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Jakarta Post

Oil industry welcomes possible return of cost recovery scheme

  • Norman Harsono

    The Jakarta Post

Jakarta   /   Mon, December 9, 2019   /  09:34 am
The Jakarta Post Image
Illustration of an offshore oil rig.(Shutterstock/File)

The Indonesian Petroleum Association (IPA) welcomes the government's plan to reintroduce a reimbursement scheme for the oil and gas industry known as cost recovery after having to work under a fixed split-cost system since 2017. In a cost recovery-based production-sharing contract (PSC), the government reimburses companies for upstream-related costs in exchange for a higher share for each company’s earnings from exploiting domestic oil and gas blocks. Meanwhile, in the so-called gross split scheme, companies bear upstream costs themselves, but the government receives a smaller cut of revenue determined in advance. “The key challenge in our industry is that not every project is the same. They have different risks, need different rewards. So the discussion about flexibility is something I'm pleased to hear," said newly-appointed IPA president Louise McKenz...