New BUK Agency Replaces SKK Migas Under Direct Presidential Control

According to Minister Bahlil, the President issued a Presidential Letter, known as a Surpres, to multiple ministers directing them to discuss the Oil and Gas Bill alongside members of the House of Representatives (DPR). Within the draft legislation, BUK Migas will absorb the responsibilities of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas). However, the new agency holds additional powers as a business operator and concession holder for upstream oil and gas mining rights. Speaking to reporters after the presidential meeting, Minister Bahlil maintained that the reporting structure is completely settled. “We will deliver this during the discussion of the law, but the institution will reside and report directly to Mr. President, and that is already clear, not to be debated,” he stated.

Did You Know?
The newly outlined BUK Migas framework in the draft legislation establishes a 7-person supervisory board chosen by the DPR upon presidential nomination, alongside a management board of at least 7 directors who are appointed and dismissed by the president.

Regulatory Formulations and Upstream Operations

Government officials are currently drafting regulatory frameworks to strengthen BUK Migas, specifically addressing licensing procedures to prevent bottlenecks in domestic oil and gas lifting. Minister Bahlil noted that the administration wants to preserve proper inter-ministerial authorities while pushing for operational models that offer greater flexibility during negotiations with commercial and government entities regarding cost recovery mechanisms and other mutually beneficial forms. Under Article 5 of the draft bill, the central government delegates upstream business activities to BUK Migas as the designated mining concession holder. If direct execution proves unfeasible, the agency can offer cooperation agreements covering specific working areas to commercial business entities or permanent establishments.

Functions, Assets, and Financial Oversight

Article 63 outlines that BUK Migas will manage and control upstream operations, which includes selecting contractors, negotiating and signing cooperation contracts, tracking proven reserves, and managing state property assets. Initial operational capital stems from existing state-owned properties tied to upstream activities and the previous operational bodies, alongside working capital sourced from non-tax state revenues gathered prior to the establishment of BUK Migas. Article 85 dictates that the minister must manage oil and gas funds transparently alongside the minister who organizes government affairs in the field of state finance to finance ongoing exploration, open-area research, and infrastructure development. Furthermore, Article 86 requires the Supreme Audit Agency of the Republic of Indonesia to audit the management of these specialized energy funds.

Frequently Asked Questions

What is the reporting line for BUK Migas under the proposed bill?
According to Minister Bahlil Lahadalia, BUK Migas reports directly to the President and operates outside the direct authority of the Ministry of Energy and Mineral Resources.

What agency does BUK Migas replace?
The drafted legislation indicates that BUK Migas will absorb the functions previously managed by the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), while gaining expanded powers as a mining concession holder.

How is the operational funding of BUK Migas structured?
Initial capital originates from state-owned assets tied to upstream operations and previous executing agencies, while operating budgets draw from revenues generated through upstream business activities and asset management.

How will direct presidential oversight alter the pace of oil and gas exploration projects across the country?