SKK Migas opposes plan to reduce cost recovery

By Febry Silaban

Chairman of upstream oil and gas authority SKK Migas, Amien Sunaryadi objected to a plan by the government to reduce the state budget allocation for cost recovery as it would run against efforts to increase the country?s oil and gas production.

?The terminology of cost recovery is more appropriate to be said as investment recovery. As such, cutting down the cost recovery is the same as trimming down investment funds,? Amien said during a hearing on Thursday between the Ministry of Energy and Mineral Resources and the House of Representatives Commission VII on energy and mining.

Coordinating Minister for Maritime Affairs Luhut Panjaitain, who also oversees the ministry, said that the government plans to cut down 2016 state budget allocation for cost recovery to around US$10.5 billion. The plan has been supported by Minister of Energy and Mineral Resources Ignasius Jonan.

Amien said that if the state budget allocation for the cost recovery is reduced it would cause negative impact to the country?s upstream oil and gas industry.

He said that the main challenge is not about cutting down cost recovery, but how to make sure the expenditures spent by oil and gas contractors which are reimbursed by the government through the cost recovery mechanism be more efficient. ?So there should be no mark-up, bribery, that?s the key,? he said.

Amien, however, said that the SKK Migas would follow whatever policy to be taken by the ministry.

Editing by Reiner Simanjuntak