September 3, 2026 | 04:00 pm
Oil and gas investment requires legal certainty. The Oil and Gas Bill’s clauses disregard accountability and integrity.
POLITICIANS always find opportunity in adversity. The latest example can be found in the revision of the Oil and Gas Law. Since 2015, the draft revision of Law No. 22/2001 has appeared only on the national legislation program. At a House of Representatives (DPR) plenary meeting on August 15, 2026, the bill was once again proposed for deliberation.
The revision of the Oil and Gas Law is mandated by a 2012 Constitutional Court ruling. The justices ruled that the existence of the Upstream Oil and Gas Business Activities Regulatory Agency (BP Migas) was contrary to Article 33 of the 1945 Constitution. BP Migas had weakened the state’s direct control over oil and gas management contracts.
According to the Constitutional Court justices, authority over managing these natural resources must return to the state through the relevant ministry. The government therefore established the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) to replace BP Migas through Presidential Regulation No. 95/2012. Unlike BP Migas, which was an independent legal entity, SKK Migas operates under the Ministry of Energy and Mineral Resources.
SKK Migas’ legal standing is not strong enough to manage a constitutional mandate. Oil and gas management contracts have lost their legitimacy because their legal basis is not a law derived from the Constitution. SKK Migas’ authority is also vulnerable to being altered by the president according to his interests. In other words, SKK Migas lacks sufficient legitimacy as the implementing body of the Oil and Gas Law.
Without legal certainty, the oil and gas sector becomes less attractive to investors. Amid regional and global competition for natural resource investment, the lack of a strong legal framework puts Indonesia at a competitive disadvantage. Vietnam, for example, offers various incentives to oil and gas investors on a solid legal basis.
Amid sluggish oil and gas production, Indonesia needs investment in the sector. Oil production from January to July 2026 alone averaged just 600,000 barrels a day, far below the country’s daily oil demand of 1.7 million barrels. Besides boosting production, domestic oil and gas investment would increase tax revenues and, ultimately, economic growth.
Amid the need for an Oil and Gas Law, the bill contains clauses that could deter investors because they disregard crucial concerns for major investments: accountability and integrity. One such provision concerns the establishment of a Special Oil and Gas Business Entity (BUK). BUK Migas would be an institution similar to SKK Migas.
Its authority would extend from upstream to downstream operations: determining working areas, appointing contractors, and handling crude oil exports and imports. These powers are currently spread across the Ministry of Energy, SKK Migas, and the Downstream Oil and Gas Regulatory Agency. The problem is that, like Danantara, BUK Migas would be directly controlled by the president.
This centralization of authority would give the president extraordinary power to control oil and gas management from upstream to downstream. There is also another clause concerning a petroleum fund financed by contractor contributions and state revenues from oil and gas. Like Danantara’s assets, the fund would be separated from the State Budget.
Placing BUK and the petroleum fund under the president’s control is reminiscent of Pertamina during the New Order. At the time, Pertamina became a cash cow for those in power and a hotbed of corruption. With such poor governance, the prospect of restoring the oil and gas bonanza of the 1970s through the Oil and Gas Law will narrow because the regulation disregards transparency.
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