F

oreign oil and gas contractors irked by Bank Indonesia’s (BI) decision requiring them to deposit their
dollars in domestic banks are not ruling out seeking international arbitration.

Officials with US-based energy giant Chevron’s local subsidiary, Chevron Pacific Indonesia left the door open for arbitration, claiming that BI’s regulation would violate its production sharing contracts (PSCs) with the government.

“We are concerned with the [BI regulations] that have conflicted with the spirit of the PSCs, as well as its impact on our investment risk,” Chevron Indonesia’s vice president for government policy and public affairs Yanto Sianipar said on Wednesday.

Yanto said the firm would not reject arbitration, claiming that the company was seeking a “win-win solution”.

Chevron is currently the largest crude oil producer in Indonesia.

The firm, which operates large oil fields, such as the one in Duri, Riau, produces more than 300,000 barrels per day (bpd) of oil, or almost 40 percent of the nation’s total daily oil production.

Bank Indonesia (BI) issued Central Bank Regulation (PBI) No. 13 in 2011, requiring all companies to keep their export earnings in local banks to provide an ample supply of dollars to protect the local currency.

The central bank issued another regulation in October to include oil and gas contractors in the scheme.

The regulation set June 30 as a deadline for all oil and gas contractors to start depositing their dollars in domestic banks.

Recently, the customs office, at the request of the central bank, temporarily suspended export permits for several companies for failure to comply with the regulation.

Total E&P Indonesie president director Elisabeth Proust previously said in Jakarta that the France-based oil and gas firm would not implement the central bank regulation.

“For the time being, we cannot implement the regulations of the Bank Indonesia and we have no plans to do so,” Proust said, claiming that current contracts and the firm’s management made it “very difficult” to comply with the regulations.

Proust, who is also the former chairperson of the Indonesia Petroleum Association (IPA), said that the firm had been depositing around US$2.5 billion a per year in domestic banks.

Total is the largest gas producer in the nation. Its concessions include the gas-rich Mahakam block in East Kalimantan.

Meanwhile, the vice president for public and government affairs of US-based ExxonMobil Indonesia, Erwin Maryoto, said that the firm would continue to discuss implementing the rule with officials, although he too declined to rule out seeking arbitration.

ExxonMobil currently operates the Cepu block in East Java, which is expected to generate an additional 165,000 bpd for Indonesia by the end of 2014.

Contacted separately, BI spokesperson Difi Johansyah declined to comment on the probability that concession holders would seek international arbitration.

Difi, however, said that the central bank would still push to impose the June deadline on all firms, including oil and gas contractors, to comply with the law, claiming that “not a single article of the government’s PSCs forbade the central bank from regulating the record-keeping of dollar-based export proceeds”.

Other contractors have complied with the regulations, including Chinese oil and gas company PetroChina, which has deposited its dollars at the Jakarta branch of JP Morgan; Australian Santos, which has deposited its dollars at the Australia and New Zealand Banking Group or ANZ; China-based CNOOC, which has deposited its dollars with the Bank of China; and US-based ConocoPhillips, which has deposited its dollars with the Bank of America.

Separately, Akhmad Syakhroza, the finance control deputy of upstream oil and gas special regulatory special force SKKMigas, said that his organization was also currently seeking an amicable solution to the dispute.