Abandoned site restoration: addressing residual liability in upstream oil and gas industry

This study examines the complex regulatory landscape governing the decommissioning policy in Indonesia’s upstream oil and gas sectors. Currently, the regulatory framework provided for addressing residual liability is limited. Consequently, this exposes contractors to potentially disproportionate post-operational risks. Therefore, legal certainty is essential to ensure a balanced allocation of risk between the state and contractors. This empirical juridical study employs statutory and conceptual approaches to develop an analytical framework. The findings indicate that contractors are subject to limited liability by partially shifting residual risk to the state, which deviates from the polluter-pays principle. The government can address this imbalance by adopting comprehensive risk-sharing strategies, such as the establishment of an abandoned-site restoration fund to support decommissioning and post-operational activities. Additionally, contractors’ environmental compliance can be assessed using more recent mechanisms. The proposed novel framework conceptualises residual liability sharing between contractors and the state to facilitate equitable and sustainable decommissioning.