JAKARTA: Indonesian Petroleum Association (IPA) will continue to strive to continue dialogue with the government for the revision of Government Regulation No. 79/2010 on Cost Recovery.
Vice President of IPA Sammy Hamzah said the organization that comprises oil and gas contractors will continue to strive for discussion with the Government despite the denial of its judicial review by the Supreme Court.
"We will see the official judgment from the Supreme Court. When rejected, we would seek another path. Contractor could also take individual attempt," he said yesterday.
IPA filed a judicial review on GR 79/2010 on Cost Recovery on June 16, 2011 to the Supreme Court. GR 79/2010 regulates Cost Recovery and Income Tax in the Upstream Business Sector.
On October 18, 2011, IPA petition for judicial review was denied by the Supreme Court. However the basis of the denial is not yet known as the judgment is not expected for another one to three months.
The organization, he added, of course very disappointed with the decision. "We will continue to strive for dialogue with the government to ensure that the implementation of GR 79 will honor the sanctity of existing contracts. We do not know the basis of the denial by the Supreme Court."
Based on the information from the IPA Attorney Todung Mulya Lubis, explained Sammy, the Ministry of Energy and Mineral Resources and the Ministry of Finance did not even give their position related to the Judicial review to the Supreme Court. However, the Supreme Court has decided to reject the request.
"Usually the government sends their answers first, then the supreme court determine their position. It's very unique. There may be problems with the administration, let see the official answer from the Supreme Court, "he said.
IPA believes that GR 79 on cost recovery could potentially change principles that exist in the existing production sharing contract (PSC), which is clearly protected by the Indonesian Civil Code. This will create uncertainty to the investors.
The GR could enable the government to change the split and cost recovery limitation from time to time after the PSC being signed.
According to Sammy, GR 79 can change the economics of a project because the government can determine which costs incurred by the oil and gas contractor that can be reimbursed to the government.