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Budget committee agrees to set cost recovery target at $10.22b
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An offshore Ambar Block oil and gas rig located in Java. (Courtesy of/www.nrgedge.net)
T
he House of Representatives budget committee agreed on Wednesday with the government’s proposal to set the 2019 cost recovery target at US$10.22 billion, a 6 percent decrease from this year’s target of $10.9 billion.
Cost recovery is an approach for recovering an oil and gas contractor’s capital expenditures and operating expenses after the initial production phase and under a production sharing contract (PSC).
“We agreed on the figure of $10.22 billion. Previously, the House Commission VII [overseeing energy] agreed on a cost recovery target between $8 billion and $10.2 billion,” House budget committee chairman Said Abdullah said on Wednesday.
The agreement was reached in a meeting between members of the committee and government representatives, including those from the Finance Ministry’s Fiscal Policy Office and other energy stakeholders.
The 2019 cost recovery target is lower than the initial government proposal of $11.3 billion, as stipulated in a financial note in the 2019 state budget bill that was introduced last month.
Upstream Oil and Gas Regulatory Special Task Force (SKK Migas) deputy chairman Sukandar said one of the reasons that the target was lowered was due to the implementation of the gross split scheme, which involved 12 oil and gas blocks up till September.
“With the policy, we can save around $800 million to $1 billion in 2019,” he said.
Sukandar also attributed the lower target to an adjustment in the total cost of production from $5.59 billion in 2018 to $5.13 billion in 2019. (bbn)
