16 cost recovery items to remain on list: Govt

The Jakarta Post ,  Jakarta   |  Tue, 07/15/2008 10:36 AM  |  Business

The government has reduced the number of items oil and gas contractors are allowed to claim reimbursement for under a cost recovery system to 16 from 33 in a bid to increase revenue in the sector, a senior official says.

The Energy and Mineral Resources Ministry's Director General for Oil and Gas Luluk Sumiarso on Monday said during a hearing with the House of Representatives Commission IX overseeing financial affairs that the reimbursable items included pension and severance payments for contractor employees.

Luluk's statement came after the ministry's Purnomo Yusgiantoro told a hearing of the Commission VII overseeing energy last month that the government was finalizing a regulation that would eliminate 17 expenses contractors could claim for.

The move was inspired by a Supreme Audit Agency (BPK) report, which found that in 2005 contractors had claimed for 33 different kinds of expenses, which included DVDs, parties and dancing courses.

Luluk said his office would hold meetings with upstream oil and gas controller BP Migas to discuss technical details on the remaining 16 reimbursable expenses.

Edy Purwanto, deputy for economy and distribution at BP Migas, told journalists: "We cannot eliminate all of the reimbursables under the cost recovery system because that would discourage contractors from investing in the oil and gas sector."

He said the government had paid out US$8.33 billion in reimbursements last year.

In 2005, the government received $19.9 billion from the oil and gas sector, but paid back $7.68 billion to oil and gas operators.

Luluk said he was urging contractors to limit their reimbursement claims to help the government increase revenue.

The gas and oil sector contributed Rp 146.2 trillion ($16 billion) to the state budget last year, down from Rp 151.6 trillion in 2006. The sector gave Rp 50.9 trillion in 2005 and Rp 77.1 trillion in 2004.

The 16 reimbursable expenses are:
1. Personal expenses, including pension and severance payments
2. Incentives, including bonuses for vendors
3. Expenses for expatriate workers
4. Training expenses for expatriates
5. Investment credit for investments yet to realized
6. Expenses for concession permits and forestry contributions
7. Expenses paid to BP Migas and Pertamina for education
8. Expenses for expatriate and domestic employees swapping program
9. Expenses for delays in signatures, renewal bonuses and production bonuses
10. Expenses for tax treaties
11. Prepayment of US$75,000 before the beginning of each annual work program
12. Over expenditure by up to 10% of authorized expenditure as calculated by BPMigas
13. Sanctions on failure to make the Financial Quarter Report before the introduction of relevant regulations
14. Delayed audit corrections by contractors
15. Delayed audit calculation by contractors
16. Delayed data submission from contractors. (ewd)

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.