T

he Constitutional Court (MK), which disbanded the upstream oil and gas regulator BPMigas last November as unconstitutional, ruled on Thursday not to disperse the erstwhile regulator’s downstream counterpart, BPH Migas.

Chief justice Mahfud MD said the ruling followed a request by labor unions to review the 2001 Oil and Gas Law.

The petitioners argued that BPH Migas — and the partition of the upstream and downstream business overall — weakened Pertamina and disintegrated oil and gas industry management.

“BPH Migas takes away the nation’s energy independence and shuns the people’s welfare,” said the unions in their statement to the court.

Both the now-defunct BPMigas and BPH Migas were formed under the 2001 Oil and Gas Law. BPMigas replaced Pertamina as upstream regulator while BPH Migas took charge of fuel distribution.

The same court last November ruled out several articles in the 2001 Oil and Gas Law, which served as the legal basis of BPMigas after a judicial review requested by 42 organizations, including Muslim group Muhammadiyah.

The court said that BPMigas’ existence was against Article 33 of the Constitution that the state should extract maximum benefit from natural resources for the people’s welfare.

An interim special task force SKKMigas was formed to fill the downstream regulatory role particularly over existing oil and gas contracts.

Even though analysts often lambast BPH Migas over the failure to keep subsidized fuel consumption on track with the quota, the court on Thursday ruled that the body was still in line with the Constitution.

“BPH Migas was simply a regulator overseeing the distribution of subsidized gasoline and thus does not have authority over energy sovereignty,” said Mahfud in the ruling.

BPH Migas has been sharply criticized over its decision to use private companies to distribute subsidized fuels outside Java and Bali, in addition to state-run Pertamina.

In November last year, the Jakarta-based regulator selected publicly listed PT AKR Corporindo (AKR) and PT Surya Parna Niaga to assist Pertamina.

The regulator selected Malaysia’s Petronas to do the job in 2010 and 2011 before the firm decided to close down its downstream business in Indonesia.

Commenting on the court’s decision, Djoko Siswanto, director of fuel distribution at BPH Migas, said the agency appreciated the court’s decision and vowed to ensure this year’s fuel consumption would not exceed the quota.

Meanwhile, Satya W. Yudha, a Golkar Party lawmaker on the House of Representatives’ Commission VII overseeing energy affairs, said that despite the court deciding not to dissolve BPH Migas, the regulator still needed to clean up its
management.

“The commission feels that the regulator overlaps with the function of the oil and gas directorate at the Energy and Mineral Resources Ministry,” he said.

This year, the government expects subsidized fuel consumption to reach 48.4 gigaliters or 2.4 gigaliters above the target of 46 gigaliters.

Premium, the government-subsidized fuel, sells at Rp 4,500 (49 US cents), the cheapest fuel in Southeast Asia.

The government is reluctant to cut Premium subsidies due to public pressure.