Ministry of Finance must be careful in reviewing cost recovery: Purnomo
Saturday, October 21 2006 - 06:00 AM WIB
?One principle that must be well understood is: Don?t look at the situation when there is already cost recovery. Look at the situation when (the oil and gas companies) were still in exploration and had yet to find oil and gas. During exploration, they are not entitled to cost recovery. They will get it after they have started production,? Purnomo was quoted by Investor Daily as saying on Friday.
Purnomo made the statement following reports that the Ministry of Finance?s Directorate General of Taxes would review the cost recovery mechanism implemented in the country?s oil and gas industry amid concerns that the operating costs which oil and gas companies ask the government to reimburse have been on the rising trends in the past two years. This has caused the government to get less oil and gas revenue, according to Minister of Finance Sri Mulyani Indrawati.
Purnomo noted that under contracts, oil and gas contractors are not entitled to recover their costs if they fail to find oil and gas.
Legislator Dito Ganinduto, who is a member of the House of Representatives? Commission VIII which oversees among others energy affairs, also voiced concerns over the Ministry of Finance?s plan.
He called on the ministry to focus on the fiscal aspect of the cost recovery.
?Let the Ministry of Energy and Mineral Resources through the Directorate General of Oil and Gas handle the technical aspect,? Dito said, adding that he doubted the Directorate General of Taxes? capability to carry out technical audits on cost recovery.
He admitted that technical audits on cost recovery were not working as the Ministry of Energy and Mineral Resources was still formulating a regulation on the matter.
Director General of Oil and Gas Luluk Sumiarso admitted that his office is formulating a regulation on cost recovery, which would be issued in the form of ministerial decree and governmental regulation.
?As a matter of fact, the contracts held by oil and gas contracts have specified rules regarding cost recovery. The regulation we are formulating now will become an addition (to the contracts) and will complement the oil and gas law,? Luluk said.
According to him, the amendment of the Governmental Regulation No. 35/2004 on Cost Recovery will be finished in December, 2006 and its detailed rules will be specified in a ministerial decree which is expected to be issued in January, 2007. (*)