Export revenues: Oil majors urged to follow bank rules

Updated 22 February 2013

Export revenues: Oil majors urged to follow bank rules

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.”

Iran sanctions shadow falls on smaller German banks

Updated 27 May 2018

Iran sanctions shadow falls on smaller German banks

  • Some German companies plan to press on with Iran dealings
  • German exports to Iran rose 15.5 percent last year

Germany’s biggest lenders have shied away from business with Iran after past penalties for breaching US sanctions, but smaller banks have leapt on opportunities afforded by the nuclear deal rejected by Donald Trump.

There are just months to go until a November deadline issued by Washington after the US president abandoned a hard-fought agreement that loosened business restrictions on the Islamic Republic in exchange for Tehran giving up its pursuit of nuclear weapons.

But some firms plan to press on in their dealings with Iran despite the looming threat of penalties.

“We will continue to serve our clients,” for now, said Patrizia Melfi, a director at the “international competence center” (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.

The center, which supports companies operating in sensitive markets like Iran or Sudan, has seen demand “rising sharply in the last few years, from firms listed on the Dax (Germany’s index of blue-chip firms), from all over Germany and from Switzerland,” she added.

German exports to Iran have grown since the nuclear deal was signed in 2015, adding 15.5 percent last year to reach almost €2.6 billion ($3.0 billion) after 22-percent growth in 2016.

Such figures remain vanishingly small compared with Germany’s €111.5 billion in exports to the US — its top customer.

Nevertheless, the KCI will “wait and see what the sanctions look like” before turning away from Iran, Melfi said.

Already, firms dealing with Tehran must take great care not to fall foul of US restrictions.

Transactions are carried out in euros, and the KCI does not deal with businesses that have American citizens or green card resident holders on their boards.

What’s more, products sold to Iran cannot contain more than 10 percent of parts manufactured in the US.

One of the most important inputs for the business is “courage among our managers” given the high risks involved, Melfi said.

Germany’s two biggest banks, Deutsche Bank and Commerzbank, avoid Iran completely after being slapped with harsh fines in 2015 over their dealings there, with Deutsche alone paying $258 million in penalties.

DZ Bank, which operates as a central bank for more than 1,000 local co-op lenders, is withdrawing completely from payment services there, a spokesman told AFP.
That left KCI to seek out the German branch of Iranian state-owned bank Melli in Hamburg.

Even that linkage could break if Iran’s biggest business bank appears on a US list of barred businesses as it has before.

Meanwhile, among Germany’s roughly 390 Sparkasse savings banks, business with the regime is mostly limited to producing documents linked to export contracts.
“We will be looking even more closely at those” in the future, a person familiar with the trade told AFP.

Elsewhere in the German economy, the European-Iranian Trade Bank (EIH) founded in 1971 is another conduit to Tehran.

Also based in Hamburg, it for now remains “fully available to you with our products and services,” the bank assures clients on its website, although “business policy decisions by European banks may result in short term or medium term restrictions on payments.”

Neither does the Bundesbank (German central bank) believe that much has so far changed for business with Iran.

“Only the European Union’s sanctions regime will be decisive,” if and when it is changed, the institution told AFP.

Any payment involving an Iranian party would have to be approved by the Bundesbank if things return to their pre-January 2016 state.

German banking lobby group Kreditwirtschaft has called on Berlin and other EU nations to clarify their stance — and to make sure banks and their clients are “effectively protected against possible American sanctions.”

KCI’s Melfi said time is running out for EU governments to act.

“Many firms just want to stop anything with Iran, since they can’t calculate the risk of staying,” she noted.

On Friday for the first time since the Iran nuclear deal came into force in 2015, China, Russia, France, Britain and Germany gathered in Vienna — at Iran’s request — without the US, to discuss how to save the agreement.