Fri, 02 May 2008
From: The Jakarta Post
By Ika Krismantari, The Jakarta Post
The new chairman of BPMigas, the country's upstream oil and gas regulator, pledged Tuesday to promote efficiency and transparency in the powerful agency.

Speaking at his inauguration, R. Priyono said the agency would cut bureaucratic processes oil and gas companies must undergo to obtain exploration licenses.

"If they (oil and gas companies) have to go through three or four tables, let's make it just one."

"Such a bureaucratic system is simply out of date," Priyono said.

The new system would help the body carry out its main task of increasing the country's oil production, which has showed a declining trend over the past five years due to a combination of aging existing fields and a lack of exploration in new ones.

In order to transform the body, some posts would be restructured to improve efficiency, he said, adding that the plan was currently being negotiated with the Energy and Mineral Resources Ministry.

Aside from raising the oil output, Energy and Mineral Resources Minister Purnomo Yusgiantoro said, Priyono must improve the monitoring of so-called cost recovery, which has drawn much public criticism lately for its lack of transparency.

Priyono promised he would make sure each department had a standardized financial surveillance system to ensure that such funds were well-spent.

A new system would also be introduced to tighten the cost recovery mechanism, by providing refunds for exploration costs only in producing fields.

Under existing regulations, companies operating under production sharing contracts can seek reimbursement from the government for operating costs related to oil and gas exploration and production activities.

BPMigas' latest report shows the government paid some US$8.33 billion to oil and gas producers in 2007 for recovery costs, up 6.4 percent from a year earlier.

In 2006 and 2005, the government paid $7.8 billion and $7.3 billion, respectively.

Of the 2007 total, $4.8 billion was spent on activities relating to oil production and the remaining $3.5 was for activities in the gas sector.

"We will try to explain to the public that a bigger cost recovery does not eventually mean a bad thing, as long as we bring with it a bigger revenue," Priyono said.



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