Local banks asked to finance oil and gas projects
Tuesday, June 2 2009 - 02:43 AM WIB
BPMIGAS' head R. Priyono said in Jakarta on Monday that the new policy aimed to provide an opportunity for the local banks to benefit from the oil and gas industry.
?The local content will be expanded not only into activities related to works for supporting facilities but also the use of funds from local banks,? he said after the signing of agreements on the placement of rehabilitation funds of oil and gas companies ConocoPhillips, PT Pertamina and PT Medco Energi Internsional in state banks including Bank Mandiri, Bank Negara Indonesia (BNI) and Medco.
Priyono said that the agency would encourage more oil and gas companies, which at present mostly put their funds at overseas banks, to place their restoration and rehabilitation funds in local banks.
He admitted that compared to other industries, the oil and gas sector, especially exploration activities, pose higher risk for the banking industry. ?In order to reduce the risk, we will encourage the local banks to finance production activities which are relatively less risky,? he added
Under contracts, the country's oil and gas producers are obliged to use the products or services provided by local companies as part of the efforts to allow local firms to benefit from the industry which is dominated by foreign firms.
The oil and gas firms however usually use funds from foreign banks to finance their operations and parked their revenue overseas. Last year, the Ministry of Energy and Mineral Resources called on the firms to place thier revenue in local banks as a requirement for them to get cost recovery.
Priyono said that investment in the oil and gas upstream activities is estimated about US$12 billion this year. The amount of cost recovery that had to be paid back by the government to oil and gas contractors totaled about $9 billion, last year. (*)