Indonesia Updates Risk-Based Business Licensing Standards for the Energy and Mineral Resources Sector

Indonesia has introduced a new framework for business licensing standards in the energy and mineral resources sector through Minister of Energy and Mineral Resources Regulation No. 7 of 2026 (Permen ESDM 7/2026). The regulation sets out business activity standards and supporting business licensing requirements under Indonesia’s risk-based business licensing framework.

Permen ESDM 7/2026 has been effective since 12 June 2026 and replaces the previous framework under Minister of Energy and Mineral Resources Regulation No. 5 of 2021. The regulation covers activities across oil and gas, electricity, mineral and coal mining, as well as new and renewable energy.

Beyond updating existing licensing standards, the regulation introduces several specific requirements, including for carbon capture and storage (CCS), biofuel blending, and LPG 3 kg sub-distributors. It also provides transitional arrangements for existing licences and applications that were already in progress when the new framework took effect.

A New Licensing Framework for the Energy Sector

Permen ESDM 7/2026 provides more detailed business activity standards for risk-based business licensing in the energy and mineral resources sector. The regulation uses the Indonesian Standard Industrial Classification (KBLI) as a reference for classifying business activities and provides that the KBLI references should be read in accordance with subsequent updates to the national classification system.

The framework covers a broad range of activities, including upstream and downstream oil and gas, electricity supply and supporting services, mining activities, geothermal activities, biofuel trading, and other energy-related businesses.

As a result, businesses operating in the sector should consider the licensing requirements applicable to their specific KBLI and business activity under the new framework.

Specific Licensing for Carbon Capture and Storage

One of the more notable developments is the introduction of a specific licensing framework for Carbon Capture and Storage (CCS).

The regulation distinguishes between exploration of the Target Injection Zone (Zona Target Injeksi or ZTI) and the subsequent operation of carbon storage facilities. An exploration licence may be granted for up to six years, while a carbon storage operation licence may be granted for up to 30 years.

Applications for both stages require supporting documentation, including a feasibility study, financial guarantees, and risk management analysis.

The distinction between exploration and operational stages provides a separate licensing structure for activities that involve different stages of CCS development and operation.

New Requirements for Biofuel Blending

Permen ESDM 7/2026 also introduces a specific approval requirement for the blending of refinery products with biofuel.

Businesses carrying out blending activities are required to meet technical standards relating to product quality. The framework also contemplates the establishment of a dedicated testing laboratory capable of assessing the quality of the resulting blended product.

For businesses that already hold licences for oil and gas processing, storage, or trading and were conducting blending activities before the regulation came into effect, a 12-month transition period is available to adjust their activities to the new requirements.

This transition period runs from the regulation’s effective date of 12 June 2026, giving affected businesses until 12 June 2027 to make the necessary adjustments.

LPG 3 kg Sub-Distributors

The regulation also expressly addresses LPG 3 kg sub-distributors (sub pangkalan).

Sub-distributors are classified under a specific KBLI and must have an appointment letter from the relevant main LPG distribution point. They are also required to maintain electronic records of transactions.

The requirements are intended to support monitoring of subsidised LPG distribution and place sub-distributors within the broader risk-based licensing framework applicable to the sector.

For businesses involved in the distribution chain, the new requirements therefore extend beyond the main distribution point and also apply to the activities of sub-distributors.

Transitional Treatment for Existing Licences

Permen ESDM 7/2026 contains specific transitional provisions to address licences and applications that existed before the regulation took effect.

Applications for business licences or supporting business licences that were already being processed may continue to be handled under the previous regulatory framework until the OSS system has been adjusted to the new framework.

Meanwhile, licences that had already been issued and remained valid before 12 June 2026 continue to be valid until their respective expiry dates. This provides continuity for businesses that were already operating under the previous licensing regime.

The regulation also provides for the adjustment of existing licensing nomenclature to the terminology used under the new framework. In certain circumstances, businesses may also rely on the new provisions where these are more favourable to them.

These transitional rules are particularly relevant for businesses that are currently renewing, modifying, or applying for sector-specific licences.

Energy Transportation Outside Pipeline Networks

Permen ESDM 7/2026 also addresses supporting business licences for the transportation of energy products by means other than pipelines.

This includes the transportation of crude oil, natural gas, fuel, gas fuel, and processed products using non-pipeline transportation. For these activities, the relevant licensing requirements are linked to the standards applicable to the transportation sector under the broader risk-based business licensing framework.

Businesses engaged in energy transportation may therefore need to consider both the energy-sector requirements applicable to the goods being transported and the relevant transportation-sector licensing standards.

Administrative Sanctions

Compliance with the business activity standards and supporting licensing requirements remains subject to the applicable administrative sanctions framework.

Depending on the relevant violation and sector, administrative measures may include written warnings, temporary suspension of activities, and revocation of the relevant licence.

The practical exposure will depend on the nature of the business activity and the specific licensing or technical requirement that has not been met. Businesses should therefore consider not only whether the relevant licence has been obtained, but also whether the operational standards attached to that licence continue to be satisfied.

Key Considerations for Businesses

For businesses operating in Indonesia’s energy and mineral resources sector, Permen ESDM 7/2026 makes it important to reassess existing licensing arrangements against the new standards.

In particular, businesses should consider:

• whether their existing KBLI remains appropriate for the activities actually being conducted;
• whether their existing business licence or supporting licence remains aligned with the new framework;
• whether additional approvals are required for activities such as CCS or biofuel blending;
• whether existing licences or applications fall within the transitional provisions;
• whether operational requirements attached to the relevant licence have changed; and
• whether any adjustment is required before the applicable transition period expires.

The impact of the new framework will ultimately depend on the nature of each business activity and its existing licensing position.

Conclusion

Permen ESDM 7/2026 replaces the previous business licensing standards under Permen ESDM 5/2021 and establishes an updated framework for risk-based business licensing across Indonesia’s energy and mineral resources sector.

The regulation is particularly relevant for businesses involved in CCS, biofuel blending, LPG distribution, energy transportation, and other regulated energy activities, while its transitional provisions provide a framework for dealing with existing licences and applications.

For businesses already operating in the sector, the immediate consideration is not simply whether a licence remains valid, but whether the underlying business activity and operational arrangements remain aligned with the standards under the new framework.

This legal update forms part of a series examining recent developments in Indonesia’s regulatory framework. Businesses operating in regulated energy activities should continue to monitor the implementation of the new licensing standards, particularly as the OSS system and sector-specific requirements are adjusted to the updated framework.

Disclaimer: Here

For additional insights on Indonesian immigration compliance and global mobility matters, explore our related publications:

POJK 13/2026: Regulation of Stock Exchange Shareholders and Ownership Structure

POJK 16/2026: Framework for the Operation of the Mineral and Strategic Commodities Exchange under OJK

Overview of the Indonesian Regulatory Framework for Food Additives

New Periodic Reporting Requirements for Guarantee Institutions in Indonesia

When Does an Immigration Compliance Issue Become an Enforcement Matter in Indonesia?

New Requirements for SBSN Auction Plans and Fallback Pricing in Indonesia