SKK Migas issues new cost recovery ruling

By Godang Sitompul

Upstream authority SKK Migas has issued a new decree on the guidelines for the suspension of cost recovery payment to oil and gas contractors operating in the country.

The decree on the ?Guidelines for the Suspension of the Imposition of Operating Cost,? was issued and signed on December 18, 2012 by then SKK Migas Chairman Jero Wacik.

According to a copy of the decree obtained by Petromindo.com Monday, the new ruling was issued following audit findings, and doubts over the validity and reasonableness of the operating cost claimed by the oil and gas contractors.

The so-called cost recovery mechanism allowed certain funds spent by oil and gas contractors on upstream activities to be reimbursed by the government after the production phase began.

However, critics have long questioned the program's transparency and said that this is prone to abuse.

Editing by Reiner Simanjuntak