JAKARTA, Nov 20, 2008 (AFP) - Oil and gas companies doing business in Indonesia must use local banks for their transactions from December in a bid to help the struggling rupiah, an official said Thursday.

"The benefit is that our balance of payments will improve," Raden Priyono, chairman of upstream oil and gas regulating body BP Migas, told Dow Jones Newswires.

Priyono said the new policy could bring in around 11 billion dollars to the country next year.

A dearth of the US currency has contributed to the gumming up of the dollar lending markets and to downward pressure on the rupiah, which slumped to 10-year lows Thursday of 12,425 against the greenback.

The last time rupiah reached this level was in September 1998. The currency is among the hardest hit in the region beside the South Korean won.

Indonesia recorded a 1.5-billion-dollar current account deficit in the second quarter, its first since the third quarter of 2005.

Analysts said the deficit had contributed to the rupiah's 23-percent slide against the dollar this year.

But Indonesian Petroleum Association executive Suyitno Patmokusumo said the domestic operations of most oil and gas companies were already banking with local institutions.

The companies will seek clarification from BP Migas on the directive, he said.

Traders said falling commodity prices, lower demand for exports, capital flight and year-end demand for the greenback to pay offshore debts had kept the rupiah on its knees.

"We have no choice. A big reason of the weakening rupiah is the drop in income from exports. Commodity prices, such as for palm oil, have dropped tremendously," David Chang from UOB Kay Hian told AFP.