A proposed regulation requiring both local and foreign oil and gas companies to use domestic commercial banks for deposits and transactions needs to be further studied before it can be introduced, industry players said on Thursday.
BPMigas, the country’s upstream oil and gas regulator, announced the plan on Wednesday as a mechanism to increase liquidity among local banks and to stop oil and gas companies from placing their US dollars in offshore accounts, which has been the standard since 1966.
Raden Priyono, head of BPMigas, said on Wednesday that companies would be free to use either locally owned or foreign-owned banks operating in Indonesia.
There has, however, been criticism of the plan, which is due to come into effect next month.
“The question is whether our domestic banks will be ready to fund oil and gas investments should the companies deposit their money with them,” said Lukman Machfoed, a board member at PT Medco Energi Internasional Tbk. Medco is Indonesia’s biggest publicly-traded oil and gas firm.
A source at a foreign energy company operating in Indonesia, who declined to be identified, said BPMigas did not need to micromanage the sector by telling oil and gas companies where they should bank.
“Oil companies have their own reasons for deciding which bank to use,” he said, adding that “local banks may not be as efficient as the overseas banks.” He said the regulator had more important things to worry about, including increasing foreign investment in the sector.
Deva Rachman, a spokeswoman for the Indonesian arm of US energy giant ExxonMobil, said the proposal would need to be reviewed by the Indonesian Petroleum Association. She pointed out that ExxonMobil already used local banks for some transactions.
However, support was also expressed for the proposal. Fauzi Ikhsan, a Jakarta-based economist at Standard Chartered Bank, said the BPMigas plan was useful as it could increase the supply of US dollars in Indonesia while simultaneously strengthening the rupiah’s value.
“To switch their banking transactions from overseas to Indonesia would not be difficult,” he said. “It’s just an administrative issue.
”State oil and gas company PT Pertamina’s vice president for communications, Anang Rizkani Noor, said that Pertamina had no problem with the plan. “It’s what we’ve been doing all along,” he said.
In a telephone interview, Widjajono Partowidagdo, a newly elected member of the National Energy Council, said: “We desperately need dollars. It would be great if the oil and gas companies could help the government with this new mechanism.” He added that the proposal was one way of preventing dollars from leaving the country, which should in turn help the rupiah.
Bloomberg reported on Thursday that the rupiah was trading at 12,400 per dollar as of 6 p.m. in Jakarta after softening at one stage to 12,350 on Wednesday, its lowest level since September 1998.
“BPMigas has its own reasons for proposing the plan. It is designed to mitigate the current adverse
economic impacts on this country,” said Tunggul Sirait, an expert adviser to the DPR’s energy and environment commission.