The Energy Regulation and Markets Review - Stikeman Elliott

Indonesia
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assessing first plans of development of a given work area and submitting its
evaluation on the MEMR for approval;
approving other plans of development;
approving work plans and budgets;
reporting to the MEMR on implementation of joint cooperation contracts; and
approving seller of the state portion of petroleum and natural gas to the best
advantage for the governement.
Further stipulation on the scope of supervision of upstream oil and gas activities may
be conducted by the MEMR and the chairman of BPMigas. The chairman of BPMigas
is appointed by the President of the Republic of Indonesia after consultation with the
parliament and is responsible to the President.
The regulatory body for oil and gas downstream activity, BPH Migas, regulates
and supervises the availability and distribution of oil-based fuel and natural gas through
pipelines, to ensure availability and distribution throughout all areas of Indonesia.
BPH Migas is also responsible for the supervision of fuel distribution and
transportation of gas through pipelines operated by Indonesian companies. Its supervisory
and distribution role regarding fuel oil encompasses supply and distribution, allocation
of reserves, market share and trading volumes and settling disputes. In the transportation
of gas, BPH Migas is responsible for the development of transmission segments and
distribution network areas, determination of natural gas pipeline transmission tariffs and
prices, market share of transportation and distribution, and settling disputes.
The BPH Migas chairman and its eight members are appointed by the President
after consultation with the parliament, and they are responsible to the President.
The primary source of law for oil and gas is Law 22 of 2001 on Oil and Gas (‘the
2001 Oil and Gas Law’).
Mineral and coal mining activities, under the authority and supervision of the
MEMR and the Directorate General of Minerals and Coal, are governed by the 2009
Mining Law. The 2009 Mining Law replaces the Mining Law No. 11 of 1967, under
which existing concessions under contract of work and coal contract of work were based.
The 2009 Mining Law introduced a significant change to the previous mining
legal framework. Contractual-based concessions, in the form of contracts of work, are
now no longer available for mining concessions. Contracts of work for foreign investors
and mining rights, in the form of ‘Kuasa Pertambangan’ for Indonesian investors, have
been replaced by a licensing system, ‘Ijin Usaha Pertambangan’. The implementing
regulations for the 2009 Mining Law are in the form of Government Regulations and
further decrees and regulations issued by the MEMR and the Directorate General of
Minerals and Coal, or regional regulations where regional governments were given
authorisation under the 2009 Mining Law.
Under the 2009 Mining Law, mining areas are designated by the central
government (the MEMR) as open for mining. Mining areas are categorised as commercial
mining areas for large-scale mining, state reserved areas for national strategic interest,
and people’s mining areas, for small-scale local mining.
With the assistance of the regional governments, the MEMR carries out mapping
exercises and prepares maps of area open for mining. Maps may be updated every five
years, and the final map designated areas must be approved by the parliament.
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