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OIL AND GAS INVESTMENT IN INDONESIA DIRECTORATE GENERAL OF OIL AND GAS

OIL AND GAS INVESTMENT IN INDONESIA DIRECTORATE GENERAL OF OIL AND GAS DEPARTMENT OF ENERGY AND MINERAL RESOURCES. NATUNA. SUMATRA. KALIMANTAN. MALUKU. SULAWESI. PAPUA. JAVA. NUSA TENGGARA. INDONESIA ARCHIPELAGO. Archipelago : 17,508 islands Inhabited : 6,000 islands

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OIL AND GAS INVESTMENT IN INDONESIA DIRECTORATE GENERAL OF OIL AND GAS

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  1. OIL AND GAS INVESTMENT IN INDONESIA DIRECTORATE GENERAL OF OIL AND GAS DEPARTMENT OF ENERGY AND MINERAL RESOURCES

  2. NATUNA SUMATRA KALIMANTAN MALUKU SULAWESI PAPUA JAVA NUSA TENGGARA INDONESIA ARCHIPELAGO Archipelago : 17,508 islands Inhabited : 6,000 islands Total Area : 751,095 sq mi Water : 705,188 sq mi Land : 45,907 sq mi TOTAL POPULATIONS : 220 Million Peoples

  3. 105 110 115 130 100 120 125 135 140 5 0 -5 -10 Drilled basin, no discovery yet (15) Producing Basin Drilled and proven discovery, but not producing yet (23) Undrilled basin (22) INDONESIA TERTIARY SEDIMENTARY BASINS MAP

  4. SEDIMENTARY BASINS IN INDONESIA (60) Undrilled (22) Drilled (38) Discovery (23) No Discovery Yet (15) Producing (15) No Producing Yet (8)

  5. INDONESIA OIL RESERVES (Status 1ST January 2004) NAD Natuna 123,2 377,2 130,0 North Sumatera Maluku East Kalimantan 7.47 100,1 854,0 Papua 4.564,1 Central Sumatera 109,1 65,7 South Kalimantan 66,1 South Sumatera 883.1 West Java East Java 15,3 741,6 South Sulawesi 583,5 PROVEN = 4.300,7 MMSTB POTENTIAL = 4.312,3 MMSTB TOTAL = 8.613,0 MMSTB Total oil & condensate (MMSTB)

  6. INDONESIA GAS RESERVES (Status 1ST January 2004) NAD Natuna 8,60 54,.21 0,85 North Sumatera East Kalimantan 47,39 Papua 8,20 Central Sumatera 24,13 3,71 Central Sulawesi South Sumatera 24,49 West Java East Java 0,44 6,02 South Sulawesi 10,30 PROVEN = 97,77 TSCF POTENTIAL = 90,57 TSCF TOTAL = 188,34 TSCF TOTAL GAS RESERVES (TSCF)

  7. GAS RESERVES, CONTINUE TO INCREASE 200 160 120 Potential TCF 80 Proven 40 0 1989 1991 1993 1995 2001 2003 1997 1987 1999 1981 1983 1985 Indicating high potential areas yet to be exploited

  8. 2D SEISMIC ACTIVITIES (Thousands Kms)

  9. 3D SEISMIC ACTIVITIES Thousands Kms2

  10. EXPLORATION DRILLING ACTIVITIES 1999-2004 *) January – September 2004

  11. NEW OIL AND GAS DISCOVERY LOCATION MAP 2003 - 2004

  12. NEW OIL AND GAS DISCOVERY 1999 - 2004

  13. Oil and Gas Fields > 50 MMBOE from Indonesia Basin Gas Oil

  14. CONTRACT SIGNED1999 - 2005

  15. REALIZATION AND BUDGET EXPENDITURE (INVESTMENT) PRODUCTION SHARING CONTRACTOR (Million US $)

  16. INDONESIA OIL AND CONDENSATE PRODUCTION 1999 – 2004

  17. INDONESIA GAS PRODUCTION AND UTILIZATION 1999 -2004 (MM SCFD)

  18. INDONESIA LNG CONTRACT EXISTING NEW / EXISTING

  19. INDONESIA INTEGRATED GAS TRANSMISSION PIPELINES

  20. OIL AND GAS NEW POLICY NEW PREVIOUS REGULATOR • REGULATOR • PLAYER PLAYER SUPERVISOR 2001 - RECENT (LAW NO. 22/2001) 1970 - 2001

  21. BACKGROUND • To promote national welfare • Strategic resources play an importance role in the national economy • an important role in giving an actual added value to increased and sustainable national economic growth • The previous oil and gas law is no longer suitable for development oil and gas business activities

  22. SECTOR REFORM • Enactment of a new oil and gas law • Ending Pertamina’s monopoly and the opening up of all aspects in the petroleum sector to create greater competition while preserving Pertamina as an important company. • Greater pricing mechanism transparency • Establishment of new institution for upstream and downstream petroleum regulation • Introduction of efficiency improvements in hydrocarbon exploration and production

  23. THE INTENTION OF THE IMPLEMENTATION • To assure that the effective management of Exploration and Exploitation business activities is useful, productive, highly competitive and sustainable with respect to the State’s Oil and Natural Gas which are strategic and non-renewable natural resources through open and transparent mechanism; • To assure that the effective management of the business of Processing, Transportation, Storage and Trading is accountable through the mechanism of appropriate, fair and transparent business competition; • To guarantee the efficiency and effectiveness of the availability of Oil and Natural Gas, either as energy resources or as raw material for domestic need. • To improve national capability towards competitive environment at the national, regional, and international levels; • To increase revenue thus giving maximum contribution to the national economy, and to develop and strengthen the position of Indonesian industry and trade; • To create job opportunities, increase the just and even distribution of the people’s welfare and prosperity and maintain the preservation of the natural environment.

  24. THE PRINCIPLE OF OIL AND GAS LAW • Oil and natural gas within territory of Indonesia are a national asset, controlled by the Government. • Government as the mining right holder establish an Implementing Body which controls the operational management. • Upstream business activities shall be conducted through the cooperative contracts. • Downstream business activities shall be conducted through the mechanism of appropriate, fair, and transparent business competition.

  25. GOAL OF THE NEW STATE OWNED LIMITED LIABILITY (PERTAMINA) • Preparing a limited liability company oil and gas business activities from Upstream - Downstream - Commerce internally and Internationally (no longer regulator) • Profit oriented • Preparing public service obligation in Oil-Based fuel supply for domestic if required

  26. Upstream Downstream HSE Oil and Gas Industries State-owned Limited Liability Co Regulatory Body Implementing Body GOVERNMENT DECREE

  27. MANAGEMENT OF OIL AND GAS ACTIVITIES PERTAMINA DIT. GEN. OIL & GAS PAST CONDITION (BEFORE UU 22/2001) Pertamina According to LAW No.8 of 1971 DIT. GEN. OIL AND GAS FUNDAMENTAL DUTIES & FUNCTION According to Pres. Decree No. 165 of 2000 and others related Regulation Upstream Function Downstream Function LAW 22/2001 CONCERNING OIL & GAS CURRENT CONDITION (AFTER UU 22/2001) PT. PERTAMINA (PERSERO DIT. GEN. OIL AND GAS FUNDAMENTAL DUTIES & FUNCTION Imp. Body Reg. Body According to Pres. Decree No. 165 of 2000 and others related Regulation Gov. Do.stream Function Gov. Upstream Function Pre Contract, Contract and Post Contract Gov. Downstream Fuction POST CONTRACT PRE CONTRACT CONTRACT DIT. GEN. OIL AND GAS DIT. GEN. OIL AND GAS DIT. GEN. OIL AND GAS/IMPLEMENTING BODY

  28. UPSTREAM DOWNSTREAM EXPLORATION PROCESSING TRANSPORTATION EXPLOITATION STORAGE TRADING CONDUCTED BY BUSINESS ENTITY OR PERMANENT ESTABLISHMENT BASED ON COOPERATION CONTRACT CONDUCTED BY BUSINESS ENTITY BASED ON BUSINESS LICENSE OIL AND GAS BUSINESS ACTIVITY IN INDONESIA

  29. FLOW OF THOUGHTS LEGISLATION AND REGULATION IN ENERGY AND MINERAL SECTOR LEGISLATION POLICY AND REGULATION IMPLEMENTATION THE POLITICAL PLATFORMS OF THE ELECTED PRESIDENT UUD 1945 “THE CONSTITUTION” A SET OF MINING AND ENERGY LAWS PROGRAM OF THE CABINET (ENERGY AND MINERAL SECTOR) ENERGY AND MINERAL POLICY OF THE MINISTRY Proposal Amendments, If necessary GOOD GOVERNANCE IN IMPLEMENTATION A SET OF GOVERNMENT REGULATION

  30. OIL AND GAS AUTHORITY OIL AND GAS INDUSTRY Policies UPSTREAM INDUSTRY MEMR Cq. DGOG BPMIGAS Technical Regulation PSC MICRO MANAGEMENT OF PSC Business Entities or Permanent Establishments Exploration Exploitation Businessl Regulation DOWNSTREAM INDUSTRY Policies TRANSPORTATION PROCESS STORAGE TRADING Business Entities Business Regulation BPH MIGAS 1) TRANSPORTATION 3) STORAGE TRADING 4) Article 46 of Law 22/2001 WHO IS DOING WHAT IN OIL AND GAS INDUSTRY 1) Only for supply and distribution of petroleum product (BBM) and pipelined-gas

  31. REGULATORY FRAME WORK ENERGY AND MINERAL RESOURCES (EMR) INDUSTRY DOMAIN ASPECT • Remark : • License issued only by government institution • Accreditation board, by law consist of : • National Accreditation Body (KAN) for M.S.T.Q. field • LPJK for Construction Services and Development of Construction Services • Department of ESDM cq. Director General Migas for Non Construction Service • Certificate issued by the accredited certification body • Legalization of meter (for business transaction) is under the authority of Ministry of Industry and Trade • Establishment of Indonesian Standard (SNI) by BSN, and yhe implementation by the Minister of ESDM cq. Director General

  32. REGULATORY TREE LAW NUMBER 22/2001 ON OIL AND GAS

  33. IMPLEMENTATION OF UPSTREAM OIL AND GAS BUSINESS ACTIVITIES

  34. DEVELOPMENT AND SUPERVISION OF UPSTREAM OIL AND GAS ACTIVITIES OIL AND GAS STATE CONTROL ARTICLE 4 (1) GOVERNMENT MANAGEMENT ARTICLE 4 (2) SUPERVISION DEVELOPMENT (DIT. GEN. OIL AND GAS) ARTICLE 39 (1) • GOVERNMENT AFFAIRS OF UPSTREAM OIL & GAS ACTIVITIES • DETERMINATION OF POLICIES/ REGULATION ON UPSTREAM OIL & GAS ACTIVITIES COMPLIANCE WITH PREVAILING LAW AND REGULATION MINISTRY OF ENERGY & MINERAL RESOURCES/DIT GEN OIL & GAS AND OTHER RELATED MINISTRIES BASED ON THE COOPERATION CONTRACT IMPLEMENTING BODY TASK AND FUNCTION IMPLEMENTING BODY FOR MINISTRY OF ENERGY & MINERAL RESOURCES/ DIT. GEN. OIL & GAS GOV. REGULATION 42/2002 TASK AND FUNCTION DIT. GEN. OIL AND GAS UPSTREAM OIL & GAS ACTIVITIES

  35. DEVELOPMENT AND SUPERVISION OF UPSTREAM OIL AND GAS ACTIVITIES PRE CONTRACT POST CONTRACT CONTRACT

  36. IMPLEMENTING BODY • Management of implementing of the Cooperation Contract • Submit management report of the Cooperation Contract to Minister Energy and Mineral Resorces • Designate the seller of state’s portion of Oil and/or Natural Gas from the Cooperation Contract • Control the management of operations • State owned legal entity

  37. POLICY OFFERING OF NEW BLOCK The Department of Energy and Mineral Resources through the Directorate General of Oil and Gas (MIGAS) has the authority to administer the awarding of blocks to parties applying for oil and gas exploration and exploitation

  38. WHO ELIGIBLELY CONDUCT THE BUSINESS • STATE OWNED COMPANY • LOCAL GOVERNMENT COMPANY • COOPERATIVES / SMALL ENTERPRISE • PRIVATE COMPANY (INCLUDING PERMANENT ESTABLISHMENT)

  39. THE BASIC PRINCIPLE OF ACQUIRING BLOCKS • No membership or being listed in a mailing list is required • There will be no negotiations in the offering • Firm commitment on exploration activities for the first 3-years period is mandatory

  40. THE COOPERATIVE AGREEMENT BASIC TERMS • Cooperative Agreements are setup in line with the Law and the Government Regulation of Oil and Gas. • The Cooperative Agreements shall be signed by BPMIGAS and Contractor. • Contractor provides all fund, technologies, necessities ability and risk. • If commercial oil and natural gas is found, the maximum contract period could be as long as thirty (30) years. • The exploration period is six (6) years and may be extended for another final four (4) years. • Contractor is obliged and required to relinquish the contract area (block) in stage. • The Cooperative Agreements in exploration and exploitation will be a PSC arrangement

  41. BLOCK OFFERING SYSTEM • ACQUIRED THROUGH REGULER TENDER • Blocks prepared and designated by Migas and offered through tender. 1. Announcement Special announcement of the new offered working acreage. 1 Bid Invitation 1 Announcement 2. Bid Invitation Invitation will be disseminated to all companies through our home page at http://www.geomigas.com Bid Invitation 2 2 Bid Invitation 3. Bid Information It contains the information of the tender process including instructions to the tender participant. The tender participant must purchase the Bid Information at MIGAS 3 Bid Information 3 Bid Information 4. Data & Information Data & Information 4 4 It is mandatory that any tender participant will have to purchase an official Government a data package through and set by MDM prior to submitting the tender document. 5 Clarification Forum 5 Participation 5. Clarification Forum 6. Bid Participation Bid Participation 6 6 Bid Evaluation The tender participant should submit the entire tender document before or on the closing date of the tender Determination of the Bid Evaluation 7 7 7. Bid evaluation Winning Bidder The tender Team evaluates the Submitted document based on the technical analysis, financial outlay and commitment ( such as signature bonus ), and especially the firm commitment of the Work Program as proposed by Bidder Determination of the 8 8 Successful Bidder 8. Determination of the Winning Bidder Based on The Tender Team Recommendation, The Director General of Oil and Gas appoints the successful Bidder Contract Signing 8 9 (BPMIGAS & Contractor) 9. Contract Signing BPMIGAS and the successful Bidder will sign The Cooperation Contract

  42. B. AVAILABLE BLOCKS Remaining and available blocks (unsold blocks) from previous tenders. The terms for the blocks remain the same as set at the time of the previous tender. C. PROPOSED BY INTERESTED COMPANY Blocks are prepared and proposed by interested company. Migas will evaluate the proposal and prepare the terms & condition. D. JOINT STUDY BY INTERESTED COMPANY Blocks are prepared and designed based on the result of joint study between Migas and Interested Company AVAILABLE BLOCKS (UNSOLD BLOCKS) PROPOSALS BY INTERESTED COMPANY JOINT STUDY BY INTERESTED COMPANY Announcement BID INFORMATION Evaluation of Proposals DATA PACKAGE Awards Contract Signing

  43. FLOW OF REVENUE OF INDONESIA PSC (NEW) GROSS PRODUCTION (-) FTP Max. 10% Investment Credit (+) (-) (+) Max. Cost Recovery : 100% (-) (+) EQUITY TO BE SPLIT CONTRACTOR SHARE INDONESIA SHARE (+) (-) DMO Max.25% (+) (-) DMO Fee Taxable Income (-) (+) Tax 44% CONTRACTOR TAKE INDONESIA TAKE

  44. INDONESIA 17 PRODUCTION SHARING CONTRACT SIGNED 2004

  45. INDONESIA 1ST BIDDING ROUND 2005 (14 Blocks)

  46. FISCAL TERM AND CONDITION FIRST ROUND REGULAR TENDER YEAR 2005 (1)

  47. FISCAL TERM AND CONDITION FIRST ROUND REGULAR TENDER YEAR 2005 (2) *) First Tranche Petroleum (FTP) 15 % is shared between the parties in accordance with the sharing split

  48. AVAILABLE BLOCKS 2001 – 2004 STATUS JUNE 2005

  49. PETROLEUM INCENTIVE PACKAGE

  50. OIL AND GAS INCENTIVE POLICIES

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