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Indonesia:

Indonesia Oil & Gas Regulation – Currency Exchange Restrictions

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The Indonesian Currency Law and Bank Indonesia (“BI”)
Regulation No. 17/3/PBI/2015 regarding the Mandatory Use of Rupiah
restrict most transactions within Indonesian territory from being
carried out using foreign currency. Core upstream activities in
Indonesia are exempted from this requirement for a certain period
of time, such as expenditures in relation to the first three years
of the exploration period (the “Firm Commitment” period),
over/under lifting, and domestic oil and gas sales transactions by
upstream players, which are exempted for 10 years as of February
23, 2016.

Minister of Trade (“MOT”) Regulation No. 94 of 2018,
as amended by MOT Regulation No. 102 of 2018 regarding Provisions
on the Use of a Letter of Credit for the Export of Certain Goods,
exempts the export of oil and gas products to be paid through a
Letter of Credit (“L/C”). Payment using an L/C was
previously required under MOT Regulation No. 94 of 2018.

In January 2019, the Government issued Government Regulation No.
1 of 2019 regarding Export Proceeds from the Exploitation,
Management, and/or Processing of Natural Resources (“GR
1/2019”). This regulation requires foreign exchange proceeds
deriving from the export of natural resources, including oil and
gas, to be placed in the Indonesian financial system through a
special account in an Indonesian foreign exchange bank, which must
be licensed by the Financial Services Authority (Otoritas Jasa
Keuangan
or “OJK”). The Indonesian branch offices of
overseas banks do not qualify as Indonesian foreign exchange
banks.

The placement of the export proceeds in a special account must
be carried out no later than the end of the third month after the
Registration of Export Declaration (Pemberitahuan Ekspor
Barang
). The funds in the special account can only be utilised
by the PSC Contractor for certain payments, such as customs, loans,
imports, profits/dividends, and other purposes permitted by the
Indonesian Investment Law (Law No. 25 of 2007 regarding Capital
Investment). Such special accounts are eligible for a tax incentive
in the form of the reduction of deposits tax (ranging from 0-10%),
as opposed to the normal deposit tax of 20%.

To implement GR 1/2019, BI issued BI Regulation No.
21/3/PBI/2019 regarding Foreign Exchange Receipts from Exports from
the Exploration, Management, and/or Processing of Natural
Resources, as amended by BI Regulation No. 21/14/PBI/2019

This is an excerpt from The International Comparative Legal
Guide to: Oil & Gas Regulation 2021. You can find the full chapter
here
.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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