Opportunities under the New Law Peter Roberts Adam Summerly

1. Opportunities under the New Law Peter Roberts Adam Summerly Pipeline M&A in Indonesia

2. Peter RobertsJones Day, Hong Kong Ph: (852) 3189 7286Fax: (852) 2868 5871Email: peterroberts@jonesday.com Adam SummerlyJones Day, SingaporePh: (65) 6233 5994Fax: (65) 6536 3939Email: asummerly@jonesday.com

3. The “Old” Oil & Gas Law The “New” Oil & Gas Law The PGN South Sumatra Pipeline Project Development of the Trans-ASEAN Gas Pipeline Introduction

4. Law 44/1960 “Mining undertakings of mineral oil and gas are exclusively carried out by State Enterprises” Law 8/1971 Pertamina appointed as the only State Enterprise granted the mining authority to transport gas in Indonesia The “Old” Oil & Gas Law

5. Regulation 37/1994 Pertamina’s exclusive transportation authority opened up to PGN PGN obliged to: develop, produce, supply and distribute processed gas develop and construct transmission lines supply and distribute natural gas in accordance with GOI policies No opportunity for private sector participation in owning onshore gas pipelines in Indonesia The “Old” Oil & Gas Lawcont’d

6. 3 components: Law 22/2001: passed by Parliament on 23 October 2001, ratified on 23 November 2001 Elucidation: Supplement to State Records No. 4152 Implementing regulations: yet to be established for downstream business activities The “New” Oil & Gas Law

7. Transportation activities may be conducted by: state-owned business entity regional government-owned business entity cooperatives; small companies private business entities Business entities undertaking Transportation must be established, function and be located inIndonesia The “New” Oil & Gas Law cont’d

8. “Transportation shall be the activity of transferring Natural Oil, Natural Gas and/or the product of their processing from the Operational Area or from the gathering place and Processing, including Natural Gas transportation through transmission and distribution pipelines.” The “New” Oil & Gas Law cont’d

9. Must obtain a Business License to undertake Transportation business activities Business entity engaging in Transportation may not engage in Upstream Business Activities The Minister shall stipulate a master plan for a gas transmission and distribution network A Business Entity holding a Business License for natural gas pipeline Transportation “shall only be granted a certain Transportation segment” The “New” Oil & Gas Law cont’d

10. The Regulatory Body will implement and regulate pipeline gas Transportation Regulation will cover tariffs price of gas for households and small customers natural gas transmission and distribution businesses Open access regime for pipelines that “concern public interests” The “New” Oil & Gas Law cont’d

11. It is now open for private sector participants to: acquire interests in existing pipeline infrastructure participate in future pipeline infrastructure projects The “New” Oil & Gas Law cont’d

12. PGN South Sumatra Pipeline Project

13. Grissik – Duri A 540km gas pipeline from the Grissik gas fields in South Sumatra to the Duri steamflood project in Central Sumatra (transporting approximately 300 MMSCFD) Grissik – Batam – Singapore A 500 km gas pipeline from the Grissik gas fields to Batam and to Singapore, supplying gas to Singapore utilities (ramping up to 350 MMSCFD in 2009) PGN South Sumatra Pipeline Assets

14. Construction of the project funded by: ADB EIB JBIC PGN Partial divestment of equity Partial divestment to experienced international investors a condition of ADB financing PGN South Sumatra Pipeline Background

15. Competitive bidding process 4 bidders shortlisted in early 2002 Successful bidder Transasia Pipeline Company Petronas 35% Gulf Indonesia (now ConocoPhillips) 35% Singapore Petroleum Corp 15% Talisman Energy 15% PGN South Sumatra Pipeline Acquisition

16. Acquisition agreements executed on 12 September 2002 Purchase price around US$187.6 million Expected to close mid-October PGN South Sumatra Pipeline Acquisition

17. PETRONAS (35%) SINGAPORE PETROLEUM CO (15%) TALISMAN (15%) CONOCO PHILLIPS (35%) TRANSASIA PIPELINE PGN PT TRANSGASINDO 60% 40% PGN South Sumatra Pipeline Investment Structure

18. 2002 PT Transgasindo created as a wholly owned subsidiary of PGN Business license issued to PT Transgasindo Grissik-Duri pipeline assets transferred from PGN to PT Transgasindo GTA to Duri for Caltex steamflooding operations September 2002 Execution of Transasia Pipeline Co’s buy in to PT Transgasindo PGN South Sumatra Pipeline Investment Schedule

19. October 2002 40% of shares in PT Transgasindo to be transferred to Transasia Pipeline Co August 2003 expected completion of construction of the Grissik-Batam-Singapore pipeline November 2003 expected transfer of the Grissik-Batam-Singapore pipeline to PT Transgasindo GTA to Singapore for Gas Supply Pte Ltd GTA to Batam for PGN’s distribution network PGN South Sumatra Pipeline Investment Schedule

20. Indonesian Integrated Transmission System South Sumatra to West Java East Kalimantan to East Java East Java to West Java Trans-ASEAN Gas Pipeline Duri to Malaka East Natuna to Sabah Arun to Pauh Future Opportunities

21. Trans-ASEAN Gas Pipeline

22. THANK YOU