Six oil and gas firms to use local banks, more to follow, BP Migas says

The Jakarta Post, Jakarta | Fri, 12/26/2008 11:20 AM  

Six oil and gas operators have opened six joint bank accounts at domestic banks to deposit their so-called abandonment and site restoration budgets totaling US$60 million. 

The nation's regulator for oil and gas upstream industry also has access to the account. 

The six contractors are: PT Pertamina EP, Medco Tarakan, Medco Rimau, Kalrez Petroleum, Kangean Energy Indonesia Ltd, and Kondur Petroleum SA, said BPMigas' chairman R. Priyono Wednesday. 

The abandonment and site restoration budget is the amount of funds oil and gas contractors must set aside to uproot their production facilities and restore environmental surroundings after they complete their activities. 

Priyono said the contractors used to place the money in individual accounts, which could be in foreign banks. Now, BPMigas has ordered them to put the money in domestic banks, whose accounts will be jointly held with BPMigas. 

"This joint account mechanism is a sort of control mechanism. By using this joint account, contractors can only withdraw the money with the approval from BPMigas," Priyono said during the signing ceremony with the constructors. 

On Wednesday, Kalrez Petroleum, Kangean Energy Indonesia, Medco Tarakan and Medco Rimau opened joint accounts with BPMigas at BNI, while PT Pertamina EP and Kondur Petroleum opened an account at BRI. 

He said BPMigas ordered contractors to place the money in local banks to help stabilize the balance of payments of the country's domestic banks. 

This regulation forms part of a package of new regulations issued by BPMigas that basically require oil and gas operators to use domestic banks to deposit their funds for their entire business operations within the country. 

In the past, many contractors placed their operational funds in overseas banks, particularly in countries where their headquarters are located. For next year, oil and gas contractors here planned to spend up to $13 billion for their operations. 

However, the joint account mechanism only applies to abandonment and site restoration budgets. 

"Hopefully, these joint accounts will make the management of the abandonment and site restoration more efficient," BNI president director Gatot M Suwondo said. 

Currently, there are 64 contractors operating at the production stage, according to BPMigas data. However, BPMigas's general deputy Hardiono said not all oil and gas contractors would be implicated by the regulation. 

The obligation to set aside the abandonment and site restoration budget only applies to contracts signed after 1994, after Indonesia ratified the UN Convention on Law of the Sea (UNCLOS). 

BPMigas did not set a deadline for oil and gas contractors to move their budgets into joint accounts. 

However, Hardiono said the process might take some time because contractors need to build their trust in domestic banks. -- Alfian