Fri, 19 Dec 2008
From: The Jakarta Post
By Irawaty Wardany, The Jakarta Post, Jakarta
The Corruption Eradication Commission (KPK) has given the Upstream Oil and Gas Regulator (BP Migas) six months to mend its poor inventory system that has given rise to allegations of embezzlement.

Speaking after meeting with BP Migas head R. Priyono, KPK deputy chairman for prevention Haryono Umar said Thursday the flawed system was responsible for the depreciation of the regulator's assets from US$24 billion in 1970 to only $3 billion today.

"BP Migas has to build a new inventory system within six months, which must integrate production, revenue, cost recovery and asset management," Haryono said.

Priyono had asked for two years to meet the KPK's request.

The KPK suggested BP Migas involve around 200 private oil and gas contractors, the Energy and Mineral Resources Ministry, the Finance Ministry and state oil company Pertamina in its plans.

"The asset depreciation has been a chronic problem in the oil and gas sector since 1970. Before BP Migas was established, the sector fell under a division of Pertamina's and has gone through a transition ever since," Haryono said. "BP Migas is a new body and none of previous activities were well documented."

The KPK demanded the regulator uphold transparency over the quality, quantity and price of oil and gas as reflected in its transactions, rather than its own reports.

Haryono said the KPK had also urged BP Migas to change its monitoring of goods and services procurement.

Priyono said he had consulted with the KPK twice regarding the improvement of the inventory system.

"The problem is BP Migas was established in 2001 but only began operating in 2002, while the value of assets kept increasing every year," he said.

Haryono said the KPK was concerned about the depreciation of BP Migas' assets because it involved huge amounts of state money. He added the KPK would seek an audit to see whether any of the assets had been embezzled.

"We will examine all information and ask auditors to help conduct an investigative audit into it," he said.

He add the KPK would launch an investigation if the audit found any indication of corruption.

Earlier this year, the Supreme Audit Body (BPK) and Indonesia Corruption Watch (ICW) reported alleged misappropriation of oil and gas revenue that may have cost the state Rp 200 trillion ($22 billion) in losses.

A BPK audit of government income statements for the 2005-2007 period revealed some Rp 120 trillion in oil revenue went unreported and was spent outside the state budget mechanism.

The BPK also found in its audit for the 2006-2007 period that BP Migas did not pay Rp 40 trillion in recovery costs to the oil and gas producers.

In its report to the KPK, ICW found alleged misappropriation of more than Rp 194 trillion at BP Migas from 2000 to 2007.

ICW said the indications of graft could be seen in the fact reported oil production levels were less than actual production levels, with the annual average discrepancy exceeding 16 million barrels.



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