Amendments to 10% PI Framework and Expanding BUMD Participation in Upstream Oil & Gas Business
In 2016, the Minister of Energy and Mineral Resources (the “Minister”) issued Regulation No. 37 of 2016 dated November 25, 2016 on Provisions on Offers of 10% Participating Interests in Oil-and-Gas Working Areas (“Regulation 37/2016”). Regulation 37/2016 established the mechanism for offering the 10% participating interests in cooperation contracts in the upstream oil and gas business (the “Participating Interests”) to region-owned enterprises (Badan Usaha Milik Daerah – a “BUMD”) and outlined the requirements for receiving, managing, and transferring the Participating Interests.
In order to enhance effectiveness and clarity for both regional and national interests, the Minister issued Regulation No. 1 of 2025 dated January 2, 2025 but effective from January 6, 2025 (“Regulation 1/2025”) which revises and supplements certain provisions of Regulation 37/2016. Below is an overview of the key changes introduced in Regulation1/2025.
♦ New Definition of Subsidiary of Region-Owned Entity
Regulation 1/2025 includes the definition of an “Anak Perusahaan BUMD” or a “BUMD Subsidiary.” Article 1(7) of Regulation 37/2016 now defines a BUMD Subsidiary as a company of which shares are partially or entirely owned by a Region-Owned Enterprise established by a regional government, which administrative area includes a field for which the first field development plan has been approved and existing fields in the extended Working Area or the management transfer Working Area with its share participation based on reservoir extension.
♦ Clarification on Eligibility of BUMDs
The eligibility criteria for a BUMD to receive an offer of the Participating Interests have been refined. Article 3 of Regulation 37/2016 now specifies that a BUMD that may be offered the Participating Interests includes a BUMD that is wholly owned by a region and which BUMD’s ownership is not divided into shares.
♦ Composition of Shareholding of BUMD Clarified
Regulation 1/2025 now clarifies that the distribution of the regional shareholding participation must align with the percentage of reservoir coverage in the respective regions and shall considering social and economic factors.
♦ Determination of Reservoir Extension Clarified
Regulation 1/2025 provides more details in the determination of a reservoir extension beyond a region. Such determination is now made after data access, based on certification from an independent institution appointed by the relevant governor and regent/mayor.
♦ Revised Procedures of Offers of Participating Interests
Article 7(2) of Regulation 37/2016 now states that a BUMD Subsidiary appointed by a governor may manage the Participating Interests of the BUMD appointed by the governor already manages the Participating Interests in another oil & gas block. Such BUMD Subsidiary must be 100% owned by the BUMD recipient of the Participating Interests.
AKSET
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com) or Rayhan Andana Harits (rharits@aksetlaw.com) for further information.
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