Minister issues new regulation on oil, gas cost recovery mechanism
Friday, August 11 2017 - 01:11 PM WIB
The ministry said in a statement that the new regulation was aimed at ?providing legal certainty on investment cost recovery mechanism in upstream oil and gas activities at the end of the production sharing contract.?
According to the new regulation, in a bid to help maintain oil and gas production, upstream oil and gas authority SKK Migas will require oil and gas contractors to maintain reasonable production level toward the end of their contracts by investing in upstream activities in their working areas.
SKK Migas gives approval to work and budget plan of oil and gas contractors whose contracts are based on cost recovery system, and also on work and budget plan of contractors based on gross split mechanism.
The new regulation says that in the case contract on an oil and gas block is not extended, the new oil and gas contractor assigned to the block is required to settle the investment cost recovery, the obligation of which shall be stipulated in the new contract.
The value of the investment cost recovery received by the contractor following settlement made by the new contractor will be accounted as subtraction to the operation cost of the existing contractor.
The investment cost recovery settled by the new contractor will be accounted as part of operating cost of the new contractor.
New oil and gas contracts signed prior to the issuance of the new regulation, where there is still outstanding investment cost that has yet to be recovered based on approval from SKK Migas, will also be subject to the new stipulations.
Editing by Reiner Simanjuntak