Final Draft Government Regulation on Cost Recovery for Oil and Gas Contractors Removes Reimbursement Limit

The government has finalized a Draft Government Regulation on Cost Recovery to expand and better define the program whereby the Indonesian state refunds certain oil-gas exploration and extraction-related expenditures. Among other things, the Draft removes the ceiling on how much may be reimbursed.

Evita Herawati Legowo, the Director General of Oil and Gas for the Ministry of Energy and Mineral Resources, told the House of Representatives (DPR) on Monday (26/4) that the cap on cost recovery will be abolished.

That incentive under the Draft, said Ms. Legowo, is in line with Law No. 47 of 2009 on State Revenues and Expenditure Budget and Law No. 36 of 2008 on the Fourth Amendment to Law No. 7 of 1983 on Income Tax, and was approved by the Coordinating Minister for the Economy, Minister of Finance, and Minister of Energy and Mineral Resources.

The ‘cap’ for this year’s cost recovery is IDR 12 billion. This amount, however, is only for temporary reference pending the conclusion of the Government Regulation on Cost Recovery.

Hatta Rajasa, the Coordinating Minister for the Economy, previously indicated to TempoInteraktif (6/4) that the final Government Regulation would be issued before the end of April. 

Ms. Legowo told the DPR that the final Draft was submitted to the State Secretariat on this weekend, meaning it is finalized and simply waiting for the President’s signature.

This Indonesian Legal Brief is based upon research and interview by the hukumonline team.