Ika Krismantari, Jakarta – The Development Finance Comptroller (BPKP) has found indications of irregularities worth about Rp 18 trillion (about US$2 billion) in cost-recovery claims submitted by oil and gas firms between 2002 and 2005.
BPKP director Didi Widayadi said Tuesday in Jakarta that the findings were based on agency audits on 43 oil and gas companies out of the total of 152 companies earmarked for audits by the Upstream Oil and Gas Executive Agency (BP Migas).
Oil and gas companies that operate under production sharing contracts (PSC) are allowed to claim back all of the production costs that arose in the extraction of crude oil and gas.
Total recovery costs are then deducted from the total sales of oil or gas by the PSC operators, before proceeds are shared out with the government.
Under the PSC scheme, operators receive 15 percent of net oil production and about 65 percent of net gas production, while the remainder goes to the government.
Didi said that of the Rp 18 trillion-worth of suspected irregularities, about Rp 8.695 trillion had, as of December 2006, been checked with the oil and gas producers concerned, and most of the money had been returned to the government.
"The remaining Rp 9.37 trillion hasn't been checked yet," Didi said, while refusing to disclose the names of the companies involved.
Most of the question marks, Didi said, arose in respect of claims for corporate taxes, interest payments, dividends and royalties (in all, totaling Rp 6.2 trillion), investment credits (Rp 2.4 trillion), and head office additional expenditure (Rp 1.6 trillion).
He admitted that the main reason the companies had such claims was because these kinds of expenditure were not regulated specifically under the current standard-form PSC.
In response, Energy and Mineral Resources Minister Purnomo Yusgiantoro, who was also present at the announcement of the BPKP's report, said that auditors must be aware of the dynamic changes taking place in the oil and gas industry, while the rules on cost recovery still adhered to the old system.
"I would urge the BPKP to provide suggestions to us as to whether the details of cost recovery would be better dealt with solely in the contracts between the government and the contractors, or whether the matter should be dealt with specifically in the legislation," Purnomo said.
Purnomo also urged people not to immediately jump to the conclusion that the companies had been guilty of criminal acts.
"We will hold a special meeting to scrutinize the findings with the government," Didi said. "However, if there are irregularities involving fake documents or mark-ups, we will not hesitant to report these to the authorities."
He suggested that the government should formulate a new scheme that would encourage operators in a particular area to share the same facilities in order to reduce cost recovery.
Indonesia has one of the highest costs of oil production in the world at $9.03 per barrel, while in Malaysia the equivalent figure is only $3.70 per barrel, and between $4 and $6 per barrel in other countries, Didi said.