Cost Control and Cost Reduction in The Upstream PSC Business Activity

Focus of Cost Control is to make sure and see if the plan-program is done accordingly or if it has difference, then we have to find out why? Cost reduction may be needed when actual cost is under the budget soon after closely analyzing and matching: the number-volume-quantity; timing phase; and dollars different? Internal Control implementation must be from of “the top management”, the President & CEO of the company shall be the first person who shall declare the needs of “good governance” solution. Whenever Top Management clearly instructed that the company’s operations and activities must reflect business performance, then all executive management underneath will case down to lower level of organization of the company for proper implementation.

The Control is intended to assess and test the performance of the company at all level transactions in each section of the functional organization. Upon the assessment and testing then management will take action to cut the budget, which means cost reduction opportunity, revision of the budget means is to appreciate current performance and have corrected for next periods operations. The weakest Control, as an example was experienced by Enron Company in USA triggered the government agencies (Committee Of Sponsoring Organizations – COSO), SEC to a recommendation that Internal control must be the responsibility of the top management focus on: Control environment; Risk Assessment, Control activities, Monitoring, and Information-communication phases, specifically on the information and communication must be “top-down and bottom up” of all business activities will eliminate such Enron’s case.

This training course will provide information, and tools to the participants the urgency of good control-internal control has achieved reference that company has run its operations effectively and efficiently in accordance with and in compliance with company policies and procedures, PSC Agreement, BPMIGAS budgeting procedures and financial manual procedures, system operating procedures, Indonesian’s tax laws, and other decrees that may be interrelated to PSC operations.

·         Operating managers

·         Field personnel

·         Project managers

·         Technology managers

·         Budget managers

• PSC Agreement as a legal base of business operations or activities of oil & gas industry
• POD
• WP&B
• AFE
• Participating Interest
• Oil reserves
• Gas reserves

• Exploration Drilling Expenditures
• Development Drilling Expenditures.
• Completion Drilling Expenditures
• Production Costs
• Inventory

• Cost Recovery
• Interchangeable costs between Oil and Gas costs
• Interchangeable between administrative and capital investment
• Sharing costs and revenues between government and PSC company
• Reflection of good cost Control will reduce cost
• Reflection of good control to tax liability: Corporate Income Tax and withholding taxes
• Closing Summary