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sharing in governance of extractive industries

Lifting, Cost Recovery and Performance of Oil and Gas Non-Tax Revenue in Indonesia

In the past year, the public debate in the oil sector in Indonesia revolves around the gross split scheme, which is meant to replace the production sharing contract (PSC) scheme. The urgency to adopt gross split is mainly grounded on the issue related to the cost recovery which has been unresolved for years. Publish What You Pay (PWYP) Indonesia highlights several issue around cost recovery and lifting also its correlation with the performance of oil and gas non-tax revenue in Indonesia. However, this does not necessarily support the gross split scheme. Instead, it provides the critical issue of the governance of oil and gas non-tax revenue in Indonesia.

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Performance of oil and gas, especially non-tax revenue from upstream sector showed a decreasing trend in the last 7 years (2010-2016), both in nominal and its contribution to the overall non-tax revenue (PNBP) and state revenue in state budget. Based on PWYP Indonesia’s analysis on Financial Report of Central Government (LKPP) from 2010 to 2016, there are a yearly decreasing trend of non-tax revenue from oil and gas, especially in 2015-2016, though there are a small increase between 2010-2014.

The PNBP of Oil and Gas is affected by several factors such as production performance (lifting), fluctuation of crude oil price (especially ICP-Indonesia Crude Price), and value of cost recovery (cost to produce oil and gas that is repaid to contractors). This policy brief specifically elaborate the performance of PNBP of oil and gas and challenges that affect it such as lifting, ICP, and cost recovery; and importance of PNBP of oil and gas to the Local Budget (APBD) and overall state budget (APBN). This brief provides some policy recommendations to improve and increase performance of PNBP of oil and gas in the future.

To access the full version, you may visit the following link:

https://pwyp-indonesia.org/en/401888/policy-brief-liftng-cost-recov...

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