March 4, 2013 / 11:55 AM / 5 years ago

UPDATE 1-Indonesia oil/gas contractors agree to export proceeds

JAKARTA, March 4 (Reuters) - Indonesia’s oil and gas contractors have all agreed to comply with a controversial rule that forces them to put their exports proceeds through a local bank rather than directly offshore, the central bank said on Monday.

The agreement follows protests by at least two energy contractors and a warning from the government that their shipments could be blocked if they refused to abide by the rule, being implemented this year.

“All the oil and gas contractors agreed to comply with BI regulations on export proceeds and use local banking services,” central bank spokesman Difi Johansyah said in a text message to reporters.

Southeast Asia’s largest economy is pushing for massive expansion of its energy sector to meet rapidly expanding domestic demand.

Indonesia’s top oil producer Chevron Corp has warned that investment will decline if confusing and sometimes overlapping regulations are not resolved, including the central bank regulation.

Another leading contractor, Total SA, has said it would be impossible to comply.

Neither company was immediately available to comment on the central bank statement.

The issue has been seen as adding to the complexity of investing in Indonesia and which a number of companies have warned could start to deter foreign investors. For the moment, however, they are pouring record amounts into the world’s fourth most populous nation and one of its fastest growing economies.

Major foreign energy firms argue that their production sharing contracts with the government allow them to decide how the earnings are channelled. Some are paid offshore directly.

Under production sharing agreements, 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.

The central bank spokesman said that in 2012, the share of reported export proceeds in local foreign exchange banks was $128.5 billion, or 82.8 percent of total exports.

The central bank is using the rule as part of measures to monitor the amount of foreign currency in the country. While it appears willing to let the rupiah continue to weaken, it has made clear that it will try to prevent any rapid movements in the currency.

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