Crucial Problems in The Cost of Recovery

Crucial Problems in Cost Recovery

COST recovery for oil and gas exploitation financed by country budget always increased from year to year. During 2006, cost recovery reached Rp68,27 trillion. Cost recovery on 2005 until Rp67,801 trillion, and in 2004 reached Rp63,27 trillion.

Although cost recovery increased, fact showed, wasn’t influential towards increase in production oil and gas, as a result, could not increased state revenue.

On 2006, sector oil and gas was given state revenue reached Rp207,69 trillion, 2005 income reached Rp153,33 trillion, and 2004 Rp107,76 trillion.

Kurtubi, observer oil and gas, mentioned, had several crucial problems in system cost recovery mining and energy in this country.

He questioned are problem of return (relinquishment) work territory or bloc, has been productive as being arranged in production sharing contract (PSC).

In PSC, contractor was given by right continue to control 20 percent work territory or bloc originally to the end of contract for 20 – 30 years.

As a result, territory that risk of loss resulting from drilling, and exploration be placed to budjet country. “Role of 20% in this PSC Indonesia were compatible with the principle of the PSC foundation, where the risk exploration should became the burden investor,” he said several last day.

Kurtubi compared by Malaysia PSC Model that only left limited area around production well that continue controlled when near finish KPS contract.

According to Kurtubi, country does not bear the risk exploration. Because of that, system cost recovery must revise.

“Exploratory drilling in the area territory of the production must really geologically justified.”

He urgent BP Oil And Gas (BP Migas) not easy signed agreement to exploration on work territory/the bloc area. Realisation drilling exploration on new territory almost without results although signing of the bloc continued to increase.

Kurtubi also considered, system cost recovery potential be mark up authorization for expenditure/AFE (the budget). Because that, needed objective transparency benchmark.

System cost recovery also dangerous intervention by expenditures irrelevant and unrelated technically with activity exploration and exploitation.

He also considered supervision system BP Oil And Gas is weak.

Chairman of The Commission VII People’s Representative Council (DPR) Energy and Mineral Resources Field, Agusman Effendi said, DPR asked government to carry out audit cost recovery by BPK on all KPS.

DPR also asked BP Oil And Gas carried out supervision seriously and held monitoring periodically on occasion of lowered cost recovery as well as made the benchmark and the achievement cost unit operational to appoint Key Performance Indicator (KPI).

DPR also ask BP Oil And Gas, to order study comprehensively about system cost recovery to find standard natural value. BP Oil And Gas also asked to increase the transparency and acuntability in realisation cost recovery.

Agusman believed, needed the clarity about item that could enter cost recovery etc, like community development program, should not entered in cost recovery.

The regulation on the proportion of purchase, the local component must be also clarified and increased by each proceeding project.

Supervision or audit (pre and post the audit) must be increased and carried out consistently and transparently as well as supervision exploration cost was placed to the production cost. “That must be indeed done.”

Increase cost recovery evidently was not influential towards the increase for production and very incriminated the country budget.

Since 1999, decline around 1,5 million barrel each day. Decline that happened during 1999, could not be restrained by only a few. Constant manner continued to experience decline till 2006.

According to Kurtubi, biside fields have been old, also because discovery the new reserve that was very rare as resulting from decline in drilling activity exploration.

The Supervision Body of Finance and Development (BPKP) also revealed, from 44 KKKS or 29 percent total of KKKS that operated in Indonesia (125 KKKS), in 2002-2005 year reached more than Rp18 trilun. “Until December 2006, handled amount Rp8,7 trillion. Hopefully BP Oil And Gas, the Director General of Oil And Gas could continue to co-operate so that this money could improve and enter the treasury negara,” Didi Widayadi said.

According to him, the increase cost recovery because many regulations in cooperation with contractor unclear. There also KKS reluctance follow up results of BPKP audit, not all that control from authority oil and gas, and operator often changed. And then, documents linked with the audit difficult gotten.

”BPKP will continue to follow up these findings, so state revenue and KKS increased by waging war colluding and indifferent side till finally the loss country.”

For more efficient and income flow country and KKS increased, Didi considered, BP Oil and gas needed existence supervision strategy. According to him, the risky oil and gas business big, and it location very far, so make difficult. Because that, supervise needed existence audit system interim.

Minister Energi and Mineral Resources Purnomo Yusgiantoro, warned that each one of the country’s losses not always corruption or criminal action. He acknowledged indeed in every year, the operating cost was bigger or exceeded the price of crude oil that was produced.

However, he said, cost was not kept or used in operation oil and gas, then cost will be returned following years.

According to Purnomo, BPKP carried out audit towards the oil and gas activity and petroleum and found existence increased cost that necessarily enter in cost recovery so as damaging country.

“But, if being paid close attention to, the existence of baldness always did not result criminal emergence. This was mispersepsi that happened in community. As if with the occurrence of the country’s loss then happened corruption,” he said.

Purnomo said, corruption not enough only because element of the country’s loss, but also must be accompanied by violation of law, and had other person or himself who got benefit.

Purnomo agreed if system cost recovery must be review in relation to findings produced by BPKP audit contractor Oil And Gas Cooperation.

“This findings was indication if cost recovery must arrange again, because developing dynamics were different last year happening.”

According to him, regulation must sit together and honored the contract.

ESDM department carried out follow-up efforts, is the improvement was carried out by Director General of Oil And Gas with sides that be involved in cost recovery.

“Role in contract must be seen, after that later we for, we socialitation to stakeholder concerning production trend. We will make sign, give to BP oil and gas to study.”

At this time, The ESDM Department with BP Oil And Gas, Director General of the Tax, the Director General of Financial and BPKP, was compilied the minister’s regulation about guide and conduct of return operated cost recovery in implementation of the contract the cooperation the activity and the earth of efforts of the oil upstream, together.

The head BP Migas, Kardaya Warnika justified, cost recovery increased was natural, when being used to maintenance and optimalitation production, development of the field, search for new reserve, return of the year operating cost beforehand, inflation and supply and demand oil and gas for industry.

Managing Director of Energy cataracts, Supramu Santosa said, cost recovery continued to rise whereas the production continued to descend because situation oil fields has been old (mature). Production descended level 10 to 15 percent year to year.

To produce increasingly old field, needed increasingly high cost. For example, his pressure was increasingly low needed bigger pump, necessary gas well compressor, wells increasingly often produced water then was needed chemicals and facilities to separate water and workover oil and well services, necessary increasingly often was carried out.

Old for a long time was needed secondary recovery carried out injection of vapour, water or the chemical material.

Therefore the maintenance cost of old wells increasingly for a long time will be increasingly big.

Cost recovery also rose together with the rise prices of goods and services that were needed by industry oil and gas.

To press cost recovery, Supramu needed existence simplification of bureaucracy especially in the procurement of goods and services. As well as efforts answered the investment lag that could cause opportunity lost.

Cost recovery also will be pressed if enlarging the cake produced by oil and gas, and not only discuss decline efforts in cost.

According to him, to enlarge the significant cake increased oil and gas investment especially the activity exploration.

Without the success exploration, oil and gas cake would increasingly became smaller.

Considering the role produced very big oil and gas, both as the source of foreign exchange and the source energy, efforts to enlarge the oil and gas cake were one very strategic national effort and were one obligation.

“simplification of bureaucracy, increased assurance of the law, assurance of taxation and improved health of social climate and politics as well as security was several efforts that must be carried out by us.”

According to him, KKKS as investor became government partner to economics development. So, must be appreciated and always not suspected. KKKS and government had same aim for production increasing and depress cost recovery.


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