What’s Next for the Oil and Gas Sector?
The Constitutional Court’s ruling to disband the oil and gas industry’s regulating body, BPMigas, and return its function and authority to the Energy and Mineral Resources Ministry has been widely hailed as a victory for the people of Indonesia.
In a landmark ruling, the court noted that BPMigas was unconstitutional and therefore annulled its operations. In a binding decree, the court declared that its actions in the oil and gas sector were in violation of the 1945 Constitution.
What comes next is now of critical importance.
Energy and Mineral Resources Minister Jero Wacik said that since the court was the highest legal authority in the country, its decree was final and binding. He added that his ministry would need to implement a transition plan to adapt the work of BPMigas to the new setting.
Jero said his priority was ensuring that the investment climate was not adversely affected at a time when Indonesia’s economy is growing robustly and foreign investors are keen to take part.
In disbanding BPMigas, the court ruled that all existing contracts must be honored.
This is absolutely critical as legal certainty is core to attracting foreign investors and the growth of local companies. If investors are scared away and local mining and energy companies discouraged, there will be a considerable impact on the economy.
The government will have to return to the drawing board in formulating new laws for the industry. It must strike the right balance between protecting national interests and allowing investors to work unimpeded.
The drive to return oil and gas regulation to the ministry must lead to greater efficiency and better legal certainty. The outcome of the court’s ruling must be better and fairer laws that support the private sector while benefiting the nation.
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