Executive Summary of Legal Opinion on Petrogas Indonesia: Key Legal Risks, Governance Issues, and Recommendations (2026)

Legal Review Uncovers Governance and Compliance Risks at Petrogas Indonesia – Key Findings for Investors

WongPartnership LLP’s executive summary of its legal opinion, dated 27 January 2026, reveals a series of significant governance, compliance, and legal risks at Petrogas Indonesia (“the Company”) and its subsidiaries, including PIL and PBL. These findings follow an independent review by PricewaterhouseCoopers (PwC) and are likely to be of material interest to shareholders and investors given their potential impact on share price, regulatory standing, and the Group’s future operations.

Key Findings

1. Alleged Improper Dealings With Minority Shareholder and Group A

Concerns Raised: The review noted possible improper dealings between Petrogas Indonesia and Group A, whose ultimate shareholders are believed to be the owners of the Minority Shareholder. While dividends requests date back to 2022, actual payments were made only in April 2023 and December 2024.
Lack of Internal Controls: There is a lack of robust controls over transactions with affiliates of Group A, with payments increasing year-on-year. The absence of market benchmarking raises questions about the fairness of these transactions.
Bribery Allegations: Allegations of bribery involving the former PD to secure regulatory advantages and his own position were investigated but not substantiated. However, the findings highlight the need for improved anti-corruption safeguards.

2. Procurement Misconduct and Potential Collusion

Bundling Led to Increased Costs: Contrary to expectations, bundled procurement contracts approved by management increased costs by USD 0.7 million, rather than reducing them.
Potential Bid-Rigging: Evidence of a major bidder appearing as a subcontractor in competing bids, unusual pricing patterns, and suspected pre-determination of results strongly suggest possible collusion or bid-rigging, which may breach Indonesian law and trigger regulatory action.

3. Unreported Oil Spill Incident

Sizable Oil Spill Alleged: A whistleblower reported a major oil spill in January 2021 in the Kasim area, with 1,975 barrels involved. The company’s internal reporting appears to have excluded this incident, raising suspicions of a possible cover-up.
Legal and Environmental Risks: Failure to report may constitute violations of environmental laws and internal policies, with possible fines, regulatory sanctions, and reputational damage. Serious deficiencies were observed in reporting and accountability within Petrogas Indonesia.

4. Bribery to Government Officials

No Direct Evidence of Bribery: While senior management contacts with regulators were noted, no direct bribery was established. Nonetheless, the need for clear boundaries and anti-bribery policies was emphasized.

5. Employment Practices and Alleged Retaliation

Retirement Age Circumvention: Contracts were used to hire personnel beyond the regulatory retirement age, lacking transparency and possibly constituting an abuse of authority.
Whistleblower Retaliation: Allegations of appraisal downgrades as retaliation against whistleblowers were investigated. While direct evidence was lacking, irregularities in the handling of appraisals were found.

6. Unprofessional Behaviour and Operational Delays

Operational Delays: Alleged deliberate delays in drilling programs were attributed to external factors such as Covid-19 and oil price drops, with work commitment periods extended as a result.

7. Whistleblowing Programme

Policy Not Disseminated: The whistleblowing policy was not communicated to Petrogas Indonesia staff until January 2024, breaching the former PD’s duties and regulatory requirements.
Improper Handling of Complaints: Complaints were shared outside authorised channels, including with implicated parties, risking whistleblower confidentiality and exposing the company to legal liabilities.
Procedural Weaknesses: Reliance on informal communication channels (e.g., WhatsApp) and absence of proper oversight in investigative teams were identified.

8. Governance and Succession Planning Failures

Abrupt Leadership Changes: The retirement and re-appointment of the former PD as Senior Advisor revealed a lack of succession planning and compliance with governance codes. Appointment of the new PD lacked rigorous assessment.
Potential Listing Rule Breaches: The unclear role of the Senior Advisor and failure to treat the PD as a Key Management Personnel (KMP) may have breached Singapore Exchange (SGX) Listing Rules and corporate governance codes.

Recommendations for Remediation

Conflict of Interest Policy: Implement comprehensive policies and periodic competitive benchmarking for related party transactions.
Procurement Controls: Strengthen due diligence, enhance training, and tighten internal controls to prevent collusion and bid-rigging.
Environmental Compliance: Conduct regular audits and drills, strengthen data integrity, and ensure proper reporting of incidents.
Anti-Bribery Programme: Establish and communicate clear anti-bribery policies, with regular training for all stakeholders.
HR Transparency: Digitise records, enforce hiring procedures, and limit contract arrangements for retirees.
Whistleblowing: Ensure policy dissemination, confidential handling, and regular reporting to management and the AC.
Governance: Update NC Terms of Reference, ensure thorough succession planning, and compliance with SGX rules for KMP changes.
Internal Audit and Legal Oversight: Strengthen internal audit and consider appointing a General Counsel for improved oversight.
Disciplinary Actions: Consider disciplinary actions and civil remedies against individuals responsible for breaches and lapses.

Potential Price-Sensitive Issues for Shareholders

Regulatory Risks: Ongoing legal, environmental, and governance issues may trigger regulatory action, fines, or sanctions in both Singapore and Indonesia, affecting company valuation and market perception.
Reputational Damage: Allegations of improper conduct, bid-rigging, environmental violations, and whistleblower retaliation could harm the company’s reputation and investor confidence.
Disclosure Obligations: Certain findings (procurement irregularities, environmental incidents, governance failures) may require immediate disclosure under SGX Listing Rules, potentially impacting share price and liquidity.
Leadership and Control Weaknesses: Abrupt changes in key leadership and lack of robust succession planning may lead to instability and strategic uncertainties.
Operational Risks: Weaknesses in procurement, HR, and whistleblowing controls could result in future financial losses or regulatory penalties.

Conclusion

The findings of the legal and independent reviews expose major governance, compliance, and operational risks at Petrogas Indonesia. Investors should closely monitor management responses and the implementation of recommended remedial actions, as failure to address these issues may have significant and lasting impacts on the company’s share price and long-term value.

Disclaimer: This article is based on the executive summary of a legal opinion and fact-finding report. The information presented is for informational purposes only and should not be construed as investment advice. Investors are encouraged to conduct their own due diligence and consult professional advisors before making any investment decisions.