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Upstream oil and gas regulator BPMigas has set up a team to
review and monitor the so-called cost recovery for oil and gas
exploration activities system, which lacks transparency and
accountability, an official said Monday.
Under the system, the government refunds oil and gas operators for
exploration activities once cited blocks have begun production, as part
of incentives for developing the country's oil and gas sector.
BPMigas chairman R. Priyono said Monday the team would be responsible
for setting clearer and more transparent guidelines and directives on
what kind of costs could be recovered, to help avoid state losses.
Priyono said the misuse of the scheme was in part due to a lack of
supervision, which had enabled operators to make claims on unrelated
costs.
Proyono said the team would tighten the system's monitoring, which has
constantly drawn criticisms from analysts owing to the scheme's failure
to translate into higher oil production.
BPMigas' latest report shows the government paid some US$8.33 billion
to oil and gas producers in 2007 in recovery costs, up by 6.4 percent
from a year earlier.
In 2006 and 2005, the government paid $7.8 billion and $7.3 billion,
respectively.
Of the 2007 payments, $4.8 billion refunded activities relating to oil
production and the remaining $3.5 billion for gas sector activities.
The country's oil production has steadily declined over the last five
years at the rate of 5.3 percent.
"With the new system, we have to make sure an increase in the cost
recovery be accompanied by an increase in the country's oil and gas
production," Priyono said.
"By then we can control the cost as expenses outside of exploration
activities would not be recovered," he said.
BPMigas targets the country to produce 977,000 barrels of oil per day
this year, a 2.8 percent increase compared to the production volume in
2007.
He also said to expedite the exploration process, he would review the
prolonged procurement system, which has delayed operators from carrying
out operations.
"I have requested for a privilege to apply a different tendering system
to speed up the procurement system," he said, without elaborating.
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