The Energy Regulation and Markets Review - Stikeman Elliott

Indonesia
A company holding a storage licence is required to provide the opportunity to
other parties to share in its storage facilities; it can increase the capacity of its storage and
related facilities after obtaining permission from BPH Migas.
A wholesale trading licence allows the holder to operate a trading business to serve
certain consumers (e.g., large consumers). The MEMR, along with BPH Migas, may
determine the minimum capacity limit of a storage facility or facilities of a company. The
company may start its trading business after fulfilling the required minimum capacity. A
direct user who owns a seaport or receiving terminal may import fuel oil, gas and other
fuels, and process the output directly for its own use, but not for resale, after obtaining
specific approval from the MEMR.
Minerals and coal
As part of government policy to guarantee the supply for domestic demand, especially
for coal, the 2009 Mining Law and its implementing regulations create a framework
where the central government has the authority to control the production and export
of each mining product. Regional governments are also obliged to comply with the
production and export controls imposed by the central government. Mining companies
must comply with the domestic market obligation by selling to domestic consumers of
minerals or coal.
The Government Regulation on the Implementation of Mineral and Coal Mining
Business Activities provides a framework authorising the MEMR to set the coal sales
reference price. The benchmark price serves as the floor price for royalty payment to the
government.
iii Ownership and market access restrictions
Investment Law No. 25 of 2007 provides a one-stop investment framework for foreign
investors under the Indonesian Investment Coordinating Board (‘the BKPM’), which
includes centralisation of the issuance of permits, licences and facilities.
The primary regulation at which foreign investors have to first look before
entering into a particular activity in Indonesia is the Negative List. The Negative List
is a set of business activities that are closed or open with limitations to foreign direct
investments. The Negative List is updated periodically, the latest one having been issued
under Presidential Regulation No. 36 of 2010.
For investment in electricity, the Negative List generally sets the maximum
ownership of foreign shareholders to 95 per cent for foreign investment in the fields
of production, transmission and distribution of electricity and 90 per cent in entities
performing operation and maintenance services for geothermal energy; however, the
limitation varies depending on the specific business and sectors.
The Negative List does not restrict foreign direct ownership in companies holding
a mining licence, it allows 100 per cent foreign ownership, which is in line with the 2009
Mining Law.
The Investment Law applies only to companies operating in the downstream
sector. Foreign investment in the upstream oil and gas sector is by way of a branch of a
foreign company.
139