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State budget no longer burdened by oil and gas activities: Deputy minister
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Energy and Mineral Resources Deputy Minister Archandra Tahar (JP/Dhoni Setiawan)
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newly issued energy and mineral resources ministerial decree on the implementation of a gross-split sliding scale for upstream oil and gas projects dictates that the government will no longer have to reimburse exploitation and exploration activities in new and renewed contracts.
The new gross-split scheme will replace the previous cost recovery in new projects, and will be an option for investors to consider when renewing contracts of existing oil and gas fields.
The new scheme will force contractors to increase their efficiency because they will no longer be reimbursed through the state budget, said Energy and Mineral Resources Deputy Minister Arcandra Tahar during a seminar on Thursday.
(Raad also: Latest draft regulation to allow partly processed mineral exports)
“It will push contractors to manage their operational funds and investments based on their own corporate finances instead of the state’s finances,” he said.
The cost recovery scheme will be phased out in the next few decades as it is deemed inefficient.
Last year, the government was forced to pay out US$13.9 billion for oil and gas cost recovery, exponentially higher than the $12.86 billion in non-tax revenues obtained from the sector.’
Furthermore, House of Representatives Commission VII overseeing energy has already agreed to the government’s request to slash the 2017 cost recovery budget to $10.4 billion from the original proposal of $11.7 billion.
Under the previous cost recovery scheme, investors were entitled to 15 percent of the profit of an oil project and 30 percent of a gas project, with the government scooping up the rest. (bbn)
