Cost recovery program to be revised
The Ministry of Energy and Mineral Resources is to tighten the cost recovery mechanism under which all operators in the oil and gas sector work after a major increase in claims, The Jakarta Post reported on Saturday (9/2/08).
The government intends to only provide refunds for exploration costs in producing fields, said the director of upstream operations at the ministry, Priyono.
Under the system, the government recovers the money that oil and gas operators spend on exploration work after the blocks start producing.
The cost recovery fund is based on the exploration cost in an entire block, even when some of the oil and gas fields within the block fail to produce, leaving the government with a huge bill.
Priyono said a new regulation, to be ready next week, would base the calculations of the cost recovery funds on the exploration money spent only on fields that produce oil or gas.
It will be used in contracts on 26 new blocks the government plans to offer investors in May.
Data from the ministry shows the government paid Rp7.3 trillion ($784 million) in cost recovery in 2005, Rp7.8 trillion in 2006 and Rp8.3 trillion in the first nine months in 2007.
BP Migas financial operation division head Sujaryono says the cost per barrel of oil has risen from $11.50 in 2005 to $14 last year.
The government intends to only provide refunds for exploration costs in producing fields, said the director of upstream operations at the ministry, Priyono.
Under the system, the government recovers the money that oil and gas operators spend on exploration work after the blocks start producing.
The cost recovery fund is based on the exploration cost in an entire block, even when some of the oil and gas fields within the block fail to produce, leaving the government with a huge bill.
Priyono said a new regulation, to be ready next week, would base the calculations of the cost recovery funds on the exploration money spent only on fields that produce oil or gas.
It will be used in contracts on 26 new blocks the government plans to offer investors in May.
Data from the ministry shows the government paid Rp7.3 trillion ($784 million) in cost recovery in 2005, Rp7.8 trillion in 2006 and Rp8.3 trillion in the first nine months in 2007.
BP Migas financial operation division head Sujaryono says the cost per barrel of oil has risen from $11.50 in 2005 to $14 last year.