Significant revision to Law No. 22 of 2001 on Oil and Gas has been discussed for some time, and its modification is scheduled as a priority for the 2010 national legislative program. Although the discussion points have changed little in the last several years, Evita Herawati Legowo, the Director General of Oil and Gas, told Detikfinance on 3 March 2010 that the Directorate of Oil and Gas has conducted a study, “but has not yet found anything that needs revision.”
The Oil and Gas Law is seen by many as being detrimental to both the national interest as well as the oil and gas industry itself. Moreover, it has been successfully challenged twice at the Constitutional Court: one Decision (No. 002/PUU-I/2003) on 21 December 2004 revoked Articles 28 (2), 12 (3), and 22 (1); these allowed over-exploitation of the resources, and were judged to contravene the Constitutional mandate that Indonesian natural resources be reserved and used for the wealth of the Indonesian people. In light of those issues, the Director’s comment - that revision may not be necessary - may seem puzzling to some.
Specialists and stakeholders have consistently focused on two discussion points around which revision, they argue, is needed.
First, a complicated bureaucracy: the Oil and Gas Supervisory Board (‘BP Migas’), which is the Indonesian state’s representative in the negotiation of Contractor Cooperation Contracts (‘KKKS’ - required for any exploration and extraction activities to get underway), is considered to be an obstacle to productivity. KKKS development plans often take months to be finalized. Overhauling that bureaucracy is considered critical to streamlining and standardizing development in the sector.
Second, the ‘Domestic Market Obligation’ (DMO). The current oil and gas law requires that, in addition to other domestic requirements, 25% of extracted oil and gas is to be simply given or ‘allocated’ by contractors to the Indonesian state: some argue this is too much, others argue it is too small; others wonder how it will be implemented, and why it appears so few sanctions exist for failure to comply. For further reading, see: ILD No. 143 12/2/2010 on Prioritizing Natural Gas for Domestic Necessities.
The revision of the Oil and Gas Law is currently being discussed at the legislative wing of the House of Representatives (‘DPR’).
This ILB is based upon research by the hukumonline team.
Significant revision to Law No. 22 of 2001 on Oil and Gas has been discussed for some time, and its modification is scheduled as a priority for the 2010 national legislative program. Although the discussion points have changed little in the last several years, Evita Herawati Legowo, the Director General of Oil and Gas, told Detikfinance on 3 March 2010 that the Directorate of Oil and Gas has conducted a study, “but has not yet found anything that needs revision.”
The Oil and Gas Law is seen by many as being detrimental to both the national interest as well as the oil and gas industry itself. Moreover, it has been successfully challenged twice at the Constitutional Court: one Decision (No. 002/PUU-I/2003) on 21 December 2004 revoked Articles 28 (2), 12 (3), and 22 (1); these allowed over-exploitation of the resources, and were judged to contravene the Constitutional mandate that Indonesian natural resources be reserved and used for the wealth of the Indonesian people. In light of those issues, the Director’s comment - that revision may not be necessary - may seem puzzling to some.
Specialists and stakeholders have consistently focused on two discussion points around which revision, they argue, is needed.
First, a complicated bureaucracy: the Oil and Gas Supervisory Board (‘BP Migas’), which is the Indonesian state’s representative in the negotiation of Contractor Cooperation Contracts (‘KKKS’ - required for any exploration and extraction activities to get underway), is considered to be an obstacle to productivity. KKKS development plans often take months to be finalized. Overhauling that bureaucracy is considered critical to streamlining and standardizing development in the sector.
Second, the ‘Domestic Market Obligation’ (DMO). The current oil and gas law requires that, in addition to other domestic requirements, 25% of extracted oil and gas is to be simply given or ‘allocated’ by contractors to the Indonesian state: some argue this is too much, others argue it is too small; others wonder how it will be implemented, and why it appears so few sanctions exist for failure to comply. For further reading, see: ILD No. 143 12/2/2010 on Prioritizing Natural Gas for Domestic Necessities.
The revision of the Oil and Gas Law is currently being discussed at the legislative wing of the House of Representatives (‘DPR’).
This ILB is based upon research by the hukumonline team.
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