BP MIGAS TO ENHANCE COST RECOVERY EFFICIENCY TO MAXIMIZE STATE REVENUE

            Upstream Oil and Gas Regulator (BPMIGAS) successfully enhanced cost of operation and investment (cost recovery) efficiency in 2012 or only USD 15.1 billions to be claimed from the State by Co-operation Contractor (KKS Contractor) from the proposed USD 17.4 billion for the production of oil and gas at 2.25 million barrels of oil equivalent.

            The cost recovery figure this year is lower than realization of cost recovery in 2011 at USD 15.5 billions. This indicates BPMIGAS? Success in making management of upstream oil and gas industry more efficient to maximize state revenue.

          Once KKS Contractor proposed a budget of USD 17.4 billions for producing total gross revenues from upstream oil and gas activity at USD 53.7 billions with the share of the state at USD 28 billions and the share of KKS contractor at USD 8.3 billions.

            But, after going through negotiation, BPMIGAS successfully maximized total gross revenue to USD 56.3 billions from the proposed USD 53.7 billions.

          With the increase in gross revenue, the share of the state increases to USD 32.2 billions from USD 28 billions.

           The share of KKS Contractor also slightly increases to USD 8.9 billions from the proposed USD 8.3 billions. While, cost recovery proposed by KKS Contractor becomes USD 15.1 billions by increasing efficiency in some budget items proposed by KKS Contractor which are considered not to affect achievement in oil and gas production.

        Basically, we consider cost recovery as an investment to maximize state revenue, said Head of Public Relations, Security, and Formalities Division, Gde He added that the investment must also be enhanced to be more efficient by providing gain to contractor and the government. Cost recovery must optimally be spent domestically in the from of local content.

       Last year, from capital spending of USD 11 billions in upstream oil and gas industry, BPMIGAS has successfully accelerated rate of local content more than USD 6 billions.

        Such investment must continuously be made by Contractor in various forms of upstream oil and gas operations to reduce decline of oil production from 14 percent to 3-4 percent per year.

           With the investment and attempt to reduce decline in oil production, such as Enhanced Oil Recovery (EOR) attempt, Indonesia’s production is currently at around 90,000 barrels a day.

          But, cost recovery spending not only produces oil, but also produces gas. Therefore, cost recovery of USD 15.1 billions is to produce 2.25 million barrels of oil equivalent. 

 Business News - April 9, 2012