Govt expects lower cost recovery for oil and gas

The Government of Indonesia was optimistic in cutting down the cost recovery by US$1 billion this year to US$10 billion. Government also raised the crude oil price benchmark for 2009 State Budget to US$61 per barrel.

Antara News quoted Anggito Abimanyu, head of Fiscal Policy Agency at Ministry of Finance, saying there is a window of opportunity to cut the cost recovery. Unfortunately he didn't explain the details of where government could cut the costs to be reimbursed to oil and gas contractors.

In a related development, government and the House of Representatives (DPR) agreed to revise up the benchmark price for crude oil to US$61 per barrel from US$45 per barrel as the crude has been hovering above US$68 per barrel in the international market. Government expects oil production would reach 960,000 bpd this year. 

In a bid to cut down the cost recovery and to prevent disputes with contractors, government will issue regulation on cost recovery scheme where details of costs that could be reimbursed will be outlined based on comparative data from other countries.

Oil and gas contributed to almost 30% of the State budget. Controlling the cost recovery will clearly boost significantly the State's income from the sector. Actually, energy and mineral resources minister has issued decree No. 22/2008 about cost of various activities in the oil and gas sector that couldn't be reimbursed by the State.

Indonesia's oil production reached 956,000 bpd in the January-April 2009. 

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