Pertamina to return $2.18b in cost recovery to government

State-owned oil and gas company PT Pertamina will return US$2.18 billion of the total amount of exploration and production costs it received from the government under the cost-recovery scheme in the period of 2004-2007.

?No problem. If the House (of Representatives) says say, we shall pay,? Tri Siwindono, President Director of Pertamina's upstream arm Pertamina EP, said on Tuesday.

The government has claimed that it had paid Pertamina US$2.18 billion more than it should have received in cost recovery during the period. And the House's Budget Commission has decided that Pertamina must return the money and it would be listed as non-tax revenue in the state budget.

Under production sharing contract, oil and gas companies will get refund of their exploration and production costs from the government. This mechanism is called "cost recovery".

Cost recovery can be claimed when an oil or gas field has started production. If the contractor fails to start production, the exploration costs should be shouldered by the contractor. However, once a field starts production, the revenue will be first used to reimburse the exploration costs. Furthermore, the government which is entitled to recieve 85 percent of a contractor's oil production and 70 percent of its gas production, has to reimburse the production costs spent by the contractor. (godang)