Study of Non Cost Recovery Contract for Oil and Gas

• Main Author: NUGRAHA SAPUTRA (NIM 12202035), AULIA
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/7358
• Institution: Institut Teknologi Bandung

Oil and gas are non renewable natural resources which play important role to Indonesia’s economics. Besides being a main source of devizen for our country, oil and gas are also the major supplier of domestic energy needs and industry material in Indonesia. Thus, oil and gas resource management has to give maximum benefit for Indonesian prosperity. Policy that is made by Indonesian Government is to open investment for private sector, which is known as Contractor. Contractor responsibility to Indonesian Government is arranged in a contract of cooperation. At this time, contract model that is used in Indonesia is a Production Sharing Contract (PSC). One of the components in PSC is cost recovery. Cost recovery is all of expenses that will be paid back by Government after production. The implementation of cost recovery in PSC gets quite sharp criticism from public because cost recovery can potentially lessen the National Income.<p>As an alternative to overcome that problem, this paper proposed a model of Non Cost Recovery PSC, which eliminates cost recovery from PSC contract, and also adjusts profit sharing to make the contract remains attractive for Contractors. Percentage of profit sharing from the model proposed is 53.77% for Government and 43.23% for Contractor. This Non Cost Recovery PSC contract model gives a good improvement on efficiency of petroleum operations, because all of Contractor’s expenses will not be recovered by the Government. If the Contractor can improve their efficiency, the Contractor’s NPV will be higher than when they use the Standard PSC model. Non Cost Recovery PSC model is best used as a contract renewal, because the production infrastructures have become the property of Indonesia, and the Contractor only have to do maintenance for the infrastructures. <br />