Indonesia's Oil and Gas Law Revision Sparks Concerns Over Investor Attraction

The revision of Indonesia's Oil and Gas Law has been proposed for deliberation at the House of Representatives (DPR) plenary meeting on August 15, 2026. The draft revision aims to address a 2012 Constitutional Court ruling that deemed the existence of the Upstream Oil and Gas Business Activities Regulatory Agency (BP Migas) as contrary to Article 33 of the 1945 Constitution.

The justices ruled that authority over managing oil and gas resources must return to the state through the relevant ministry. In response, the government established the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) in 2012, which operates under the Ministry of Energy and Mineral Resources.

However, SKK Migas' legal standing is deemed weak by the Constitutional Court justices, as its authority is vulnerable to being altered by the president according to his interests. The court argued that SKK Migas lacks sufficient legitimacy as the implementing body of the Oil and Gas Law.

The lack of a strong legal framework has made Indonesia less attractive to investors in the oil and gas sector. Amid regional and global competition for natural resource investment, the country is at a competitive disadvantage compared to Vietnam, which offers various incentives to oil and gas investors on a solid legal basis.

Indonesia needs investment in the sector to boost production, as oil production from January to July 2026 averaged just 600,000 barrels a day, far below the country's daily oil demand of 1.7 million barrels.