Indonesian Political, Business & Finance News

The Inner Workings of the Accelerated Oil and Gas Bill Explained

| Source: CNBC Translated from Indonesian | Energy
The Inner Workings of the Accelerated Oil and Gas Bill Explained
Image: CNBC

The Indonesian House of Representatives (DPR RI) has initiated a major overhaul of the oil and gas sector through the drafting of a new Oil and Gas Bill, intended to replace Law Number 22 of 2001.

The most striking feature of this draft Bill is the formation of a Special Business Entity (Badan Usaha Khusus or BUK) as a replacement for the Special Laying Body for Upstream Oil and Gas Business Activities (SKK Migas). During the 2nd Plenary Meeting of the 2026-2027 Session, eight parliamentary factions approved the Bill as a DPR initiative.

Key focuses of the Bill include the restructuring of oil and gas institutions, meeting domestic needs, and managing oil and gas revenues through the BUK. According to the draft obtained by CNBC Indonesia, the proposed BUK would possess greater authority than SKK Migas, as it would report directly to the President rather than to a technical ministry.

Members of Commission XII of the DPR have indicated that the draft is still under discussion and is expected to be finalised by the end of this year. As a core point of its power, the BUK Migas will act as the holder of upstream oil and gas mining rights, with the ability to manage and enter into partnerships with other business entities.

The initial capital for BUK Migas will be derived from state assets within upstream activities, as well as assets from the current upstream business implementation body and SKK Migas. Furthermore, BUK Migas revenues will stem from upstream business activities and the management of state assets under its rights. With ministerial approval, the entity may even invest portions of its funds through cooperation with the Indonesia Investment Authority (LPI).

Key provisions from the draft Bill regarding the formation of BUK Migas include:

ARTICLE 5 (Control and Exploitation)

  1. Upstream business activities shall be conducted by the Central Government as the holder of Oil and Gas Mining Rights.

  2. The Central Government shall delegate the conduct of Upstream Business Activities to BUK Migas.

  3. BUK Migas shall be the holder of the Oil and Gas mining rights and shall be responsible to the President.

  4. As the holder of mining rights, BUK Migas shall conduct all Upstream Business Activities.

  5. If Upstream Business Activities cannot be carried out, BUK Migas may offer cooperation for Working Areas to other Business Entities and/or Permanent Establishments.

ARTICLE 6 (Exploitation)

  1. Oil and Gas business activities shall be conducted based on Business Licences from the Central Government.

  2. Oil and Gas business activities consist of: (a) Upstream Business Activities; and (b) Downstream Business Activities.

  3. The acquisition of Business Licences for Upstream Activities shall be coordinated and implemented by BUK Migas.

  4. Upstream Business Activities consist of: (a) Exploration; and (b) Exploitation.

  5. Downstream Business Activities consist of: (a) Processing; (b) Transportation; (c) Storage; and (d) Trading.

BUK Migas: Formation, Duties, Organ, Capital, and Revenue

ARTICLE 63

  1. BUK Migas is established under this Law.

  2. BUK Migas functions to manage and control Upstream Business Activities.

  3. In performing its functions, BUK Migas is tasked with: managing working areas through contractor cooperation; preparing tenders for working areas; selecting and determining contractors; preparing terms and conditions for Cooperation Contracts; signing Cooperation Contracts; reviewing and submitting field development plans to the Minister; approving work plans and budgets for contractors; selling oil and/or gas that is its right under contracts; managing and recording revenues and assets from upstream activities; recording proven reserves; managing upstream data; preparing oil and gas supply plans; conducting investments via interest participation; performing corporate actions subject to supervisory board approval; and reporting regularly to the President.

ARTICLE 64

  1. The organs of BUK Migas consist of: (a) a Supervisory Board; and (b) a Board of Directors.

  2. The Supervisory Board shall consist of 7 members: 1 Chairperson (who also serves as a member) and 6 members.

  3. Members of the Supervisory Board shall be selected by the House of Representatives (DPR) upon the President’s proposal.

  4. The Chairperson and members of the Supervisory Board shall be appointed and dismissed by the President.

ARTICLE 65

  1. The Board of Directors shall consist of at least 7 members.
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