Oil and Gas Bill: Reorganising Indonesia's Oil and Gas Governance
After 25 years since Law No. 22 of 2001 on Oil and Gas came into force, Indonesia requires a new legal framework capable of responding to changes in the oil and gas industry while strengthening national energy security. The Indonesian Energy Security Society (MKEI) views the deliberation of the Oil and Gas Bill as a strategic momentum to reorganise the foundations of Indonesia’s oil and gas governance.
For MKEI, oil and gas cannot be seen merely as an economic commodity. Oil and gas are strategic resources directly linked to energy security, industry, transportation, electricity, state revenue, the trade balance and national development. Therefore, the new Oil and Gas Law must be able to reconcile the interests of state sovereignty, investment certainty and energy security within a single governance design.
From the Indische Mijnwet to the Oil and Gas Law
The history of Indonesia’s oil and gas governance shows that regulation has always changed in line with the times and national interests. During the colonial period, mining operations were conducted within the framework of the 1899 Indische Mijnwet. After independence, that paradigm shifted through Government Regulation in Lieu of Law No. 44 of 1960 on Oil and Gas Mining, which affirmed state control over oil and gas resources while ending the colonial-era concession regime.
That paradigm was subsequently reinforced through Law No. 8 of 1971 on the State Oil and Gas Mining Company, which gave Pertamina a strategic position in national oil and gas operations. Entering the reform era, Law No. 22 of 2001 again altered that design through the separation of the government’s function as regulator, the implementing agency for upstream business activities, and business entities as operators.
This journey shows that Indonesia’s oil and gas governance is an evolution, from a colonial concession regime towards state control, the strengthening of state enterprises, and the separation of regulatory and operational functions.
25 Years of the Oil and Gas Law and Constitutional Corrections
Law No. 22 of 2001 is now 25 years old. During that period, the national and global oil and gas industry has changed significantly. Indonesia faces the challenges of declining oil production, a growing need for exploration, competition for global investment, the development of LNG, CCS/CCUS, digitalisation, changes in energy geopolitics, and demands for efficiency and sustainability.
Beyond issues of age and relevance, the construction of the Oil and Gas Law has also undergone a number of constitutional corrections. The Constitutional Court, through Decision No. 002/PUU-I/2003, declared several norms in the Oil and Gas Law to be in conflict with the 1945 Constitution. A more fundamental correction then occurred through Constitutional Court Decision No. 36/PUU-X/2012, which declared several provisions relating to BP Migas to be in conflict with the 1945 Constitution and resulted in the dissolution of BP Migas. The government subsequently established SKK Migas to carry out the function of managing upstream business activities.
This situation leaves important homework: Indonesia needs a new legal basis that comprehensively regulates the institutional design of oil and gas in accordance with the constitutional mandate and the needs of today’s industry.
This challenge becomes increasingly apparent when looking at national production conditions. Based on SKK Migas data, Indonesia’s oil production in June 2026 stood at around 580 thousand barrels per day, while the need for oil imports remains at a high level of around 1 million barrels per day. This condition shows that increasing domestic production and strengthening upstream investment is not merely an industry issue, but also part of the national energy security and economic agenda.
The Oil and Gas Bill Must Be Integrated with National Energy Security
MKEI believes that the Oil and Gas Bill must not stand alone as a sectoral regulation. The new law must be integrated with the national energy security strategy because oil and gas have direct links to various strategic sectors.
Oil and gas play a role in transportation, electricity, industry, fertiliser, petrochemicals and state revenue. Natural gas also holds an important position in supporting industrialisation while serving as one of the transition energies towards a lower-emission energy system.
Therefore, the success of the Oil and Gas Law cannot be measured solely by the size of investment or the number of contracts signed. The regulation must be able to encourage reserve additions, increase exploration and production, meet domestic needs, reduce import dependence, optimise state revenue and expand economic benefits for the public.
Seeking an Institutional Model to Replace SKK Migas
One of the most strategic issues in the Oil and Gas Bill is the institutional model for managing upstream business activities. MKEI believes that the debate should not stop at the question of whether SKK Migas is maintained or replaced. The more important question is what kind of institution is most capable of exercising state control, increasing production, attracting investment, ensuring accountability and providing the greatest possible benefit to the people.
The idea of establishing a Special Business Entity (BUK) for oil and gas, which has emerged in the deliberation of the Oil and Gas Bill, is one alternative that deserves serious study. MKEI is of the view that if that model is chosen, the BUK Migas must not merely be a change of nomenclature from SKK Migas. There must be a real improvement in authority, decision-making effectiveness, legal certainty, governance, investment and accountability.
MKEI also believes that the relationship between the Ministry of Energy and Mineral Resources, the upstream oil and gas management institution, Pertamina, Danantara, cooperation contract contractors and regional governments needs to be clearly formulated. The separation of policy, regulatory, supervisory, contract management and business functions must have firm boundaries of authority so as not to create overlap or conflicts of interest.
At the same time, investment interests and state interests should not be positioned as two opposing things. Indonesia needs regulation that is able to provide strategic control to the state while also providing legal certainty, fiscal certainty and a competitive decision-making process for industry.
MKEI Supports the Initiative of Commission XII of the Indonesian House of Representatives
MKEI views the development of the Oil and Gas Bill deliberation by the Indonesian House of Representatives as an important momentum to carry out a fundamental renewal of national oil and gas governance. The agreement of the House Legislation Body in August 2026 to designate the Oil and Gas Bill as a replacement bill indicates room to rebuild the oil and gas legal framework more comprehensively.
MKEI supports the initiative of Commission XII of the Indonesian House of Representatives to encourage the birth of a new Oil and Gas Law that is relevant to Indonesia’s needs. However, the process needs to be carried out openly, based on data and involving all stakeholders, from the government, the House of Representatives, SKK Migas, Pertamina, Danantara, national and foreign cooperation contract contractors, industry associations, academics, practitioners, regional governments to civil society.
The Oil and Gas Bill must become a meeting point between state sovereignty, investment certainty and national energy security. These three are not interests from which one must be chosen, but must be designed to reinforce one another.
MKEI believes that Indonesia does not only need a new Oil and Gas Law but needs better oil and gas governance. The new regulation must be able to safeguard state sovereignty, increase investment and production, optimise state revenue, strengthen national industry and make oil and gas an important part of Indonesia’s energy security strategy.
Ultimately, the renewal of the Oil and Gas Law is not only about replacing a regulation that is a quarter of a century old. This is an opportunity to determine how Indonesia manages its oil and gas resources in the decades ahead.