Indonesia: Indonesian Gas Regulation (2006)

Even though the Indonesian government issued a new Oil and Gas Law (Law 22 of 2001) in 2001, and several government regulations to implement Law No. 22, principally, Government Regulation No. 35 of 2004 as amended by Government Regulation No. 34 of 2005 regarding upstream oil and gas business activities (GR 35) and Government Regulation No. 36 of 2004 regarding downstream oil and gas business activities (GR 36), the gas business in Indonesia remains in transition. Law 22 and these government regulations substantially changed the existing business structure for both oil and gas activities, especially for downstream gas activities. While Law 22 outlines the objectives and policies of the government for the natural gas sector, details of the new regulatory scheme will be established through a series of government regulations to be issued under Law 22. To date, six government regulations have been enacted. GR 35 and GR 36 were enacted to provide certain details concerning the regulation of the upstream and downstream oil and gas business activities in Indonesia, respectively, while the remaining three government regulations deal with the establishment of the governmental agencies to supervise the upstream and downstream oil and gas sectors, BP Migas and BPH Migas, respectively, and the establishment of PT Pertamina (Persero).

While Law 22 changed the regulatory framework of the oil and gas sector in a number of significant respects, two changes need to be highlighted: (i) Law 22 dramatically changed the role of the state-owned oil and gas enterprise, Pertamina; and (ii) it greatly liberalised the downstream natural gas business. Law 22 grants the government the exclusive rights for oil and gas mining and requires all private companies wishing to explore for and exploit oil and gas to enter into cooperation contracts based upon a production sharing scheme with BP Migas, which has promulgated a form of cooperation contract that is substantially similar to the form of production sharing contract (PSC) previously utilised by Pertamina with one significant exception for the natural gas sector—consistent with the requirement under Law 22, the form of cooperation contract imposes a domestic market obligation on natural gas.

The role of Pertamina as holder on behalf of the government of all oil and gas mining rights and as party to, and regulator of, PSCs with private sector companies (such parties to a PSC, contractors) has been phased out. With the issuance of Government Regulation No. 31 of 2003, Pertamina has been converted from a state-owned enterprise to a state-owned limited liability company, PT Pertamina (Persero), which, generally speaking, is to function like any other private sector commercial oil and gas company. It will hold all of Pertamina’s commercial contractual interests while BP Migas will succeed to all of Pertamina’s interests in PSCs and other contracts in which Pertamina acted on behalf of the government except for Pertamina’s interests in contracts other than PSCs or related contracts, such as LNG sales contracts. Notwithstanding this general rule, for production sharing arrangements with contractors subject to technical assistance contracts (TACs), GR 35 provides that Pertamina’s rights under a TAC will be transferred to PT Pertamina (Persero) for the balance of the term of the TAC. Once the TAC expires, PT Pertamina (Persero) must enter into a cooperation contract with BP Migas in order to continue the exploration and exploitation under the TAC.

Law 22 ended Pertamina’s dominant position in downstream activities. Under Law 22, as implemented by GR 36, downstream activities are carried out by private entities based on licences issued by the government under the supervision of the government and BPH Migas, the regulatory body established by GR 67. In addition, BPH Migas issues special rights required by private companies intending to distribute or transport natural gas through pipelines.

In 2004, Indonesia was the largest exporter of LNG in the world with about a 19 per cent share of the global LNG market. Exports of LNG amounted to 55 per cent of total natural gas production. Total production was 3,030 billion SCF (BCF). Indonesia exports LNG mainly to Japan, Korea and Taiwan. Indonesia also exports natural gas via pipeline to Singapore and Malaysia from the West Natuna Fields and by another pipeline from South Sumatra to Singapore. In 2004, these two pipelines transported around 150 BCF of natural gas. The fertiliser, petrochemical and power generation industries are the principal domestic consumers of natural gas in Indonesia.

2. What is the statutory framework for the domestic natural gas sector?

The following statutes form the main legislative framework:

• Law No. 22 of 2001 regarding oil and natural gas (Law 22)
• Government Regulation No. 17 of 1974 regarding supervision of the implementation of offshore oil and gas exploration and exploitation
• Government Regulation No. 35 of 1994 regarding requirements and guidelines for Production Sharing Contracts
• Government Regulation No. 42 of 2002 regarding oil and natural gas upstream business activities implementing body Soewito Suhardiman Eddymurthy Kardono indonesia Getting the Deal Through – Gas regulation 2006 (BP Migas) (GR42)
• Government Regulation No. 67 of 2002 regarding regulatory body for supply and distribution of fuel oil and business activities of transporting natural gas through pipelines (BPH Migas) (GR67)
• Government Regulation No. 31 of 2003 regarding the conversion of the status of the state oil and natural gas mining company (Pertamina) to become a state-owned limited liability company (Persero) (GR31)
• Government Regulation No. 35 of 2004 as amended by Government Regulation No. 34 of 2005 regarding upstream oil and gas business activities (GR35)

• Government Regulation No. 36 of 2004 regarding downstream oil and gas business activities (GR36)
• Government Regulation No. 1 of 2006 regarding amount and use of contributions payable by business entities engaging in the supply and distribution of fuel oil and transportation of natural gas through pipelines
• Presidential Decree No. 42 of 1989 regarding cooperation between Pertamina and private entities in oil and gas refining process
• Presidential Decree No. 31 of 1997 regarding construction and operation of oil and gas refineries by private entities
• Presidential Decree No. 86 of 2002 regarding the establishment of BPH Migas for supply and distribution of fuel oil and business activities of transporting natural gas through pipelines (PD86)
• Decree of the Minister of Mines and Energy No. 0579K/325/ MPE/1984 regarding the selling price of natural gas for domestic use
• Decree of the Minister of Energy and Mineral Resources No. 0821K/20/MEM/2005 regarding guidelines and fixed outline of the utilisation of national natural gas in 2005 to 2020
• Regulation of the Minister of Energy and Mineral Resources No. 007 of 2005 regarding requirements and guidelines for implementation of business licences in the downstream oil and gas business activities
• BPH Migas Regulation No. 01/P/BPH Migas/XII/2004 regarding guidelines for the granting of special rights for the transportation of natural gas through pipelines in natural gas transmission internodes

• BPH Migas Regulation No. 02/P/BPH Migas/XII/2004 regarding guidelines for the granting of special rights for the transportation of natural gas through pipelines in certain distribution network areas
• BPH Migas Regulation No. 03/P/BPH Migas/XII/2005 regarding guidelines for the stipulation of the prices of natural gas for households and small customers
• BPH Migas Regulation No. 04/P/BPH Migas/XII/2005 regarding guidelines for the stipulation of the tariff for transportation of natural gas through pipelines
• BPH Migas Regulation No. 05/P/BPH Migas/XII/2005 regarding guidelines for the auction of natural gas transmission internodes and distribution network areas

3. Broadly speaking, what is the governmental policy for the domestic natural gas sector and which governmental bodies set it?

A goal of Law 22 is to ensure "effective implementation and control" of upstream and downstream activities. One of its purposes is to encourage further development of Indonesia’s substantial natural gas reserves, for both domestic use and export. Another is to ensure that sufficient natural gas is available to meet domestic demand. Satisfying such a demand at present is limited by insufficient natural gas transmission and distribution infrastructure. At the same time, the Law aims to encourage competitive activity (eg by the conversion of Pertamina into a commercial oil and gas company competing with private sector companies and by opening downstream activities to private investment). Under GR 35, for PSCs executed after 23 November 2001, the contractor is subject to a domestic market obligation pursuant to which the contractor can be required, by the minister of energy and mineral resources (the minister), to supply up to 25 per cent of its gas production to the domestic market.

Indonesia does not import natural gas. In 2004, Indonesia was the sixth-largest producer of natural gas, producing an estimated 3.03 TCF. Approximately 20 to 25 per cent of Indonesia’s energy needs are met by natural gas.

Ownership of natural gas remains with the government through production until delivery to a third-party purchaser.

Exploration, development and production (ie upstream) activities are conducted by foreign or domestic companies acting as contractors of the government under cooperation contracts with BP Migas. Existing PSCs are effective until expiry except that Pertamina’s rights and obligations under such PSCs are to be assumed by BP Migas through an amendment to the PSC. As to production sharing arrangements in the form of TACs, the government’s interests under TACs are transferred to Pertamina and remain effective until they expire. Pertamina must enter into a cooperation contract with BP Migas in order to continue exploration and exploitation under the TACs.

Cooperation contracts grant contractors the exclusive right for up to 30 years to conduct upstream activities within a defined area under the control of BP Migas. This right does not encompass any grant of surface rights to land, which must be acquired through negotiation with owners and occupiers. All financial risks of operations conducted under the cooperation contract are borne by the contractor. The oil and natural gas produced is shared between the contractor and the government in the proportions specified by the cooperation contract. The cooperation contract may be extended once for up to 20 years.

6. What governmental or administrative authorisations are required to carry out natural gas exploration and production? Does the government allow the lease of mineral rights; are there laws or regulations governing when, where or how much natural gas may be produced; for drilling on public land, is there a governmental authority that authorises and/or monitors such activities?

As the exploration and exploitation of natural gas are upstream activities, the only governmental authorisation required to carry out such activities is the cooperation contract with BP Migas, although determination of the contract area subject to the cooperation contract and the initial development of the field must be approved by the minister upon recommendation of BP Migas and consultation with the relevant provincial government, and Soewito Suhardiman Eddymurthy Kardono indonesia Getting the Deal Through – Gas regulation 2006 any subsequent development must be approved by BP Migas. Executed cooperation contracts must be notified to (but not approved by) the DPR and the Indonesian People’s Legislative Assembly.

The day-to-day conduct of exploration and production activities will require the obtaining of permits and approvals from agencies within the applicable regional and provincial governments, as well as the national government. As pointed out above, mineral rights (ie the right to mine oil and gas) remain with the government. Private companies may engage in the exploration and exploitation of oil and gas through a cooperation contract with BP Migas. However, such cooperation contracts do not transfer the mineral rights to the private entities.

There are no direct regulatory restrictions on the quantity of natural gas that can be produced by contractors under cooperation contracts, but all work programmes (whether for exploration, drilling or production) are subject to the prior approval of the minister based on the consideration of BP Migas and plans of development are subject to the prior approval of BP Migas or the minister.

There are several governmental authorities that monitor drilling activities, namely the Directorate General of Oil and Gas, the Department of Resettlement and Regional Infrastructure, the Department of Forestry, the National Land Agency and the State Ministry of Environment.

The proceeds of sale of natural gas produced under a PSC are shared between the government and the contractor. Historically, the general after-tax split between the government and contractors for natural gas has been 70:30 after a contractor has recovered its costs in accordance with the provisions of a given PSC. Generally, the current split is 65:35 and, at least theoretically, the split for any given cooperation contract is subject to negotiation. In addition to sharing production under cooperation contracts (which it, in turn, is required to share with local governments), the government also taxes profits of contractors and companies engaging in downstream business, as well as the profits of Pertamina.

While private companies may own and operate pipelines and storage facilities, the minister and BPH Migas will determine how those downstream activities are organised and conducted under the Law. The minister is charged with developing a national gas transmission and distribution network master plan (the master plan) while BPH Migas is authorised to conduct auctions of special rights to transport natural gas by pipeline in certain regions based on the master plan and to stipulate what should be paid for the rights granted. These rights are limited to a certain pipeline network. BPH Migas is also authorised to regulate the transportation through pipelines and distribution of natural gas, stipulate the joint utilisation of transportation, distribution and storage facilities, determine the obligations of private entities engaging in downstream activities where market mechanisms are not functioning, in remote areas, set tariffs for pipeline use, and set the price of natural gas for households and small-scale consumers.

Companies engaging in transportation of natural gas through pipelines or trading of natural gas must pay a defined contribution or toll to BPH Migas based on volumes of transported or sold gas. The contribution is to be used by BPH Migas for its working plan and budgetary purposes as contemplated by article 48(2) of Law 22.

Generally, a specific business licence is required from the minister while, to transport natural gas through pipelines, the authorised entity must also obtain special rights for such pipeline from BPH Migas. Construction and operation of these facilities will be subject to the regional, provincial and national regulations generally applicable to the construction and operation of industrial facilities.

Uncertainty exists concerning the authority of BPH Migas over pipelines that contractors require to transport natural gas to delivery points under natural gas sales contracts.

10. In general, how does a company obtain the land rights to construct a natural gas transportation or storage facility?

Generally speaking, land rights will be obtained by negotiating with owners and occupiers in accordance with prevailing laws. To the extent these facilities are used for upstream activities within the framework of a cooperation contract, the contractor will have to comply with Law 22, GR35 and the relevant implementing regulations to be issued thereunder. Contractors are responsible for the payment of these rights and the land that is purchased for a facility will become the property of the state, title to which will be held in the name of BP Migas, while land that is leased for a facility will be leased in the name of the contractor.

Title to land purchased for facilities used for downstream activities outside of a cooperation contract may be held in the name of the business entity engaging in the transportation/storage activity.

Under Law 22, as stated above, the minister will establish the master plan and, given its general authority over transmission and distribution of natural gas, and its specific authority to determine joint utilisation of transportation systems and intervene in pipeline operator disputes, BPH Migas will likely play a key role in determining questions of access to natural gas transportation systems and interconnection of, and cooperation between, pipeline systems.

To date, most pipelines that have been built are project-specific and are not interconnected. As to cooperation between systems, please see our answer in 11 above.

A pipeline or storage facilities operator cannot be required to expand its facilities in order to accommodate new customers. While expansion cannot be mandated directly, given that development plans for natural gas requires BP Migas’ approval and the operation of pipelines is regulated by BPH Migas, it is conceivable that either could require a contractor or pipeline operator to develop facilities in excess of its needs and BPH Migas could then use its authority to compel such excess to be shared, especially given the Law’s stated objective of ensuring sufficient natural gas is available to meet domestic demand.

As noted in 8 above, BPH Migas is responsible for regulation, stipulation and supervision of tariffs for pipeline and storage services.

To date, there is no specific regulation covering the extraction of natural gas liquids which may be conducted either within or outside the framework of a cooperation contract. If conducted outside the framework of a cooperation contract, it would be viewed as a downstream processing activity for which the processing entity must obtain a processing business licence from the minister.

16. Describe the contractual regime in relation to transportation and storage.

In general, and subject to BPH Migas’s authority to set the tariff for transportation of natural gas through pipelines, parties may agree on the terms of the agreements for the transportation and storage of natural gas. A ‘contractual regime’ is in its early stages of evolution. Regulation of natural gas distribution

Regulation of natural gas distribution

To date, the local distribution of natural gas is extremely limited in Indonesia, and there is as yet no developed regulatory system for natural gas distribution. The distribution of natural gas will be a downstream activity subject to regulation by BPH Migas (on this, please see 8 above).

See 9 above, which is applicable to distribution as well as transportation pipeline networks.

As stated in 11 above, BPH Migas has the authority to determine the scheme for access to the natural gas grid, subject to the master plan.

Tariffs for pipeline use and the price of natural gas for households and small-scale consumers are to be determined by BPH Migas.

BPH Migas may adjust tariffs for pipeline use if there is a change in the cost of the pipeline and/or new investment is made or if there is a change in the number of users of the pipeline. The tariff can also be changed if there is an amendment to the gas transportation agreement which affects the amount of the tariff.

Given that sellers of natural gas to households and smallscale consumers are required to submit in their natural gas price proposal to BPH Migas, among others:

• a proposal for the amount of natural gas price;
• an economical analysis relating to the stipulation of the natural gas price;
• the numbers of households and/or small-scale consumers along with the marketing map;
• the volume of sales; and
• a copy of Gas Sale Agreement.

It is possible that any change in this information could be used as the basis for a price adjustment.

See 13 above.

22. Describe the contractual regime in relation to natural gas distribution

See 16 above.

The ownership of natural gas remains with the government as far as the point of delivery or sale. The structure for supply and trading of natural gas will enter a new era, as the direct negotiation of gas sales contracts by sellers and buyers and the trading of natural gas have been made possible by the enactment of Law 22.

To engage in trading, an entity must obtain a trading business licence from the minister which will cover only a certain trading area and, as stated above, the price of natural gas for households and small-scale customers will be determined by BPH Migas. The trading business licence granted will be either a wholesale business licence or a limited trading licence. A wholesale business licence entitles the licensee to serve large customers. These licensees must have a guaranteed supply of product from domestic and/or overseas sources and they must maintain minimum operational reserves, as stipulated by BPH Migas. They must also own or control their own storage facilities and infrastructure. Further oversight might evolve given Law 22’s purpose of ensuring an adequate domestic supply and its requirement that contractors make available to the domestic market up to 25 per cent of their gas production.

At present, no. Going forward, the answer to this question will depend on how BPH Migas regulates distribution and trading activities and whether the government will issue multiple trading and distribution licences for a given area. Bundling of several products is possible since one entity may hold both a distribution and a trading licence.

It depends on how the LNG business is carried out. If, under the applicable contractual arrangements, the natural gas to be sold is to be sold as LNG, then the owner of the LNG will be the government until the point of delivery/sale and the facilities would be developed within the framework of the cooperation contract. If the natural gas to be liquefied has been purchased by a private party, then the LNG and related processing and other facilities would be owned by the purchaser.

Currently, Indonesia has two main LNG export facilities, the Arun and Bontang facilities. The structure for each of these projects is generally as follows (although BP Migas may have assumed several of the roles of Pertamina described below):

• Pertamina has entered into sales agreements with non-Indonesian buyers and, to support these agreements, Pertamina has entered into supply agreements with contractors to ensure that Pertamina holds committed gas reserves sufficient to meet its obligations under the sales agreements
• Pertamina, on behalf of the government, owns the LNG to the point of export and all facilities for the LNG plant. Pertamina contracts with the shipping companies to transport the LNG to the end buyers, and with a management company to manage and operate the LNG plant. All costs for processing dry gas into LNG, including the costs of the management company, are reimbursed at cost. The sales revenue recognised by the contractor is recognised on a ‘net-back’ basis. The sales proceeds are utilised first to repay any loans, and then to pay all costs of processing and transporting the LNG to the buyers. The contractor is entitled to the remaining proceeds after these costs have been paid in accordance with its PSC

Two new LNG projects are under development: the Tangguh LNG project in Papua and an LNG facility in Sulawesi to be supplied by the Donggi and Senoro fields.

If conducted within the framework of a cooperation contract, the chief approval required will be the approval of the development plan by either the minister or BP Migas. If conducted outside the framework of a cooperation contract, the processing entity will need one or more downstream business licences depending on the scope of its operation.

Technically speaking, presidential approval is required to establish and operate private LNG facilities, as is the approval of Indonesia’s Capital Investment Coordinating Board (BKPM) if the project is to be undertaken by a processing company with foreign ownership. In addition to these approvals, other technical, safety and environmental licences are required to be obtained from the Department of Energy and Mineral Resources, the other departments having jurisdiction over major construction projects, as well as from the relevant regional and provincial governments. Depending on the structure of the project, its financing may also be subject to government approval.

There are no regulations concerning the determination of the prices and terms of service in the LNG sector. The price of LNG will vary depending on the contractual arrangements between the sellers and buyers. If the LNG is sold within the framework of a cooperation contract, its sale and pricing will be subject to the provisions of the cooperation contract and the regulations of the government and BP Migas applicable to the sale of natural gas.

As the production, transmission, distribution and supply of natural gas can be considered as either upstream activities or downstream activities, they may be regulated and supervised by the government and either BP Migas or BPH Migas.

The government’s authority is to issue the required business and technical licences. BP Migas is authorised to implement the government’s mining rights through cooperation with private companies by virtue of a cooperation contract and BPH Migas is authorised, among other things, to supervise and regulate the distribution, transportation and marketing of natural gas through pipelines.

BP Migas was established by virtue of GR 42 in the form of a state-owned legal entity which is directly responsible to the president. BPH Migas was established by virtue of GR 67, as further implemented by PD86, in the form of an independent institution of the government which is also directly responsible to the president. The head of BP Migas is appointed by the president upon consultation with the DPR and the other members are appointed by the minister while the head and all members of BPH Migas are appointed by the president upon prior approval of the DPR.

Decisions of the regulators can be challenged and appealed by affected parties by submitting an application to the relevant state administrative court (PTUN).

The grounds for challenging or appealing the regulators’ decisions are as follows:

• the decision is contrary to law;
• the state administrative agency or official has used its power for purposes other than those intended; or
• the state administrative agency or official should not have reached the state of making or not making such decision.

To appeal, the concerned party must file an application to the PTUN within 90 days from the date of the decision. If the head of the PTUN rejects the appeal, the appeal may be made to the PTUN itself within 14 days following such rejection.

33. Which governmental body has the authority to prevent or punish anticompetitive practices in the natural gas sector?

While BPH Migas can impose penalties on business entities engaged in the natural gas sector, the Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha or KPPU) is responsible for implementing Indonesia’s Anti-Monopoly Law. The KPPU may issue decisions that certain agreements and conduct or a position in the relevant market (including the natural gas market) are anti-competitive and therefore in violation of the Anti-Monopoly Law. The decisions of the KPPU can be appealed to the district courts and then to the supreme court.

The general prohibitions set forth in the Anti-Monopoly Law will be applied. These prohibitions can be categorised as follows: prohibited agreements; prohibited conduct; and abuse of dominant position in a given market sector.

Should the KPPU determine that a violation of the Anti-Monopoly Law has occurred, it may, among other things, order the termination of the prohibited agreement or cessation of the prohibited conduct or abuse of dominant position. While administrative sanctions are within the KPPU’s authority, if the case is appealed to a district court, the district court may, among other sanctions, impose criminal sanctions, revoke a company’s business licence, or require the termination of conduct that causes damage to other parties.

The transfer of shares in any company with foreign ownership requires the approval of the BKPM. This approval is usually granted routinely, but for the natural gas sector, the BKPM may require a recommendation from the Directorate General of Oil and Gas, BP Migas or BPH Migas. Once any required recommendation letter is obtained, the BKPM’s approval should be issued within two weeks.

For the transfer of assets, generally speaking no approval would be required, although the purchasing company would have to obtain all requisite licences before engaging in business and the selling company may have to obtain approval to transfer assets it had imported with tax or custom facilities.

Under GR 35, any direct transfer of a contractor’s participating interest in a PSC must be approved by the minister based on the recommendation of BP Migas. GR 35 is inconsistent with PSCs existing as at the date the Law was enacted and cooperation contracts entered into since the Law, since under such contracts, transfers to affiliates only require notice to BP Migas, while transfers to non-affiliates require both BP Migas and government approval. In practice, transfers of interests to affiliates are notified to BP Migas which will, in response, issue an acknowledgement letter to the parties concerned. GR35 also imposes a new requirement that if all or a portion of the rights of the contractor are transferred to a non-affiliate or to another company that is not a partner in the same working area, the minister can ‘request’ the contractor to offer the interest to a national company. No corresponding provision is in any PSC or cooperation contract of which we are aware and, given that the Law provides that rights under existing PSCs are not to be affected by the Law, it is uncertain as to whether the new transfer requirements of GR 35 can be applied to a transfer of interests in a PSC existing as at the date the Law was enacted.

For mergers, acquisitions and consolidations, while the Anti-Monopoly Law does not give the KPPU the authority to pre-approve such transactions, all mergers, acquisitions, and consolidations with assets and/or sales value exceeding certain stipulated thresholds are required to be notified to the KPPU at the latest 30 days after closing. Since no regulation has been adopted implementing this notification requirement and because the Anti-Monopoly Law is silent on the issue, it is unclear as to what may happen should the KPPU find that the consummated merger, acquisition or consolidation is anti-competitive.

As this issue relates to the tariff for the distribution of natural gas, it is an issue to be determined by BPH Migas.

With the enactment of Law 22, other than the general rules applicable to the acquisition of shares in private and state-owned entities or their assets and subject to our answer to 39 below, there are no restrictions on the acquisition of shares in or the assets of gas utilities.

As to the transfer of assets, see 36 above.

Foreign companies may not directly engage in downstream activities, although they may establish subsidiaries to engage in these activities, the establishment of which requires the approval of the BKPM and the obtaining of the requisite downstream business licence. If the acquisition is by way of acquiring an interest in an existing Indonesian company, then such acquisition would require the approval of the BKPM. The conditions for obtaining BKPM’s approval to either the establishment or acquisition of an Indonesian company will depend on the regulations and policies then in effect. BKPM’s current internal guidelines seem to indicate that it would only permit maximum foreign ownership of 95 per cent in a company engaged in downstream gas business activities in the natural gas sector. Other than the foregoing, there are no special requirements or limitations imposed on foreign companies. However, Law 22 restricts any company from engaging in both upstream and downstream activities at the same time and provides that a company (whether foreign or domestic) may hold an interest in only one cooperation contract.

The most recognised treaties that would affect the regulatory policy are those tax treaties to which Indonesia is a party. Multinational agreements may also affect the regulatory policy to the extent such agreements have been ratified by the Indonesian government.

There are no specific laws concerning cross-border sales of natural gas or LNG.

42. What, if any, restrictions exist on transactions between a natural gas utility and its affiliates?

Law 22 does not restrict any transaction between affiliates of a natural gas utility. General restrictions under the Anti-Monopoly Law and Indonesian tax laws (in respect of transfer pricing) would apply.

The KPPU and the Indonesian tax authorities would enforce such restrictions. Sanctions imposed under the Anti-Monopoly Law are discussed in 35 above while the tax authorities have, among other things, the right to adjust to market prices those prices it deems non-market in any transaction between affiliates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.