Under Indonesian law, cross-border sales of natural gas can only be conducted if (i) the domestic need for natural gas has been fulfilled, (ii) there is insufficient domestic infrastructure, or (iii) domestic purchasing power is insufficient to satisfy the relevant gas field’s economics.
Pursuant to Ministry of Energy and Mineral Resources (MEMR) Regulation No. 6 of 2016 regarding Provisions and Procedures for Stipulating the Allocation and Utilization as well as Pricing of Natural Gas, as partially revoked by MEMR Regulation No. 32 of 2017 (MEMR Reg. 6/2016), the allocation of natural gas production is prioritised: (i) for the Government’s program to provide natural gas for transportation, households, and small-scale customers; (ii) to increase national oil and gas production; (iii) for the fertiliser industry; (iv) for industries that use natural gas as a raw material; (v) for the provision of power; and (vi) for industries that use natural gas as fuel.
Cross-border deliveries of natural gas are subject to import or export approvals from the Ministry of Trade, which takes into account the import or export recommendation from the Directorate General of Oil and Gas (DGOG). The DGOG considers domestic supply and demand in issuing such recommendation.
In regard to imports in general, an additional licence is required in the form of a Business Registration Number (NIB), in accordance with Government Regulation No. 24 of 2018 regarding Electronic Integrated Business Licensing Services (GR 24).
The NIB acts as an import licence issued by the Online Single Submission (OSS) system implemented under the auspices of the Indonesian Capital Investment Coordinating Board (BKPM). Although the import of natural gas is not specifically subject to an NIB pursuant to GR 24, in practice entities importing natural gas are required to obtain an NIB.
The Job Creation Law designates a new licensing regime, e.g. risk-based licensing, which stipulates different business licensing requirements for business activities classified as low, medium or high risk. The Job Creation Law has not stipulated the level of risk for natural gas import activities and therefore has not specified the applicable Business Licence(s). This may be further clarified in a government regulation expected to be issued to implement the Job Creation Law.
For more information, please contact:
Fitriana Mahiddin, Partner
Syahdan Z. Aziz, Partner
Aninda Nurul Savitri, Associate
This is an excerpt from The International Comparative Legal Guide to: Oil & Gas Regulation 2021. You can find the full chapter here.
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