Oil and Gas Bill to Tighten DMO and Regulate National Fuel Prices

The House of Representatives Expert Agency is discussing the draft Oil and Gas Bill dated 3 March 2026. This draft contains major changes in the governance of the oil and gas industry.

The draft Bill proposes the establishment of the Special Oil and Gas Business Entity or BUK Migas. This institution will carry out upstream oil and gas business activities.

Article 5 paragraph 1 states that upstream business activities remain under the central government as the holder of mining authority.

“The central government as referred to in paragraph (1) delegates the management of upstream business activities to BUK Migas,” states the draft.

BUK Migas will hold mining business authority and be directly accountable to the President. The establishment of this institution aims to shorten bureaucracy and reduce operational costs.

BUK Migas also has the authority to offer Working Areas to business entities or permanent business forms. This process is carried out through cooperation contracts.

The draft Bill reinforces the Domestic Market Obligation or DMO. Contractors are required to supply part of their production for domestic needs.

“Contractors must deliver at least 25% of the Oil and Natural Gas from their production share for domestic needs,” states Article 26.

In addition, contractors must offer a participating interest of 10 percent to regional government-owned enterprises (BUMD) since the field development plan is approved.

Participating interest can be given in the form of grants, profit sharing, or other schemes. BUMD can also transfer part or all of the ownership to third parties.

These provisions align with efforts to reduce emissions in the energy sector.