Improving Ease of Doing Business Through Legal Certainty in Upstream Oil and Gas Licensing
On the matter of ease of doing business, Indonesia's upstream oil and gas sector is known to still lag behind other neighboring countries, such as Malaysia, Thailand, and Vietnam. Based on a governance study conducted by the law firm D.S. Setyadi & Partners for IPA, this issue stems from a technical legal mismatch that urgently needs to be addressed. In one of the discussion sessions during the recent IPA Convex 2026 event, the Managing Partner of D.S. Setyadi & Partners, Didik Sasono Setyadi, emphasized that amid geopolitical dynamics, the effort to fix the regulatory flow is not merely an administrative matter but a vital step to ensure the availability of the national energy supply.
Historically, the administrative licensing instruments that generally apply were designed to accommodate applications from non-government parties. In fact, if traced through six decades of legislative history, starting from Law No. 44 of 1960, Law No. 8 of 1971 through Pertamina, up to Law No. 22 of 2001, Indonesia's upstream oil and gas sector has been positioned as a strategic function of the state under the direct control of the government.
Even in 2012, when the Constitutional Court issued Decision No. 36/PUU-X/2012, this position was reaffirmed through a ruling stating that the Indonesian government manages the upstream oil and gas sector by assigning it to a state enterprise. Therefore, Didik assessed that the current licensing system, which is typically used for private subjects dealing with the state, ultimately creates administrative complexity that is inefficient for the smooth running of projects when applied to upstream oil and gas activities.
This complexity often appears in spatial planning and land access. Although the Elucidation of Article 5 Paragraph (5) of Law No. 26/2007 on Spatial Planning has categorized oil and gas mining areas as national strategic zones, the licensing process on the ground still often has to go through multiple layers of sectoral evaluations. Adjustments to various regional regulations, such as Sustainable Food Agricultural Land (LP2B) and protected areas, often cause the land acquisition and environmental licensing processes to move slowly.
Highlighting the redundancy of these obstacles, Didik pointed out that "by default, as determined by the Oil and Gas Law and the Spatial Planning Law, the upstream oil and gas sector has been recognized as a vital strategic activity whose spatial planning must be prioritized by the government," so that operators no longer need to repeatedly re-prove this strategic status for every individual project.
Rather than involving multiple entry points across various agencies, Didik proposed that upstream oil and gas licensing be coordinated at a single table under the Ministry of Energy and Mineral Resources (ESDM), and SKK Migas in particular within the operator's work plan. While awaiting long-term legislative refinement, the issuance of a Presidential Regulation (Perpres) could be a tactical step to accelerate this one-door process. This step is also in line with the direction of executive policy, namely, the speech of the Minister of ESDM, Bahlil Lahadalia, at the opening of IPA Convex 2026, which delivered a firm message that "President has instructed SKK Migas to streamline and accelerate all upstream licensing processes" so that national energy targets can be achieved without obstacles.
Ultimately, this adjustment of legal instruments is not merely about correcting past administration but is also a concrete mechanism to accelerate the government's direction in executing the oil and gas sector on the ground. As Didik concluded, by aligning upstream oil and gas administrative law with its original spirit, a more integrated licensing process will boost Indonesia's ranking in ease of doing business while also strengthening national energy security amid global challenges. (*)
