State suffers loss of $400 million due to PSC activities

The government?s loss due to financial deviation by Pertamina?s production sharing contractors has reached a total of over US$400 million since 1991, according to a member of the House of Representatives (DPR).

The House?s member Husni Thamrin said in a hearing with Pertamina?s executive board on Thursday that the PSCs, mostly foreign oil companies, abused the cost recovery policy adopted under their contracts.

According to Thamrin, the abuse included accounting the spending in gas activities into the expense allocated for the oil operation to get more gain.

Under the contracts with Pertamina, a PSC receives 15 percent of oil production, and 30 percent of gas production, after the deduction of all the expenses needed to produce the oil or gas.

In addition to such practice, the state suffered a loss also due to the high spending made by the companies for their expatriate workers, and accounting the spending in non-productive activities into those which have started production. (*)