MEMR 1/2025: Strengthening Regional Roles in PI Allocation

Indonesia has reinforced its commitment to local participation in energy projects through Ministerial of Energy & Mineral Resources (MEMR) Regulation No. 1/2025, which revises the earlier framework (No. 37/2016). The new regulation clarifies the structure of local government -owned enterprises (LGOC/BUMD), recognizes subsidiaries as eligible PI recipients, and formalizes the offer process with stricter transparency requirements.

This update is not only about compliance — it’s about ensuring transparency, investment continuity, and equitable benefits for local communities in oil and gas projects.

What is 10% Participating Interest (PI)?

The 10% PI obligation requires contractors to offer up to 10% ownership in a cooperation contract to a Regional-Owned Enterprise (BUMD) or, if declined, to a State-Owned Enterprise (BUMN).

This mechanism ensures that local governments share in the benefits of oil and gas projects, supporting community welfare and regional development.

Purpose of the 10% PI

• Strengthen regional and national involvement in managing oil and gas resources
• Ensure local communities benefit from natural resource wealth
• Support community welfare and regional development

Key Principles

• PI shares cannot be sold, transferred, or pledged
• BUMD must be established as a limited liability company (>99% owned by the local government)
• Contractors cover initial costs on behalf of the BUMD
• Reimbursement is made from the BUMD’s share of production revenues

The Process

1. POD Approval → Contractor must offer 10% PI after the Plan of Development (POD) is approved
2. Appointment of LGOC → Governor appoints a Local Government-Owned Company (LGOC) within 10 working days
3. Offer to LGOC → Contractor submits a written offer; LGOC responds within 60 days
4. Due Diligence → LGOC conducts due diligence for 180 days before confirming interest
5. Offer to SOE → If LGOC declines or fails to respond, PI is offered to a State-Owned Enterprise (SOE)