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Indonesia oil and gas industry exempted from L/C requirement

JAKARTA ( – The Energy and Mineral Resources Minister Sudirman Said assures that the oil and gas industry will be exempted from requiring opening a letter of credit (L/C) in domestic bank when exporting oil and gas in a bid to maintain conducive business climate in the oil and gas industry.

The ministry targets to issue the ruling by October. The Special Task Force for Upstream Oil and Gas Business (SKK Migas) has recently said the mandatory use of L/C in exporting oil and gas by oil and gas companies is difficult to be implemented as the oil and gas sales have been based on long-term contracts. Such change means they have to amend their contract.

“Oil and gas exports are expected to operate smoothly with the exemption of letters of credit for the sector,” the minister said.

The minister also said Indonesia wants the 200,000 barrels per day of oil exported by private producers to be processed in domestic refineries.

At present, out of 400,000 barrels of oil that are the production share of private oil and gas contractors are exported as domestic refineries are unable to process those crude oil. The government wants half of this can be processed in domestic refineries, meaning that Pertamina’s refineries need to revamp.

On April 1, 2015, the Trade Ministry issued regulations that mandated all exporters to use L/C in exporting their goods. The move is aimed to boost dollar supply in domestic banks.

Observers said that the decision to exempt oil and gas reporters from the mandatory use of letters of credits is a correct one. Without the L/C, oil and gas exports have been well monitored. (*)

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