New ruling on cost recovery to be completed in October

The government said a new ruling concerning a revision of cost recovery mechanism in the oil and gas sector is expected to be completed in October this year, Republika reported Saturday.

 

Director of the Upstream Business Development at the Directorate General of Oil and Gas R Priyono said in Jakarta Friday that efforts are now underway to revise the ruling of cost recovery that are seen as widely multi-interpretable.

 

According to R Priyono, the new ruling will specify in detail points that contractors cannot ask for reimbursement from the government, especially those unrelated to operational activities.

 

The new ruling of the cost recovery will also be applied to the prevailing contracts, he said.

 

He said that in the new ruling of the cost recovery, contractors would not be allowed to ask the government to pay interest charge because, “It is mentioned in the contract that the interest charge will be recovered by contractors,” he said.

 

On capital depreciation, he said that it would depend on the status of the items. “If the items are used for operational activities, government will recover the cost spent on the items and consequently, the items automatically become the government’s properties,” he said.

 

Meanwhile, he said that the government would not be obliged to recover the cost for operational activities in the contractor’s central office, except for funds spent on operational activities in a regional office.

 

On the funds for community development programs, he said that the point related to the issue is still under study. (*)