Export revenues: Oil majors urged to follow bank rules



REUTERS

Published — Saturday 23 February 2013

Last update 22 February 2013 11:28 pm

| نسخة PDF Print News | A A

LATEST STORIES IN ECONOMY

JAKARTA: Indonesia told oil and gas contractors they will have to stop shipments if they do not follow central bank rules to channel export revenues through local banks, despite earlier protests from Chevron and Total.
Southeast Asia’s largest economy is pushing for massive expansion of its energy sector to meet rapidly rising domestic demand, but its top oil producer Chevron has warned it could reduce its investment if the bank regulation and other issues are not resolved.
“If (oil and gas contractors) keep refusing, they will not be allowed to export,” oil and gas regulator (SKKMigas) finance director Akhmad Syakhroza said, referring to the Bank Indonesia regulation.
He said firms had until June 30 to comply with the rules, a measure Indonesia wants to better gauge currency flows at a time of heavy downward pressure on the rupiah.
Chevron was not immediately available for comment on the latest warning.
In a written statement, Total said under its production sharing contract it had the legal right to “freely lift and dispose of its entitlement and retain its export proceeds abroad.”
The subject of natural gas exports is politically charged in Indonesia, where many perceive exports as removing much-needed gas from the domestic market.
The warning underscores tensions between oil majors and the former OPEC member, as pressure mounts over how best to manage its resources in the lead up to presidential elections in 2014.
It also throws into question earlier assurances from the regulator that Indonesia could not afford to cancel gas exports.
“If we breach a contract in the name of nationalism or in the name of ownership it would not be fair. We must adopt a collaborative approach with other countries. I think that is what’s best for Indonesia,” SKKMigas chief Rudi Rubiandini said recently.
Total, banking proceeds from its gas sales via HSBC in New York, said it was “not possible to match the amount of netback to parties, including the contractors, with the amount of gas export proceed mentioned in export documents.”
Syahkroza said all proceeds from the sale of Indonesian natural resources must go through a local bank, regardless of where the transactions took place or what currency they were in.
“If you sell via your seller in the UK, and they give you $ 1 billion, does that money get transported in cash in a container back to Indonesia? No way. It just gets transferred between banks. What’s so difficult about that?“
In 2012, Total was Indonesia’s biggest exporter of natural gas, with production reaching 132,000 boe/day, while Chevron was its biggest producer of crude, accounting for 45 percent of production. The same year, Indonesia’s gross revenue from the oil and gas sector reached approximately $ 61.1 billion, according to data from the regulator.
Under production sharing agreement, oil companies bear all costs until production begins, at which point all their costs are reimbursed by the Indonesian government.
Then the production is divided up 85 percent to the government and 15 percent to the oil firms. For gas the split is usually 70-30, depending on the specific contract.
Several other oil majors operating in Indonesia — ConocoPhillips, BP and CNOOC Ltd. — already complied with the regulation,Syakhroza said.
Japan and South Korea are the top buyers of Indonesian crude and took 77 percent of the country’s natural gas exports in 2010.
Several traders also said the central bank could damage oil and gas investment. One questioned why the rule, introduced in 2011, had not been implemented earlier.
“It would have been reasonable if the rule was implemented right at the start, not when itís introduced halfway,” he said.
“What they do now will affect future production,” a second trader said.
“If the companies cannot get their revenue out, they are not likely to invest more.”
Earlier, Chevron said the regulation added risk to new investment because it “fundamentally changes the fiscal terms of the production sharing contract by impacting the free flow of share cash movement.”
Despite the fears, Indonesia remained an attractive place because of its cost recovery structure, energy investor Baduraman Dorpi Parlindungan told Reuters. “Where else can you get a cost-recovery structure like you do in Indonesia?“
When every oilman knows there is 100 percent uncertainty in the industry, Dorpi said, Chevron was playing “Texas poker bluff.”

What's happening around Saudi Arabia

ALKHOBAR: A power failure at the King Fahd Causeway on Wednesday night resulted in a massive traffic congestion, even as officials failed to explain the cause of the snag, local media reported.A power outage for 74 minutes on the link between the Kin...
JEDDAH: A female Saudi lawyer was able to get a stay order on a ruling by the general court in Jeddah that awarded custody of a two-year-old girl to her father. She successfully argued to get the court order reversed that gave custody back to the mot...
JEDDAH: The Commission for the Promotion of Virtue and the Prevention of Vice (Haia) said that combating harassment cases is part of its responsibility to promote Islamic values and morals in society.“Those harassing women will be brought to book,” s...
RIYADH: A thick layer of sand covered the city’s skyline on Saturday with a heavy blanket of dust caused by strong winds hampering visibility and creating traffic snarls on busy roads.The traffic department advised motorists to drive slowly and exerc...
JEDDAH: More than 26 million Umrah pilgrims and worshippers visited the Grand Mosque during the month of Ramadan and in the first few days after Eid Al-Fitr, thanks to a smooth transport arrangement under the guidance of Makkah Gov. Prince Khaled Al-...
AL-AHSA: An outbreak of lumpy skin disease (LSD) has been discovered in cattle in Al-Ahsa which is an area with many cows. All necessary measures have been taken to protect the livestock, said Mahmoud Al-Shuaibi of the Agriculture Department in Al-Ah...
RIYADH: An architectural masterpiece — the King Abdul Aziz Historical Center (KAHC) — in Riyadh is a huge complex dedicated solely to collecting, preserving, promoting and showcasing the history and heritage of Saudi Arabia. The KAHC is a three milli...
RIYADH: The Saudi Blind Society (Kafif) has made all preparations for the three-day workshop for the blind to be held here next week and attended by delegates from various Asian countries.Mohammed bin Suleiman Al-Shuwaiman, Kafif director general, th...
JEDDAH: The number of Saudis who took early retirement schemes last year stood at 38,647, the General Organization for Social Insurance (GOSI) has said. The Eastern Provinces got the lion's share of disbursements for retirees, amounting to SR3.8 bill...
JEDDAH: Meat and poultry topped the list of food items seized by the Saudi Food and Drug Authority (SFDA) at the border crossings for violating the health standards in the last two months.Approximately 267,137 kg of unfit meat and poultry were reject...
JEDDAH: Many sponsors and workers of small companies are struggling to get a comparatively cheaper health cover for renewal of iqama (residential permit) as the insurance companies have stopped issuing the same.The passport department has made it com...
RIYADH: Police have detained 11 Indonesian nationals, who arrived in the holy city of Makkah for Umrah a few days back.The Indonesian Religious Affairs Ministry is working closely with the Indonesian Consulate in Jeddah to assist the group of citizen...
JEDDAH: The National Committee for Bakeries at the Council of Saudi Chambers (CSC) said this Haj season would see no shortage in supplies of bakery items.The committee said there was need to increase operational labor by about 20 percent.It confirmed...
JEDDAH: Maj. Gen. Ibrahim Al Hamzi, director general of prisons, has sacked Brig. Ahmad Al Shahrani, director of Jeddah prisons, after the case of a video clip about prisoners taking heroin went viral, according to local media.Quoting informed source...
JEDDAH: Makkah Gov. Prince Khaled Al-Faisal met with leaders of security forces in the region on Thursday to discuss future plans and mechanisms to limit infiltrators from entering the holy sites via land passageways during Haj.During the meeting, he...