The Demise of Indonesia's Upstream Oil and Gas Regulatory Agency: An Alternative Perspective

In late 2012, Indonesia's Constitutional Court declared the law on oil and gas unconstitutional, ruling that the independent regulatory agency (IRA) interfered with the state's direct control over the country's resources as mandated in the Constitution. The controversial decision stunned the foreign investor community and Indonesia's political establishment. To date, scholars have concentrated on the Court's decision-making and have underscored the role that economic nationalism and political Islam played in opposing the Upstream Oil and Gas Regulatory Agency, which was viewed as a tool of foreign oil firms. This article presents an alternative perspective on the agency's demise by deploying an institutional analysis of the IRA itself and its struggles to govern the country's rich and hotly contested energy sector. It argues that while the vested interests that amassed against the agency were great, it was the country's decline in oil production that sealed the IRA's fate more than anything else.