February 18, 2013 / 1:46 PM / 5 years ago

Total joins Chevron in complaint over Indonesia earnings rules

* Rupiah’s fall in value makes rules more problematic

* Chevron warned it may cut investment

* Indonesian regulation “very difficult”, says Total

By Fergus Jensen

JAKARTA, Feb 18 (Reuters) - French oil major Total has added its voice to complaints by U.S. leviathan Chevron that Indonesia’s rules for overseas investors are hampering operations in the southeast Asian country.

Indonesia’s central bank brought in rules in 2011 to force exporters to channel earnings through local banks, but the issue has become more sensitive in recent months because of the fall in value of the rupiah and could threaten future investment by the two companies.

“With today’s contracts and way of working, it would be very difficult,” Total’s Indonesia CEO Elizabeth Proust told reporters on Monday, in reference to the Bank Indonesia regulation. “It’s not possible.”

Indonesia, a former OPEC member and now a net oil importer, is trying desperately to boost energy production and encourage investors to put more money into exploration. But it has been widely criticised for confusing and sometimes contradictory regulations that some have warned could end up scaring off foreign investment.

The complaint by Total, the biggest producer of liquefied natural gas (LNG) in Indonesia, follows a warning by Chevron that it could reduce its investment in the country.

Chevron, Indonesia’s biggest oil producer, had told the state oil and gas regulator (SKK Migas) that the central bank rules were among a number of issues threatening its investments in Indonesia. Chevron accounted for 45 percent of Indonesia’s total crude production in 2012.


“We have engaged with Bank Indonesia and the government of Indonesia to clarify its regulations, given (that) they conflict with terms of the Production Sharing Contract (PSC) under which Chevron operates,” the company’s Asia Pacific spokesman Alex Yelland told Reuters in a written statement.

“(The regulation) will increase economic risk to new investments.”

There was no immediate comment from the central bank. Its rules do not state how long funds need to be held in local banks.

The issue of gas production has become politically sensitive, with some politicians arguing that Indonesia should stop gas exports unless its trade partners help it to balance its own needs through alternative energy infrastructure investments.

Total operates the Mahakam block with Japan’s Inpex , but state oil and gas company Pertamina has expressed an interest in the gas field, which was producing 100 million standard cubic feet of gas a day in late 2012.

While Total’s investment plans for 2013 remain intact, Proust said that uncertainties over the company’s Mahakam contract extension could interfere with its business in future.

“For the time being we can still work, but in the coming years it will be more difficult.”

Another oil major, ExxonMobil, also ran into difficulties when the government decided not to renew its local CEO’s work permit, accusing him of being uncooperative and of moving too slowly to ramp up production in the Cepu oil block, Indonesia’s main hope for increased production.

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