Global Business Guide Indonesia

Website Navigation
Energy in Indonesia Energy in Indonesia Energy in Indonesia Energy in Indonesia Energy in Indonesia
Sign up for the GBG Indonesia Quarterly Business Intelligence Report for the latest news on your sector.
Sign Up
Energy & Mining | Legal Framework for Mining and Minerals

Mining Law No. 4/2009 came into effect January 2009 and replaces Law No. 11/1967. Implementation procedures No. 22/2010 and No.23/2010 were enacted in 2010 to provide the guidelines for how the law is to be executed.

Summary of the Law

  • Mining can only be done in areas delineated by the Ministry of Energy and Mineral Resources to protect areas from environmental damage.
  • Introduction of a tendering process to make it more transparent and competitive for both local and foreign firms.
  • Mining Business License (IUP) and Special Mining Business License are issued for 20 years and replace the Contracts of Work (CoW) and Coal Contracts of Work (CCoW) that were valid for 30 years.
  • The relevant local authority determines a mining business license area, Wilayah Izin Usaha Pertambangan (WIUP). Only after this can a IUP be granted.
  • For coal, a maximum of 25,000 hectares for a WIUP is granted in the fourth year of exploration and 15,000 hectares in the seventh year of production.
  • For metals, a maximum of 50,000 hectares for exploration in the fourth year of exploration is granted and 25,000 hectares for the beginning of production or in the eighth year.
  • Foreign owned license holders must divest 20% within 5 years of production commencing, replacing the 51% under the CoW.
  • Existing CoW are still valid but must be converted to IUPs.
  • All processing of raw materials must be done locally and domestic market needs would be prioritised for purchase as per Ministerial Regulation No. 34/2009. By 2014, no raw materials from mining (referring to metals and minerals) can be exported to the international markets.

Other laws to be considered

  • Law No. 39/2004 (amendment of Law No. 41/1999) on Forestry and subsequent Presidential Decree of February 2010 that derives from that law, permitting only underground mining in protected forest deemed to be of ‘strategic importance’.
  • Spatial Planning Law No 46/2007 that requires all regional authorities to specify the designated zones for activities such as mining for a 5 year term. Specified zones may be in conflict with those designated by the national government under the Law on Mineral and Coal Mining.
  • Environmental Law No. 32/2009 concerning Environmental Impact Assessment (AMDAL). Businesses engaged in natural resource exploitation are required to obtain an environmental permit issued by the Ministry of Environment and details the penalties for those who cause environmental damage including imprisonment and fines.

Global Business Guide Indonesia - 2012

icone share

Indonesia Energy Snapshot

Contribution to GDP: 3.44% (2016) Oil & Gas Imports: $1.22 billion USD (Jan 2016)
Proven Oil Reserves: 3.69 billion barrels (2016)
Proven Gas Reserves: 2.85 trillion cubic metre (2016)
Proven Coal Reserves: 28 billion tonnes total reserves (2015)
Proven Potential in Geothermal Energy: 27 GW
Proven Potential in Hydropower: 75 GW
Other Energy Sources: Coal Bed Methane, Biomass, Waste, Ocean Current, Solar, Wind.
Current Energy Mix: Petroleum 41%, Coal 30%, Natural Gas 23%, Renewables 6% (2014).