Indonesia’s extractive industries continue to face significant transparency challenges. Transparency and accountability are essential to reforming governance and must therefore be firmly embedded in the new Oil and Gas Bill.
Civil society organizations under the Publish What You Pay (PWYP) Indonesia coalition have raised concerns over several provisions in the Draft Oil and Gas Bill, which was approved as a House of Representatives (DPR) initiative on Tuesday, 18 August 2026. The approval followed harmonization meetings between the DPR’s Legislative Body (Baleg) and Commission XII on 15–16 August 2026.
PWYP Indonesia National Coordinator Aryanto Nugroho said the replacement of the existing Oil and Gas Law underscores the need for governance reform in the sector. The new bill should directly regulate transparency and accountability rather than delegating these matters to implementing regulations.
“Most of the problems in the oil and gas sector are fundamentally problems of transparency and accountability. These principles must be locked into the law itself. This is particularly important because several provisions directly intersect with issues such as contract disclosure, the management of non-tax state revenue (PNBP), oil and gas funds, and revenue-sharing funds (DBH),” Aryanto said when contacted on Wednesday (2 September 2026).
The findings of the 2024 EITI Indonesia Validation reinforce the urgency of these reforms. The EITI International Board gave Indonesia a score of 67 out of 100, classified as fairly low, with transparency identified as the weakest component. Among its findings was that contracts and licensing documents have not yet been fully disclosed.
Aryanto emphasized that transparency cannot rely solely on ministry portals or corporate reports. The Oil and Gas Bill must require the publication of contracts, cost audits, and clarity over which parties are authorized to trade state-owned oil and gas. This is necessary to close corruption risks arising from the large value of contracts, lengthy supply chains, and limited transparency over allocation and pricing.
“The new bill must not reproduce an architecture that perpetuates these vulnerabilities,” Aryanto said.
PWYP notes that cooperation contract documents have historically lacked transparency and have been difficult for the public to access. The Oil and Gas Bill should clearly establish minimum contractual requirements—including environmental obligations, community development, respect for Indigenous peoples’ rights, and post-operation responsibilities—alongside mandatory contract disclosure.
Aryanto also pointed to ambiguities in the upstream oil and gas contracting regime, particularly following the enactment of the Job Creation Law. Business activities are subject to business licensing, while upstream operations continue to be governed through cooperation contracts. Subsequent implementing regulations have treated contracts as a form of licensing within the Online Single Submission (OSS) system. As a result, the distinction between permits and contracts has become blurred, and so have the corresponding transparency obligations.
The Oil and Gas Bill should resolve this ambiguity by clearly distinguishing contracts from permits. Both documents must be publicly disclosed rather than merged under an administrative label. The determination and offering of working areas must also not be insulated from public participation.
Meaningful Participation and Environmental Restoration
The Oil and Gas Bill must guarantee meaningful participation for Indigenous and local communities, including Free, Prior and Informed Consent (FPIC), before an area is designated and offered for oil and gas activities. Without this, an open bidding process merely facilitates transactions at the central level rather than preventing conflicts at the project site.
Aryanto also highlighted Article 48(1) of the Draft Oil and Gas Bill, which states that producing contractors “are only required to pay income tax, land and building tax, and non-tax state revenue.” PWYP proposes removing the word “only” because the provision could potentially eliminate contractors’ obligations to pay regional taxes and levies.
The new Oil and Gas Bill must not repeat the old pattern in which producing regions bear the burden of lifting and social and ecological risks while receiving a disproportionate share of the benefits. Distributive justice must be secured through an adequate revenue-sharing ratio, with transparent management mandated by the bill.
The bill should also strengthen the governance of Participating Interest (PI), which gives producing regions the right to participate in upstream oil and gas management. PI must be managed transparently and accountably by regionally owned enterprises (BUMD) so that producing regions participate in governance, oversight, and technology transfer—not merely receive rents through third parties.
The regulation of Abandonment and Site Restoration (ASR) must also be embedded in the bill rather than delegated to implementing regulations. Restoration funds must be set aside from the beginning of operations, made publicly accessible, and regularly audited by independent institutions, particularly given the Audit Board of Indonesia (BPK)’s findings concerning weaknesses in the management of post-operation funds.
In its Second Semester 2025 Summary of Audit Results (IHPS II 2025), BPK noted weak controls over ASR funds, unaccounted use of funds, and the risk that the state could be left to cover restoration cost shortfalls in several working areas. ASR funds are not idle cash or merely technical costs associated with well closure. The Oil and Gas Bill must ensure that these funds are fully used for environmental restoration, addressing the socio-economic impacts on producing regions, and preparing for the post-oil-and-gas transition.
“The fundamental principle is the polluter pays principle. The state—let alone producing regions and new contractors—must not be forced to bear the ecological legacy left behind by previous contractors,” Aryanto stressed.
Energy Transition
Aryanto emphasized that PWYP Indonesia rejects land acquisition provisions that prioritize the smooth operation of upstream activities over community rights. Article 52 of the Draft Oil and Gas Bill must establish clear acquisition mechanisms, respect the rights of Indigenous and local communities, and prevent the dispossession of productive land.
In the context of the energy transition, the Oil and Gas Bill must also be aligned with the Energy Law, the National Energy General Plan (RUEN), and Indonesia’s national climate commitments so that it does not prolong dependence on fossil fuels without clear reduction targets.
PWYP Indonesia rejects an Oil and Gas Bill that merely pursues higher production and lifting. Contractors must bear the costs of climate mitigation and ensure that producing regions, workers, and communities do not carry the burden of post-production impacts. Carbon Capture and Storage/Carbon Capture, Utilization and Storage (CCS/CCUS) must also not become a justification for extending fossil fuel concessions indefinitely, without climate feasibility assessments and the consent of affected communities.
“If the new Oil and Gas Bill is not aligned with fossil fuel reduction, Indonesia will simply lock itself into price shocks and the climate crisis. True energy security cannot be built by adding more fossil fuel tables,” he said.
Aryanto also proposed stronger oversight of the revenues and operational budgets of the Special Oil and Gas Business Entity (BUK Migas) through clear audit standards and public reporting. The Oil and Gas Bill must resolve overlapping institutional mandates in oil and gas trading. In addition to BUK and BPH, the Government, through Presidential Regulation No. 26 of 2026, has also opened opportunities for oil and gas imports through public service agencies (BLUs), including Lemigas, while preparing an Energy Sector BLU to supply natural gas for electricity generation.
“If the new Oil and Gas Bill does not clearly define who is authorized to manage and trade state-owned gas, the state will end up with many desks but no single accountable command. The bill must close this gap,” he explained.
Previously, all parliamentary factions unanimously approved the Oil and Gas Bill as a DPR initiative. The approval was granted during a DPR plenary session on Tuesday (18 August 2026). After representatives of each faction delivered their views, the session chair, Saan Mustopa, struck the gavel three times to signify the approval of all factions to establish the Oil and Gas Bill as a DPR initiative.
“We ask the honorable members of the House whether the Commission XII initiative on Oil and Gas can be approved as a DPR bill. Agreed? Thank you,” said the NasDem Party politician.
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