Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia, has provided crucial clarification regarding Indonesia’s new strategic natural resources export policy. He confirmed that the mandate requiring exports to be channeled through Danantara’s subsidiary will definitively not apply to upstream oil and gas commodities, offering a significant exemption for the sector.
Addressing industry concerns, Bahlil urged oil and gas business players not to be apprehensive about the newly established agency overseeing these exports. He underscored that the upstream oil and gas sector would maintain its existing operational framework without disruption.
“Based on objective and thoroughly researched information presented to the President, His Excellency has decided that the aforementioned Government Regulation (PP) will not be enforced for the upstream oil and gas sector. Therefore, there is no room for doubt; business will proceed as usual,” Bahlil affirmed during the 50th IPA Convex event on Wednesday, May 20.
Furthermore, Bahlil offered assurances concerning the Export Proceeds Fund (DHE) policy for upstream oil and gas. He guaranteed that funds parked domestically would continue to abide by current regulations, deviating from the proposed revision that would mandate 100 percent repatriation for a full 12 months.
“The President also conveyed that these Cooperation Contract Contractors (KKKS) entrepreneurs are reputable individuals. There’s no need for suspicion; consequently, you are free to utilize your DHE without being subject to the current Presidential Regulation,” Bahlil elaborated, highlighting trust in the sector’s stakeholders.
Following the event, Bahlil explained the rationale behind exempting upstream oil and gas exports from the single state-appointed business entity. A primary reason is the imperative to honor the extensive long-term contracts already established with international partners.
“Its implementation is not imposed on the oil and gas sector. Why? Firstly, nearly all oil and gas sales occur domestically. Secondly, for international sales, we have already entered into long-term export contracts, which virtually eliminate the risks of transfer pricing or under-invoicing,” Bahlil stated, emphasizing the transparency and stability of existing agreements.
Another crucial factor, Bahlil continued, involves the existing agreements and negotiations between the government and the Cooperation Contract Contractors (KKKS), which are meticulously detailed within their respective Plan of Development (POD) documents. These pre-negotiated terms solidify the current operational framework.
Additionally, Bahlil pointed out that investments in the upstream oil and gas sector demand considerable exploration costs and entail substantial risks. This reality underpins why the obligation for DHE to be deposited in state-owned banks is capped at a maximum of 30 percent, allowing flexibility for significant foreign borrowing.
“Given that a majority of the investment is financed through international loans, we are not enforcing the demand for 100 percent DHE repatriation to be held domestically. If any DHE is held locally, it typically ranges from a maximum of 10 to 30 percent. Beyond that, there are no issues,” Bahlil revealed, clarifying the policy’s practical application.
Bahlil unequivocally affirmed that this policy concerning oil and gas exports would remain unchanged indefinitely. This permanence stems from the decades-long nature of existing contracts, a stark contrast to the mineral and coal sectors, where exports via Danantara will be implemented gradually.
“Oil and gas (exports not through Danantara) are permanent, as we cannot dictate one-year contracts; their agreements typically span a minimum of 20 years. These contracts can subsequently be extended as long as oil or gas reserves remain viable,” he explained, stressing the inherent long-term stability of the sector.
This clarification follows an earlier announcement by Prabowo, who unveiled a new strategic natural resources export scheme. Under this scheme, exports of designated commodities could only be conducted through a state-owned export entity acting as a single export entity. The commodities initially targeted include crude palm oil (CPO), coal, and minerals.
“The sale of all our natural resources, commencing with crude palm oil, coal, and iron alloys, is mandated to be conducted through a State-Owned Enterprise (BUMN) designated by the Government of the Republic of Indonesia as the sole exporter,” Prabowo stated during a Plenary Session of the Indonesian House of Representatives (DPR RI) on Wednesday, May 20.
The designated export BUMN was established by Danantara Indonesia. According to documents obtained by Kumparan, this policy is set to be formalized within a draft Government Regulation (PP), which will stipulate that all exports of strategic natural resource commodities must exclusively pass through this export BUMN.
Within the draft regulation, the new export mechanism is scheduled to take effect on December 31, 2026. Prior to this implementation date, all export operations for the specified commodities are to be fully transitioned to the export BUMN.
Meanwhile, legal entity formation documents from the Directorate General of Legal Administration (Ditjen AHU) indicate that Danantara has established a new business entity named PT Danantara Sumberdaya Indonesia. The shareholders of this new entity include PT Danantara Investment Management (DIM) and PT Danantara Mitra Sinergi.
Summary
Minister of Energy and Mineral Resources, Bahlil Lahadalia, confirmed that Indonesia’s new strategic natural resources export policy, which mandates exports through Danantara’s subsidiary, will definitively not apply to upstream oil and gas commodities. This presidential decision ensures the sector maintains its existing operational framework, and business players should not be apprehensive about disruptions.
The exemption is due to the sector’s long-term international contracts and the significant exploration costs and risks involved. Moreover, the Export Proceeds Fund (DHE) policy for upstream oil and gas will continue under current regulations, allowing flexibility for foreign borrowing instead of a proposed 100% repatriation, a policy difference that is permanent for the oil and gas sector.