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Upstream oil and gas regulator BPMigas said on Thursday that it expected state-owned banks would see bigger gains from transactions by oil and gas companies this year as the regulator required them to bank locally.

Since last April, BPMigas has required all oil and gas producers to use state-owned banks, while exploration companies are required to use domestic commercial banks rather than offshore banks.

Foreign oil and gas companies previously were encouraged to use domestic banks but not required to.

Hardiono, deputy chairman of BPMigas, said state banks could benefit from the expected increase in oil and gas investment this year.

He expected investment in the sector to rise more than 40 percent to $16 billion, up from $11.3 billion last year, as the investment climate has given investors leeway to get more financing.

About $13.6 billion of that investment would go into production activities “that require goods and services procurement,” Hardiono said.

“The rule of thumb is that procurement uses up to 70 percent of the investment. Our aim is that 70 percent of the procurement is to use state-owned banks,” Hardiono said.

This means that $6.677 billion in funds from oil and gas companies would go through state banks this year, up by 58 percent from $4.2 billion last year.

Indra Gunawan, of Bank Indonesia’s directorate of monetary policy research, praised the BPMigas policy, saying it would help reduce the dependency on “hot money” for the banks’ supply of dollars.

“In the end our dollar supply will stabilize and help our exchange rate. BI is very supportive of this policy,” Indra said.

However, local suppliers, which foreign contractors deal with in procurement transactions, said state-owned banks had to improve their capabilities so that the oil dollars could benefit industry suppliers in terms of competitive and sufficient dollar-denominated loans.

“State-owned banks have to be more aggressive, particularly in terms of quick service and competitive interest. Our business is in dollars, so they need to learn fast about this business,” said Eka Taufik Syah Putera, president director of PT Geo Link Nusantara, an oil drilling and supplies company.

Paul Tehusijarana, senior vice president of wholesale product management of PT Bank Mandiri, admitted that the bank enjoyed cheap dollar inflows, as most oil and gas funds were placed in checking accounts, and could gain margins from the exchange rate.

“We also benefit if some of the fund stays, but most of them just pass by,” he said.

“But in terms of credit for the oil and gas sector, we are still in the learning process. We plan to set up a more specialized unit to deal with this business,” Paul said.