Indonesian Oil & Gas Regulation – Development of Oil and Natural Gas

Indonesia's oil and gas sector is gove­­rned by Law No. 22 of 2001 regarding Oil and Natural Gas (November 22, 2001), as amended by Law No. 11 of 2020 regarding Job Creation (November 2, 2020) ("Job Creation Law") (collectively, the "Oil and Gas Law"). The State retains mineral rights throughout Indonesian territory and the Government holds the mining authority.

The oil and gas sector comprises upstream and downstream activities, which are regulated and organised separately. Upstream activities include exploration and exploitation and are regulated under Government Regulation No. 35 of 2004 regarding Upstream Oil and Natural Gas Business Activities, as amended most recently by Government Regulation No. 55 of 2009 ("GR 35"). The upstream sector is managed and supervised by SKK Migas.

Due to the unique territorial composition of the archipelagic State of Indonesia, upstream oil activities may be undertaken in onshore and offshore areas. Work areas for onshore and offshore operations are determined by the MEMR based on consultations with and recommendations from the respective regional governments.

Downstream activities encompass processing, transportation, storage, and trading, and are regulated under Government Regulation No. 36 of 2004 regarding Downstream Oil and Natural Gas Business Activities, as has been amended by Government Regulation No. 30 of 2009 ("GR 36"). Downstream operations fall under the auspices of the MEMR and BPH Migas.

Through Government Regulation No. 79 of 2014 regarding the National Energy Policy, the Government has stipulated national energy policy to be implemented from 2014 to 2050, focusing primarily on energy availability for national needs, prioritisation of energy development, utilisation of national energy resources, and national energy reserves. The target for the availability of primary energy, which includes natural oil and gas, is approximately 400 million tonnes of oil equivalent ("MTOE") in 2025 and approximately 1,000 MTOE in 2050.

The President of Indonesia, Joko Widodo, announced a list of national strategic projects through Presidential Regulation No. 3 of 2016 regarding the Acceleration of the Implementation of National Strategic Projects, as amended most recently by Presidential Regulation No. 109 of 2020, which include several downstream oil and gas projects, namely the development of the Bontang and Tuban refineries, upgrading existing refineries, and the construction of fuel oil and LPG tank storage in the eastern parts of Indonesia. A presidential decree and presidential instruction seek to accelerate these projects and mandate enhanced cooperation among relevant Government institutions for the achievement of these objectives.

This is an excerpt from The International Comparative Legal Guide to: Oil & Gas Regulation 2021. 

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