In a series of official announcements and press releases issued throughout the course of January to March of this year, the Ministry of Energy and Mineral Resources (MEMR) initiated a large scale deregulation program in a bid to promote and facilitate investment in the energy sector.
The deregulation program in the energy sector, following a direct instruction from President Joko Widodo, has resulted in the elimination of 90 regulations and 96 licensing requirements
(i.e. certification, recommendations, licenses), carried out in the following stages:1
- Stage I on 22 January 2018, which saw the elimination of 11 regulations;
- Stage II on 5 February 2018, which saw the elimination of 30 regulations and 2 licensing requirements;
- Stage III on 12, 19 and 26 February 2018, which saw the elimination of 45 regulations and 72 licensing requirements; and
- Stage IV on 5 March 2018, which saw the elimination of 4 regulations and 22 licensing requirements.
One of the industries to have witnessed significant development as a result of the deregulation program is the energy sector supporting business industry, which saw the elimination of the Registration Certificate (Surat Keterangan Terdaftar) as a required license for certain energy sector supporting businesses during Stage IV as referred to above. This elimination was preceded by the issuance of several MEMR regulations intended to consolidate the licensing frameworks for certain energy sub-sectors.
In view of the above, we set out below recent developments and overall licensing framework for the energy sector supporting business industry.
In summary, the current licenses required for a company, whether foreign or domestic, to carry out supporting business activities in each of the energy sub-sectors are as follows:
- with respect to the Oil and Gas (O&G) sub-sector, the O&G Supporting Business Ability Certificate (Surat Kemampuan Usaha Penunjang, SKUP) issued by the Directorate General of Oil and Gas of MEMR (DGOG);
- with respect to the Mineral and Coal (M&C) sub-sector, the Mining Services Business License (Izin Usaha Jasa Pertambangan, IUJP) issued by the Directorate General of Mineral and Coal of MEMR (DGMC) through the Investment Coordinating Board (BKPM);
- with respect to the electricity sub-sector, the Electricity Supporting Services Business License (Izin Usaha Jasa Penunjang Tenaga Listrik, IUJPTL) issued by the
Directorate General of Electricity of MEMR (DGE) through BKPM; and
1 Publication entitled Revocation/Simplification of Regulations and Licenses in the Energy and Mineral Resources Sector (Pencabutan/Penyederhanaan Regulasi dan Perizinan Sektor ESDM) published by the MEMR on 5 March 2018. See (in Bahasa Indonesia): https://www.esdm.go.id/assets/media/content/content-pencabutan-penyederhanaan-regulasi-dan-perizinan-sektor-esdm-
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(d) with respect to the geothermal sub-sector, the Geothermal Registration Certificate (Geothermal SKT) issued by the Directorate General of New and Renewable Energy and Energy Conservation of MEMR (DGNREEC) through BKPM.
In practice, in addition to the licenses set out above, other licenses are required to conduct supporting businesses relating to:
- construction, which also requires a Construction Services Business License (Izin Usaha Jasa Konstruksi, IUJK) issued by the Ministry of Public Works and Housing (MoPWH) through BKPM; or
- industry, which also requires an Industrial Business License (Izin Usaha Industri, IUI) issued by the Ministry of Industry (MoI) through BKPM.
Furthermore, other supporting business sub-sectors (commonly referred to as nonconstruction) usually require the company and/or its experts and skilled personnel (i.e. human resources) to hold certificates issued by relevant accredited institutions.
3.O&G supporting businesses
O&G supporting businesses are regulated under MEMR Regulation No.14 of 2018 on Oil and Gas Supporting Business Activities (MEMR 14/2018) and is generally classified into three types:
(a) construction services; (b) non-construction services; and (c) industry.
The license to conduct O&G supporting businesses is the SKUP, which is granted by the DGOG, to a company or an individual that has demonstrated its ability to produce goods and/or services domestically, based on evaluation of the following aspects:
- legal, namely its business and financial status;
- technical, namely its production ability and management system;
- marketing network; and (d) after sales service.
Previously, the license to engage in O&G supporting businesses was the O&G SKT, whereas the SKUP was issued to an O&G SKT holder as evidence that its ability in the relevant O&G supporting business classification had been evaluated by the DGOG.
MEMR 14/2018 provides that the SKUP application must be made online; however, the online platform has not yet been developed. In the meantime, SKUP applications must be manually and directly submitted to the DGOG.
Prior to obtaining an SKUP, MEMR 14/2018 sets out that an applicant must have also obtained the following technical licenses (as applicable):
- to carry out construction services, an IUJK;
- to carry out technical inspection and testing as a non-construction service:
- an inspection agency management certificate; and
- maintenance of inspection standards (evidenced by a certificate); (c) to lease vehicles as a non-construction service:
- a Sea Transport Company Business License (SIUPAL); or
- an Air Transport Business License; and
- a Vessel Grosse Deed; and
(d) to carry out supporting industry, an IUI.
4.M&C services businesses
M&C services businesses are currently regulated under MEMR Regulation No.11 of 2018 on Procedures on the Granting of Areas and Licenses and Reporting for Mineral and Coal Mining Business Activities (MEMR 11/2018), and are classified into the following categories:
- consultation, planning for and implementation of:
- general planning;
- feasibility study;
- mining construction;
- mining environment;
- reclamation and post-mining; and/or
- mining safety; and
- consultation and planning for:
- mining; or
- processing and refining.
The license to conduct M&C services business activities is the IUJP, which is granted by the DGMC through BKPM, and permits the holder to conduct core mining services business activities relating to a stage and/or part of a mining business activity.
MEMR 11/2018 does not explain what is referred to as core mining and non-core mining business activities. However, MEMR Regulation No.28 of 2009 on the Implementation of Mineral and Coal Services Businesses defines non-core mining services business activities as “services apart from the mining services business, to support mining business activities”.
The classifications and sub-classifications of the mining services business, including the procedures and requirements for application, evaluation, issuance and extension of the IUJP, are currently set out in Attachment VII of MEMR Decree No.1796 K/30/MEM/2018 on Guidance on the Implementation of Application, Evaluation, and Issuance of Licenses in the Mineral and Coal Sector (MEMR Decree 1796/2018).
Based on the above, non-core mining services business activities are activities that are neither set out under MEMR 11/2018 nor classified in MEMR Decree 1796/2018. To conduct non-core mining services business activities, a company only needs to hold a basic business license (e.g. SIUP) and is no longer required to obtain a mining registration certificate (tanda registrasi).
5.Electricity services businesses
Electricity supporting services businesses are regulated under MEMR Regulation No.35 of 2013 on Procedures on Electricity Business Licensing, as amended by MEMR Regulation No.12 of 2016 (MEMR 35/2013), and cover the following activities:
- consultation in the electricity supply installation sector;
- construction and installation of electricity supply installations;
- inspection and testing of electricity installations;
- operation of electricity installations;
- maintenance of electricity installations;
- research and development;
- education and training;
- electricity equipment and utilisation testing laboratories;
- electricity equipment and utilisation certification; (j) electricity technical personnel competency certification; or
(k) electricity supporting services business entity certification.
The license to conduct electricity supporting services businesses is the IUJPTL, which is granted by the DGE, by way of BKPM, in accordance with the classification, qualification and/or certificate of the relevant business entity.
The certificate referred to above is a Business Entity Certificate (Sertifikat Badan Usaha, SBU) which is the formal recognition of the suitability between the ability of a business entity with the classifications and qualifications in the electricity services business sector issued by a Business Entity Certification Agency (Lembaga Sertifikasi Badan Usaha).
6.Geothermal Supporting Businesses
Geothermal supporting businesses are generally regulated under Government Regulation No.7 of 2017 on Geothermal for Indirect Utilisation (GR 7/2017). Currently, the only regulation that expressly refers to the Geothermal SKT is the same MEMR regulation that delegates authority to the Chairman of BKPM to issue electricity business licenses.8
Procedures to apply for a Geothermal SKT are currently set out in the official website of the DGNREEC (in Bahasa Indonesia). According to the website, geothermal supporting businesses are categorised into: (a) construction services;
- non-construction services;
- the material industry; and
- the equipment industry.
A draft MEMR regulation on Geothermal Supporting Businesses had already been prepared by the DGNREEC when the MEMR announced Stage IV of the deregulation program, eliminating the Geothermal SKT as a supporting business license.
Despite the above, our sources at DGNREEC have advised that they will continue to receive and process applications for Geothermal SKTs through BKPM, as there is yet to be a firm legal basis (i.e. the issuance of an MEMR regulation) that eliminates the Geothermal SKT. In any case, GR 7/2017 requires Geothermal supporting businesses to be registered with the MEMR, which until now has been evidenced by the Geothermal SKT.
Similar to O&G supporting businesses, the Geothermal SKT application document checklist on the DGNREEC’s official website sets out a specific technical license requirement for construction services, namely the IUJK.
An IUI is not expressly required for industry services businesses. However, an applicant must also enclose a permanent business license issued by BKPM (Surat Izin Usaha Tetap) with its Geothermal SKT application.
7.Licensing duality and relationship with other sectors
It should be noted that certain supporting business activities also fall under the scope and authority of other ministries, namely the MoPWH in relation to construction, and the MoI in relation to industrial activities.
Strictly speaking, the IUJP and IUJPTL entitle the holder to immediately carry out activities, independent of any other licenses. However, practice indicates otherwise, with both MoPWH and MoI insisting that any energy supporting businesses relating to construction and/or industry would require basic licenses issued by each of them, respectively.
This is not the case with the SKUP and Geothermal SKT (with respect to construction services), which are issued on the basis of a basic business license and are supplementary in nature.
The only solution for companies wishing to avoid any potential risks has been to take a middle way of obtaining licenses and satisfying requirements from both ministries, including:
- an IUJK issued by the MoPWH through BKPM, after obtaining an SBU from the National Construction Services Development Board (LPJK) and certification for certain personnel; or
- an IUI issued by the MoI through BKPM.
We will continue to monitor developments in respect of this matter and issue further relevant updates as more information becomes available.
Soemadipradja & Taher (S&T)
S&T is one of
Indonesia’s leading law firms with a recognised market leading energy, resources and infrastructure practice.
If you would like to discuss any aspect of this update or your energy-related activities or plans, please feel free to contact us.
Mochamad Kasmali Anandianty Febrina Jamal Soemadipradja
Partner Associate Associate
firstname.lastname@example.org anandianty_febrina jamal_soemadipradja @soemath.com @soemath.com
 Article 1(7) of MEMR 14/2018.
 Article 16(1) in conjunction with Article 16(2) of MEMR Regulation 27 of 2008 on Oil and Gas Supporting Business Activities.
 Article 1(20) of MEMR 11/2018 in conjunction with Article 2(i) of MEMR Regulation 25 of 2015 on Delegation of the Authority to Grant Mineral and Coal Sector Licenses to the Chairman of BKPM to Implement One Stop Services.
 Article 1(6) of MEMR 28 of 2009.
 Article 36(1) of MEMR 35/2013 in conjunction with Article 2(4) of MEMR Regulation 35 of 2014 on Delegation of the Authority to Grant Electricity Business Licenses to the Chairman of BKPM to Implement One Stop Services (MEMR 35/2014).
 MEMR Regulation 5 of 2014 on Procedures for Electricity Accreditation and Certification 8 Article 2(9) of MEMR 35/2014.
 See (in Bahasa Indonesia): http://ebtke.esdm.go.id/post/2015/05/21/859/prosedur.penerbitan.surat.keterangan.terdaftar.skt.panas.bumi
 Article 103(1) in conjunction with Article 103(2) of GR 7/2017.