Oil, gas contractors should keep operating funds at local banks

Beginning next month, both local and foreign oil and gas production sharing contractors (PSCs) will be obliged to keep their operating funds at local banks. Otherwise, they will be unable to claim their cost recovery funds.

The head of oil and gas upstream regulatory body BPMIGAS, R. Priyono said on Wednesday the measure would be needed to help strengthen the country?s foreign exchange reserves which have been in jeopardy in recent weeks due to the surge in the demand for the U.S. dollar.

He said at present many oil and gas contractors conducted their transactions through overseas banks including those for the payment of goods and services for their operations.

?Especially for goods and services for their operation and supporting activities, foreign oil and gas contractors mostly carry out transactions through overseas banks,? he said. ?They use local banks only when they receive payment for cost recovery funds,? he said.

Oil and gas contractors operate under a production sharing contract (PSC.) Under the PSC scheme, contractors are allowed to ask for reimbursement for their expenditures for operations and supporting activities from the government. Such a claim is more popularly called cost recovery funds.

With the new policy, Priyono said that the government would pay compensation for the recovery funds only if they show evidences that the payments for the goods and service they used were carried out through local banks. (*)