Indonesia Undertaking Revision of Oil and Gas Law

Feb 2019

Indonesia plans to revamp its 2001 oil and gas law to increase oil and gas production, boost Indonesia’s Energy independence and strengthen investment in the country’s human resources in the sector. The proposed changes include the creation of a new special oil and gas agency, called BUKMigas, which will act as regulator, taking over from the current upstream regulator Special Taskforce for Upstream Oil and Gas Business Activities (SKKMigas) and the downstream regulator, BPHMigas. However, BPHMigas will continue to carry out oversight of pipeline fuel and gas transportation

BUKMIgas may perform upstream activity including oil and gas exploration. Currently, such activities are undertaken by state or private companies who receive contracts from the upstream regulator, SKKMigas. BUKMigas may also work in partnership with oil and gas contractors who must propose extensions 8 years before contracts expire at the latest. Currently,  contractors can propose extensions 10 years before contracts expire at soonest and 2 years before contracts expire at latest.

BUKMigas would also be tasked to develop refineries with possible cooperation with state enterprises or other companies. The current law does not give authority for regulatory agencies to develop oil and gas Infrastructure. BUKMigas will also control oil and gas imports and exports. 

Under the new proposed regulation, Indonesia will have a state petroleum fund for the first time in history. The Ministry of Energy and BUKMigas will manage the fund in one bank account. The petroleum fund will receive the revenue that government makes from oil and gas production, as well as levies and bonuses. The fund will be utilized to compensate for exploration activities, develop Infrastructures and pay for research and development in the oil and gas sector.

(Sources: Gulf Times; Reuters)

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