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This paper aims to explain the normative rules relating to cost recovery as a basis for profit sharing between the government and the contractors in oil and gas agreements, and the implementation of those agreements. As the exploration and exploitation of oil and gas is a strategic industry for Indonesia, wherein oil and gas industry contributes 30% of the Indonesian state budget. In the management of national oil and gas industry, foreign investors are often involved with Production Sharing Contract. This Production Sharing Contract between the government and investors usually done after cost recovery reduction was made. With a normative juridical and conceptual approach, show there is existence of inconsistency in the implementation of cost recovery in Production Sharing Contract (PSC) of oil and gas procurement, particularly regarding the components that should exist in cost recovery contract of oil and gas cooperation

The Effect of Cost Recovery Mechanism in Production Sharing Contract (PSC) in Oil and Gas Industry in Indonesia