Following a requirement to use domestic banks for their banking transactions, oil and gas contractors have so far made US$1.8 billion worth of transaction commitments through local banks, or 64.29 percent of the companies’ total expenses in the first half of the year.
As of June, oil and gas contractors operating in Indonesia have made a total of $2.8 billion worth of banking transactions, of which $1.8 billion was made using domestic banks, upstream oil and gas regulator BPMigas’s general deputy Hardiono told reporters Thursday.
“BPMigas officially required that all oil and gas contractors use local banks in April this year. Between April and June only, they totalled $1.8 billion worth of transactions through local banks,” Hardiono said.
Local banks used by oil and gas contractors included: Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, and Bank Syariah Mandiri, he added.
Hardiono believed the amount of transactions the contractors made using domestic banks would significantly increase in the second semester.
“Oil and gas contractors normally make most of their purchases in the third quarter,” he said.
Oil and gas contractors plan to spend a total of $15 billion this year for their exploration and production activities.
“I am confident that about $11 billion will be spent using domestic bank services,” Hardiono said.
BPMigas demanded oil and gas contractors use local bank services to help boost the liquidity of the country’s banking sector.
“As oil and gas companies use our banks for large financial transactions, it will boost our domestic banks’ liquidity.
“It [the policy] will have a positive effect on our banks’ balance of payments,” BPMigas’s chairman R. Priyono said in November last year.
Hardiono said the requirement to use domestic banks only applied to oil and gas companies in the production stage.
He added BPMigas would punish contractors working in the oil and gas production stage if they did not use local banks for their transactional needs. “We will not pay their cost recovery claims,” he said.
There are about 270 oil and gas contractors operating in Indonesia and 60 of them are in the production stage. Aside from ordering them to use local banks, BPMigas has also obliged them to open joint bank accounts with BPMigas to place their abandonment and site restoration budgets.
However, this obligation only applies to contracts signed from 1995 onwards, after Indonesia ratified the UN Convention on the Law of the Sea (UNCLOS).