Kardaya Warnika officially gets BP Migas top job

Urip Hudiono, The Jakarta Post, Jakarta

Kardaya Warnika was inaugurated as the chairman of the Oil and Gas Upstream Regulatory Agency (BP Migas) on Tuesday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on the sidelines of the inauguration ceremony that BP Migas needed to be more careful in verifying the cost recovery calculations submitted by oil and gas field operators.

"Cost recovery has a huge impact on government revenue," said Purnomo.

Most production sharing contracts (PSCs) state that the government will be entitled to 85 percent of the output and the operator 15 percent.

However, such contracts become effective only after the initial investment made by the operator prior to oil production -- commonly known as cost recovery -- has been fully covered by the output.

If cost recovery is factored in, the ratio could eventually shrink to an even 50:50, Purnomo added.

The minister also expected the new leadership of BP Migas to help push the country's oil and condensate output to reach 1.3 million barrels per day (bpd), compared to 1.1 million bpd at present.

In his response, Kardaya said the agency had been studying the possibility of introducing incentive packages to lure investors and speed up the development of the sector.

"Later this month or early next month, we will announce our incentive packages for marginal fields," he said, adding that more than 30 small fields could start being developed after the incentives were announced.

Starting 2002, Kardaya served as deputy chairman under his predecessor Rachmat Sudibyo, who reached retirement age in the middle of last year. Kardaya's appointment was unanimously approved by the House of Representatives' mines and energy commission after a selection hearing over two months ago.

The President then appointed the 53-year-old Kardaya by way of presidential decree.

The other candidates for the top position were the ministry's director general of oil and gas, Iin Arifin Takhyan, and BP Migas operations director Trijana Kartoatmodjo.