* Firms required to channel export revenues via local banks
* Regulator says firms have until June 30 to comply
* Total says 'not possible' under current export
By Fergus Jensen
JAKARTA, Feb 22 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
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 told Reuters on Friday, 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
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
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?"
"TEXAS POKER BLUFF"
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 PLC 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
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 it's 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