Constitutional Court revises Oil and Gas Law

Constitutional Court on Tuesday decided to make revisions to the country's crucial oil and gas law, a decision that may seem to slow down liberalization push in the downstream sector.

The court decided to revoke Article 28 chapter 2 and 3 in the oil and gas law, which basically stipulated that pricing for oil products and natural gas would be decided based on market mechanism. A member of panel of judges in a press conference said that the article was not in line with the country's Constitution and therefore must be annulled. He did not elaborate further. This, according to one expert, may mean that the government will retain authority to regulate fuel and gas prices, as the commodities are regarded vital to the public, and therefore must be regulated by the state.

In the upstream sector, The Court decided to make some minor revisions on Article 12 Chapter 3. The Court also revised Article 22 Chapter 1, which stipulates that: Business entities or permanent establishments shall give up maximally 25% of their portion resulting from the production of petroleum and natural gas to meet domestic need. The Court erased the word ?maximally? from the Article. The court said that the revision in upstream articles were mainly ?to make the articles legally logic?. ?If the Law stipulates ?maximally?, then there should be ?minimally??, explained one judge.

The decision was a relief to the government, which feared that the Court might decide to annul the Oil and gas Law, as it recently did with the Electricity Law.

One expert, however, opined that the decision to hand authority on fuel and gas pricing to the government might reduce investors? appetite to invest in Indonesian downstream sector.(godang)