| | | | |

What Do the New Cooperation Schemes in MEMR 14/2025 Mean for Oil and Gas Stakeholders?

Oil_and_Gas

The Indonesian Government, through the enactment of the Minister of Energy and Mineral Resources Regulation Number 14 of 2025 concerning Cooperation in the Management of Parts of Working Areas for Enhancing Oil and Gas Production (“MEMR Regulation 14/2025”), introduces a new regulatory framework governing various forms of cooperation between Oil and Gas Contractors and other business entities to optimize national oil and gas production. 

Notably, this regulation sets out new cooperation schemes that allow for the involvement of local entities in the management of specific areas within oil and gas working areas. Depending on the type of cooperation, these local entities may include regional-owned enterprises (Badan Usaha Milik Daerah, “BUMD”), cooperatives, Micro, Small and Medium Enterprises (“MSME”), or other eligible business entities, as further elaborated below for each cooperation scheme. These initiatives reflect a regulatory reform aimed at improving governance and formalizing cooperation mechanisms in the upstream oil and gas industry. 

Type of Cooperation  Objective & Scope  Parties Involved  Profit Sharing  
Operational and/or Technological Cooperation  The objective is to optimize oil and gas production in: 

  1. idle wells; 
  2. production wells; 
  3. idle fields/structures; and/or 
  4. production fields/structures. 

The scope of activities includes: 

  1. subsurface and surface evaluation; 
  2. well maintenance; 
  3. re-opening; 
  4. stimulation; 
  5. layer rework and replacement activities; 
  6. deepening; 
  7. sidetracking; 
  8. secondary recovery; 
  9. tertiary recovery; 
  10. water injection into injection wells; 
  11.  management of oil and gas production including waste management up to delivery point;  
  12. other supporting activities determined by the Head of the Special Task Force for Upstream Oil and Gas Business Activities or (Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi, “SKK Migas”) or the Head of the Aceh Oil and Gas Management Agency (Badan Pengelola Migas Aceh, “BPMA”) in accordance with their authority; 
  13. drilling; 
  14. fracturing; and/or  
  15. multi-stage fracturing  

The activities referred to in points m), n), and o) apply only to cooperation related to fields or structures. 
  1. Contracting Parties:  
    • The Contractor under the Oil and Gas Production Sharing Contract (“Contractor”).
    • Partners (mitra), consisting of business entities and/or permanent establishment that meet the administrative, technical, and financial requirements. These requirements include the partner’s capability and experience in supporting upstream oil and gas activities. 
  2. Relevant Authorities: 
    SKK Migas and/or BPMA. Their involvement includes:

    • Providing technical evaluations and considerations for the proposed activities and scopes of work.  
    • Recommending or proposing potential cooperation opportunities with prospective Partners to Contractors.  
    • Issuing technical guidelines for the implementation of the operational and/or technological cooperation. 
 The profit sharing for partners is as follows: 

  1. For cooperation in idle and producing wells 1 : 
    • The partner is entitled to receive up to 70% of crude oil production2 , which is applicable under the cost recovery Production Sharing Contract (“PSC”) scheme. 
    • The Partner is entitled to 89% of the Contractor’s share of production (before tax), applicable under the gross split PSC scheme. 
  2. For cooperation in idle and producing fields/structures3 : 
    • The Partner is entitled to 85% of the Contractor’s share of profit (after tax), applicable under the cost recovery PSC scheme. 
    • The Partner is entitled to 89% of the Contractor’s share of production (before tax), applicable under the gross split PSC scheme. 
Production Cooperation for Oil Wells of BUMD, Cooperatives, or MSMEs\  The Objective is to optimize the production rate of oil wells located within the Contractor’s working area and outside the operational area by involving the community through BUMD, cooperatives, or MSMEs (“Local Entities”) in the oil production activities.  

The cooperation shall be carried out under the following provisions, including the existence of oil well production activities involving the community:4  

  1. within the Contractor’s working area but outside the operational area; and/or 
  2. outside the Contractor’s working area, provided that the location has the potential for working area expansion. 

The cooperation is implemented through the following stages: 5  

  1. The government (i.e., a joint team, the governor, the regent/mayor, the Head of SKK Migas or the Head of BPMA) conducts an inventory of the relevant oil wells; 
  2. The government, upon the recommendations of the regent/mayor, appoints Local Entities as oil well managers; 
  3. The appointed Local Entities may apply to the Contractor for cooperation by submitting the required business and technical documents. 

The Contractor will evaluate and, if complete, the documents will be forwarded to the Ministry of Energy and Mineral Resources (“MEMR”) through SKK Migas or BPMA for either final approval or rejection.  

Upon approval, the Local Entities execute the production cooperation agreement; and 

  1. SKK Migas or BPMA supervises the cooperation and reports it to MEMR. 
  1. Contracting Parties:
    Contractors & BUMD/Cooperatives/MSMEsRelevant authorities:  

    • Governor: Appoints the operator (BUMD, Cooperatives, or MSMEs) responsible for managing the oil wells within their administrative region, based on recommendations of the relevant regent/mayor. 
    • MEMR: Grants either final approval or rejection of the cooperation proposal submitted by the Contractor, based on the technical recommendation provided by SKK Migas or BPMA. 
    • SKK Migas or BPMA: Conducts a technical evaluation of the cooperation proposal submitted by the Contractor and issues a formal recommendation to the MEMR as the basis for approval. 

 

 
  1. The following are the Local Entities’ compensation: 
    • Local Entities are entitled to 80% of the Indonesian Crude Price (ICP)6 , applicable under the cost recovery PSC.
    • Local Entities are entitled to 93% of the Contractor’s share of production (before tax), applicable under the gross split PSC.7
  2. Local Entities must provide compensation to the community in an amount of up to 70% of the ICP, based on mutual agreement.8  
    • The Contractor is entitled to a maximum incentive of 10% under the PSC, subject to a the recommendation of SKK Migas or BPMA and approval of MEMR.9  

 

Have These Schemes Been Regulated Previously? 

These cooperation schemes were not previously detailed in existing upstream oil and gas regulations, such as Law Number 22 of 2001 on Oil and Gas (as amended) or Government Regulation Number 35 of 2004 on Upstream Oil and Gas Business Activities (as amended) (“GR 35/2004”).  

There were no legal provisions explicitly allowing Contractors to engage in upstream cooperation with third parties such as BUMDs, MSMEs, cooperatives, or community-based entities, either within or outside the PSC framework. While GR 35/2004 and MEMR Regulation No. 37 of 2016 concerning Provisions for Offering 10% Participating Interest in Oil and Gas Working Areas (as amended)  mandate the offering of a 10% Participating Interest to BUMDs in newly developed working areas, this obligation is limited to equity participation and do not cover broader operational or technological cooperation.  

MEMR Regulation No. 14 of 2025 introduces a regulatory basis for such cooperation, enabling Contractors to formally collaborate with local entities to optimize oil and gas production, particularly in idle wells, marginal fields, or outside core operational areas. 

Oil_and_Gas

Read More: Energy Transition in the Power Sector: Key Highlights from MEMR Regulation 10/2025

Key Takeaways for Oil and Gas Industry Players 

  1. Experience Requirements: Partners must demonstrate prior experience in upstream oil and gas activities. However, MEMR 14/2025 does not specify detailed experience criteria, leaving it open to interpretation and assessment of the evaluators. 
  2. Scope of Cooperation: Cooperation is limited to certain parts of the Work Area, particularly those not yet optimized or excluded from the Contractor’s approved work plan. This cooperation does not alter the Contractor’s management of the overall Working Area, and must be approved by the relevant authorities. 
  3. Profit-Sharing Models Vary: Each cooperation type applies a distinct compensation scheme. For example, in operational or technological cooperations, the compensation for Partners is calculated based on the volume of additional production multiplied by a designated percentage, ICP, and applicable exchange rate. In contrast, for production cooperation with BUMDs, Cooperatives, or MSMEs, the remuneration is directly tied to a fixed percentage of the ICP. 
  4. Transitional Period for Community-Managed Wells: MEMR Regulation 14/2025 introduces a transitional period of up to four years from its enactment, during which community-managed wells may continue to be managed under a specific production cooperation scheme. This interim period allows time for well inventory, appointment of operators, agreement approval, and continued operations. After this period, only producing and compliant wells can proceed under new cooperation agreements in accordance with technical guidelines and future regulatory approvals. 

Conclusion 

MEMR Regulation 14/2025 presents a fresh opportunity for cooperation in upstream oil and gas operations, not only for large-scale companies but also for regional-owned enterprises, cooperatives, and MSMEs. A clear understanding of the new cooperation schemes allows stakeholders to explore potential participation and adequately prepare to meet the administrative and technical requirements set by Contractors and regulatory authorities. 

Our team continues to monitor regulatory developments in this area. For further information or consultation, please contact ADCO Law. 

***

About ADCO Law:

ADCO Law is a law firm that offers clients a wide range of integrated legal services, including commercial transactions and corporate disputes in a variety of industry sectors. Over the course of more than a decade, we have grown to understand our clients’ industries and businesses as well as the regulatory aspects. In dealing with business dynamics, we provide comprehensive, solid legal advice and solutions to minimize legal and business risks.

From Upstream to Downstream, We Understand Your Industry. In complex transactions and certain cases, we actively engage with financial, tax, and environmental specialists, accountants, and law firms from various jurisdictions to add value to our clients. Our strong relationships with Government agencies, regulators, associations, and industry stakeholders ensure that our firm has a holistic view of legal matters.

ADCO Law is a Proud Member of the Alliott Global Alliance (AGA) in Indonesia. Founded in 1979, AGA is one of the largest and fastest-growing global multidisciplinary alliances, with 215 member firms in 95 countries. As a law firm, we also believe in regeneration. To stay abreast of business changes and stay relevant, our formation of lawyers is comprised of the top graduates from Indonesian and international law schools.