The Proposed BUK Migas Framework: Preliminary Observations

Marinza Savanthy

Introduction

The proposed establishment of Badan Usaha Khusus Minyak dan Gas Bumi (BUK Migas) is one of the notable features of the Draft Oil and Gas Law currently under discussion. Whilst BUK Migas has attracted considerable attention from industry participants, its ultimate structure, functions and powers remain subject to the ongoing legislative process.

At the time of writing, public statements indicate that the DPR is still awaiting the Government’s Daftar Inventarisasi Masalah (DIM). As is often the case in the legislative process, the DIM may provide important insight into the Government’s position on key aspects of the draft and may lead to further refinement of a number of provisions.

Accordingly, it may be premature to draw firm conclusions regarding the eventual role of BUK Migas. The observations set out below should therefore be read in the context of a draft that remains subject to further review and discussion as part of the ongoing legislative process.

Proposed Role of BUK Migas

Based on the current draft, BUK Migas appears to be envisaged as the institution responsible for managing and controlling upstream oil and gas activities on behalf of the State.

Among other things, the draft assigns BUK Migas responsibility for:

1. administering upstream working areas (Wilayah Kerja);
2. conducting contractor selection processes;
3. preparing and executing production sharing contracts (PSCs);
4. reviewing and approving work programmes and budgets;
5. managing upstream data and assets; and
6. reporting on upstream activities.

Viewed collectively, these functions appear broadly consistent with the role currently performed by SKK Migas under the existing upstream regulatory framework.

The current draft also provides that upstream activities may be undertaken by state-owned enterprises, regional-owned enterprises, cooperatives, private business entities and permanent establishments. Notably, BUK Migas is not expressly included within that category.

On a preliminary reading, this may suggest that BUK Migas is primarily intended to act as the State’s upstream manager and PSC counterparty, rather than as an upstream contractor in its own right.

Participation Interest Provisions

The draft further contemplates the possibility of BUK Migas undertaking investment activities through participation interests. The inclusion of this provision is notable as many of BUK Migas’ other proposed functions appear to relate primarily to the management and control of upstream activities on behalf of the State.

At present, the intended scope and practical operation of this provision remain unclear. On one hand, many of BUK Migas’ proposed functions appear broadly aligned with the existing role of SKK Migas, namely the management and control of upstream activities and the administration of PSCs on behalf of the State. On the other hand, participation interests are generally associated with an economic interest in an upstream project.

This distinction may become relevant in considering the ultimate scope of BUK Migas’ mandate. Depending on how the provision is implemented, further clarification may be required as to the relationship between BUK Migas’ proposed upstream management functions and any investment activities undertaken through participation interests.

By way of example, if BUK Migas were to hold a participation interest in a particular working area whilst also exercising approval, management or oversight functions in relation to the same project, questions may arise as to how those different roles are intended to operate alongside one another and whether any specific governance mechanisms are contemplated to address such circumstances. The current draft does not elaborate on these aspects, nor does it provide detailed guidance regarding the governance framework that would apply in such circumstances.

The current draft therefore leaves a number of questions open regarding the intended operation of the participation interest provisions, including the extent of BUK Migas’ potential commercial involvement and how such activities are intended to interact with its broader upstream management functions.

Given that the DPR is reportedly still awaiting the Government’s DIM, additional clarity on these aspects may emerge during the next phase of legislative deliberations.

Looking Ahead

The publicly available draft dated 15 August 2026 appears to indicate that BUK Migas is intended to serve as the institution responsible for managing and controlling upstream activities on behalf of the State, within a more permanent statutory framework.

However, certain aspects of the proposed framework, particularly those relating to participation interests and investment-related activities, may benefit from further clarification as discussions on the Draft Oil and Gas Law continue.

Given that the DPR is reportedly still awaiting the Government’s DIM, the next stage of the legislative process is expected to provide greater visibility regarding the final institutional design of BUK Migas and how the various provisions relating to upstream management, participation interests and investment activities are intended to operate in practice.

At this stage, the publicly available draft provides a useful indication of the proposed direction of the new framework. Nevertheless, the Government’s DIM and subsequent legislative deliberations are expected to provide greater clarity regarding the final role and functions of BUK Migas under the new Oil and Gas Law.

***

About ADCO Law:

ADCO Law is a law firm that offers clients a wide range of integrated legal services, including commercial transactions and corporate disputes in a variety of industry sectors. Over the course of more than a decade, we have grown to understand our clients’ industries and businesses as well as the regulatory aspects. In dealing with business dynamics, we provide comprehensive, solid legal advice and solutions to minimize legal and business risks.

From Upstream to Downstream, We Understand Your Industry. In complex transactions and certain cases, we actively engage with financial, tax, and environmental specialists, accountants, and law firms from various jurisdictions to add value to our clients. Our strong relationships with Government agencies, regulators, associations, and industry stakeholders ensure that our firm has a holistic view of legal matters.

ADCO Law is a Proud Member of the Alliott Global Alliance (AGA) in Indonesia. Founded in 1979, AGA is one of the largest and fastest-growing global multidisciplinary alliances, with 215 member firms in 95 countries. As a law firm, we also believe in regeneration. To stay abreast of business changes and stay relevant, our formation of lawyers is comprised of the top graduates from Indonesian and international law schools.