Aimed at cutting red tape and facilitating business, the company will take over the roles of the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) and the Downstream Oil and Gas Regulatory Agency (BPH Migas).

The House of Representatives will include the establishment of the company in the revision of the 2001 Oil and Gas Law, which is expected to be passed this year.

The deputy chairman of House Commission VII overseeing energy, Satya W. Yudha, said all 10 political party factions had agreed to include the establishment of the firm after months of heated debate.

“What we are now contemplating at Commission VII is creating a special company for the upstream and downstream sectors. This is different to the previous ideas whereby there would be only one new special state-owned firm for the upstream sector,” he said.

Negotiating upstream contracts and monitoring fuel distribution would also be part of the firm’s function, he said.

Stakeholders in oil and gas businesses have waited for the revision for more than a decade as the current law is considered to restrict investment and has caused a raft of legal uncertainty.

As deliberation of the revision, initiated by the House, has seen sluggish progress, the government has tried to patch holes in the law by issuing several new regulations in the hope of forging confidence and legal certainty after the Constitutional Court dissolved the Upstream Oil and Gas Executive Agency (BP Migas) in 2012.

SKKMigas was formed through a presidential decree following the court’s ruling to dissolve BP Migas as its existence was deemed unconstitutional.

SKKMigas currently oversees oil and gas contractors’ work plans and budgets, which consist of exploitation and exploration activities.

Satya remained tight-lipped on whether the proposed firm would be an oil and gas holding company that the State-Owned Enterprises (SOEs) Ministry was currently trying to create.

The holding company will consist of state-owned oil and gas giant PT Pertamina and state-owned gas firm PT Perusahaan Gas Negara (PGN).

“We will see. I have already said that we hope during our discussions that we will be able to come to a mutual agreement, this is all still in progress. Hopefully, it will not clash with state-owned firms,” he said.

The Habibie Institute said there were several options the House could take to establish a special company for the upstream and downstream sectors.

Senior institute researcher Zamroni Salim said it would be inefficient to create a new firm as the upcoming oil and gas holding company could be given more authority to do the same tasks.

“This means that if any international companies want to conduct drilling activities, they must deal with the oil and gas holding company. This also means that all profit-sharing contracts will be with the company,” he said.

Despite overwhelming optimism that the planned holding company will be given more authority, the government is faces several obstacles that has prevented the holding company from being formed.

The government has already issued Government Regulation (PP) No. 72, which is a revision of a 2005 government regulation that stipulated the mechanism of state capital participation and administration for SOEs.

The revision is supposed to act as a legal basis for the transfer of capital among SOEs, but the House has since requested the government freeze its implementation as it would have an impact on the state budget.

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