Regulatory: Agencies, Infrastructure Access, Judicial Review, Fracking, and Market Entry in Indonesian Energy

Originally published in Lexology Panoramic: Energy Disputes 2026.

By Setyawati Fitrianggraeni, S.H., LL.M., FCIArb., FAIADR, Reynalda Basya Ilyas, Aga Kristiana Silaen, Marcel Raharja, and Irvena A Dewanto

In brief

Indonesia’s energy sector is regulated by the Ministry of Energy and Mineral Resources and its directorates, together with SKK Migas for upstream oil and gas and BPH Migas for downstream oil and gas. This part identifies the principal agencies, explains that there is no specific rule giving new entrants access to infrastructure, sets out how regulator decisions can be challenged, explains the position on hydraulic fracturing, and describes the protections for indigenous groups and the barriers foreign companies face when entering the market.

Principal agencies

The principal agencies that regulate the energy sector are as follows.

Ministry of Energy and Mineral Resources (MEMR):

Directorate General of Oil and Natural Gas: formulates and implements policies on coaching, controlling, and supervising oil and gas activities.
Directorate General of Mineral and Coal: formulates and implements policies on coaching, controlling, and supervising mineral and coal activities.
Directorate General of Electricity: organises the formulation and implementation of policies on development, business, engineering, work safety, and the environment in the energy field.
Directorate General of New, Renewable Energy and Energy Conservation: formulates and implements policies on guidance, control, and supervision of geothermal activities, bioenergy, various new and renewable energy, and energy conservation.

Indonesian Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas): oversees upstream oil and gas business activities based on the Cooperation Contract. The institution is intended to ensure that the extraction of state-owned oil and gas natural resources provides maximum benefits and revenues for the state and the people.

Downstream Oil and Gas Regulatory Agency (BPH Migas): regulates and determines the availability and distribution of fuel, national fuel reserves, joint utilisation of fuel transportation and storage facilities, natural gas transportation rates through pipelines, natural gas prices for households and small customer businesses, and natural gas transmission and distribution operations.

Access to infrastructure

There is no specific regulation on new entrants accessing infrastructure in Indonesia. However, the energy sector, as an important production sector for the state, is controlled by the state, as regulated by Article 33 of the 1945 Constitution of the Republic of Indonesia as amended by the fourth amendment. Energy sector companies that have cooperated with the state can utilise existing infrastructure facilities, as long as these facilities are facilities provided by the state (public facilities) or facilities that are State Property. For example, in the oil and gas sector, Law No. 22 of 2001 on Oil and Gas provides that for areas experiencing scarcity of fuel oil and in remote areas, transportation facilities (including pipelines) and storage, including supporting facilities, can be utilised with other parties (including new parties entering the market).

Judicial review of regulator decisions

Non-judicial procedures to challenge the decisions of the energy regulator are available in the form of objection and administrative appeal, and these efforts must be exhausted before filing a claim in the State Administrative Court. Objections are addressed to the state administrative body or official that issued the state administrative decision, while an administrative appeal is addressed to the superior official or other agencies authorised to re-examine the disputed decision. A claim to the State Administrative Court should be submitted no later than 90 days after the decision is issued.

Moreover, any decision that can be challenged before the State Administrative Court must possess the following elements: it must be a written decision; it must be issued by a state administrative agency or official; it must contain acts of state administration; it must be based on the relevant laws and regulations; it must be concrete, individual and final; and it must have legal consequences for a person or legal entity. The claimant may request that the decision be void or invalid, with or without a request for indemnity.

Hydraulic fracturing (fracking)

In Indonesia, hydraulic fracturing is regulated under Article 1 point 10 of MEMR Regulation No. 53 of 2021. That article defines Non-Conventional Oil-and-Gas as oil and gas formed and confined in fine-grained and low-permeability reservoir rocks within the maturity zone, which will be profitable if produced through horizontal drilling by using the stimulated hydraulic fracturing technique, including shale oil, shale gas, tight sand oil, tight sand gas, coalbed methane, and methane-hydrate.

Under MEMR Regulation No. 53 of 2021, Indonesia’s legal and regulatory position is to define oil and gas obtained by the fracking technique as Non-Conventional Oil-and-Gas. This results in different procedures for the preparation and offering of conventional and Non-Conventional Oil-and-Gas Working Areas.

To address any environmental impact caused by fracking, the government also introduced procedures for the issuance of technical approvals and operational feasibility certificates for environmental pollution control activities, as stipulated in Minister of Environment and Forestry Regulation No. 5 of 2021.

Protection of indigenous groups

Statutory and regulatory protection for indigenous groups includes:

the 1945 Constitution of the Republic of Indonesia and its amendments. Article 18B paragraph (2) of the Constitution as amended by the second amendment stipulates that the state recognises and respects Indigenous communities and their traditional rights as long as they are alive and in accordance with the development of society and the principles of the Unitary State of the Republic of Indonesia, as regulated by law. Article 28I paragraph (3) of the Constitution as amended by the second amendment stipulates that cultural identity and traditional community rights are respected in line with the development of the times and civilisation.
Minister of Home Affairs Regulation No. 52 of 2014 concerning Guidelines for the Recognition and Protection of Indigenous People. Article 2 stipulates that the governor and regent or mayor carry out recognition and protection of indigenous communities.
Law No. 11 of 2010 on Cultural Heritage, including principles for preserving cultural heritage, identification and conservation. Article 13 stipulates that Cultural Heritage Areas can only be owned and controlled by the state, except those traditionally owned by customary law communities.
Law No. 32 of 2009 on Environmental Protection and Management as amended by Government Regulation in Lieu of Law No. 2 of 2022. Article 63 stipulates that the central, provincial and city or regency governments are tasked with establishing and implementing policies regarding procedures for recognising the existence of Customary Law Peoples, local wisdom, and the rights of Customary Law Peoples related to environmental protection and management.

Barriers to entry for foreign companies

Article 12 paragraph (2) of Investment Law No. 25 of 2007, as amended by Government Regulation in Lieu of Law No. 2 of 2022, stipulates that business fields closed for capital investment include: the cultivation and industry of class I narcotics; any form of gambling or casino activities; fishing of fish species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); the utilisation or extraction of coral, and the utilisation or extraction of corals from nature used for building materials, such as lime and calcium, aquariums and souvenirs or jewellery, as well as recently dead corals from nature; the chemical weapons manufacturing industry; and the industrial chemicals industry and ozone-layer-depleting materials industry. Based on this list, the energy sector is not a closed-field business.

In the Investment Positive List stipulated under Presidential Regulation No. 10 of 2021 as amended by Presidential Regulation No. 49 of 2021, foreign investment in the energy sector is not restricted in Indonesia.

The barriers to entry for foreign companies are in the implementation of these provisions. In practice, the applicable procedures and requirements are still complicated, for example the need for permits from relevant ministries and local governments. For instance, companies in the energy sector need permits from the Ministry of Energy and Mineral Resources, the Ministry of Environment and Forestry, and the Ministry of Manpower.

Criminal, health and safety, and environmental liability

Companies in the energy sector most commonly face strict liabilities due to the nature of activities that produce hazardous and toxic materials or pose a serious threat to the environment. Law No. 32 of 2009 covers sanctions for various violations, both administrative and criminal. As amended by Government Regulation in Lieu of Law No. 2 of 2022, administrative sanctions include written warnings, government coercion, administrative fines, and a frozen or revoked business licence. Criminal sanctions cover many aspects of environmental violations, and range from criminal fines of up to 15 billion rupiah and imprisonment for up to 15 years. For corporations in particular, a variety of additional criminal punishments may be imposed, including confiscation of assets earned as a result of the crimes committed, the forcible closing of part or the whole of the place of business or project, and the placement of the company under receivership for a maximum of three years.

For advice on energy regulation, market entry, or regulator decisions in Indonesia, contact Anggraeni and Partners at connect@ap-lawsolution.net.