Pertamina is the only form of business entity governed by a special law. As it is a special State Owned Enterprise (SOE) for oil and gas, it has a special national mission, with special obligations and therefore also privileges compared to other SOEs. Under Law No. 22 of 2001 on Oil and Gas, Pertamina is required to transfer its businesses, assets and liabilities to a state-owned limited liability company, that will be established by November 2003. It is designed to be able to seek profits in a competitive domestic and international environment, but nevertheless remains to have preferential status in the supply and services in oil and gas.

Interesting however is the division of shares that will enable private investment, whenever the government so desires. This is an issue considered controversial as this may provide opportunity that foreign private capital would perhaps be able to gain control over Pertamina’s business and ultimately the nation’s strategic supply of oil and gas.

Initially the draft of Government Regulation (GR) that would implement the transfer, contained articles that the transfer will be limited to businesses not directly related to oil and gas, the enactment of Government Regulation 31/2003 on Transfer of Form of Legal Entity from a State-Owned Enterprise to a Limited Liability Company however did not include this limitation, which thus strongly indicates that the transfer will include all of Pertamina’s assets, including its core business of exploration, supply and distribution of oil and gas.

Although mining rights are governed by Law No 1 of 1967 on Mining that stipulates procedures of gaining obtaining such mining rights, the establishment of a new SOE for the Indonesian State Oil Company as governed under Law 22/2001 and its implementing Government Regulation 31/2003 is interpreted by certain parties as the issuance of mining rights to domestic or foreign business entities, which may potentially prejudice national interests in the event of disputes involving investors.

If you need clarification or legal advice on this issue, please contact Lubis Ganie Surowidjojo at lgs@lgslaw.co.id