spending for reimbursement of oil and gas exploration and production costs in 2011, Kontan reported on Tuesday.

Agus Supriyanto, the head of the fiscal policy agency at the Ministry of Finance, said that the so-called cost recovery spending was calculated based on the estimated revenues from oil and gas production next year.

The 2011 cost recovery spending represents a 2.5 percent increase from $12 billion this year. In 2009, the cost recovery spending was capped at $10.5 billion.

Under standard production sharing contracts, oil and gas producers in the country receive about 15 percent of their oil production and 30 percent of their gas production. However, as part of the contract, the government covers all their exploration and production costs, albeit after a tight auditing process. (*)