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Oil and Gas Industry in Indonesia Under the New Regulations
The vital natural commodity of Indonesia such as oil and gas is (and indeed should be) under the possession of the State. The Government holds the oil and gas mining concession ("Mining Concession") within the mining territory of the Republic of Indonesia. Thus, the Government has the authority to conduct exploration and exploitation activities on oil and gas and further has the responsibility on the availability and distribution of fuel and natural gas throughout the Republic.
Cooperation with investors in this field is nevertheless a must. The huge amount of capital necessarily involved along with the know-how skills required in the exploration and exploitation activities have been among the reasons to encourage investment in this field. In an attempt to provide an environment which is conducive to the investment opportunity, a new regime regulation has been enacted on 23 November 2001. It is Law No. 22 of 2001 on Oil and Gas (the "Law") that takes effect on the same date of its enactment that prescribes a new scheme for the oil and gas industry as well as the implementation of the Mining Concession. The Law distinguishes upstream activities and downstream activities.
Whilst the Law attempts to provide more legal certainty plus some flexibility on investment in this field, some uncertainty in the upstream activities remain exist. Those (other than the lawmaker) who engage in this field are usually able to cope with the problems in the real world. It is therefore our role to give inputs to the lawmaker with the hope that an applicable approach could be brought into the implementing regulations.
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