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Update of IPA Activities January – July 2010 Extended IPA Board of Directors Meeting Jakarta, 27 th August 2010

Update of IPA Activities January – July 2010 Extended IPA Board of Directors Meeting Jakarta, 27 th August 2010 . HIGHLIGHTS OF THE PRESENTATION. IPA COMMITTEES ACTIVITIES IPA SECRETARIAT ACTIVITIES MEETINGS WITH SENIOR GOVERNMENT OFFICIALS. 1. IPA COMMITTEE S ACTIVITIES.

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Update of IPA Activities January – July 2010 Extended IPA Board of Directors Meeting Jakarta, 27 th August 2010

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  1. Update of IPA Activities January – July 2010 Extended IPA Board of Directors Meeting Jakarta, 27th August 2010

  2. HIGHLIGHTS OF THE PRESENTATION • IPA COMMITTEES ACTIVITIES • IPA SECRETARIAT ACTIVITIES • MEETINGS WITH SENIOR GOVERNMENT OFFICIALS

  3. 1. IPA COMMITTEES ACTIVITIES • 1.Regulatory Affairs Committee: • Worked with the F&T Committee to formulate IPA’s concerns and communicate IPA’s feedback to the Government on draftGR on Cost Recovery and Income Tax andon Import Exemption matters • Formulated IPA’s concerns on other proposed and new regulations such as Minister Regulation No. 6/2010 on Guidelines on Production Increase and PTK 033 on PIS of Production Facility. • Formed a subcommittee to review draft of a bilingual Production Sharing Contract to meet MIGAS request for feedback • 2. Finance & Tax Committee • Monitored new developments in the industry’s finance and taxaffairs and actively discussed with BPMIGAS and DG of Taxes for improvements to industry’s finance and tax implementation procedures. Regularly shared its progress and developments to the IPA Board and key finance people in the PSC’s.

  4. 1. IPA COMMITTEES ACTIVITIES • 2. Finance & Tax Committee: • Formed a joint effort with RAC to provide input to the Government on draft GR on Cost Recovery and Income Tax and on improvements to the WP & Budget process • Obtained a resolution on tax issues with DG of Taxes, with support of BPMIGAS and Fiscal Policy Board on the implementation of PMK 73/2010 (revision of PMK 11/2005) regarding timing for VAT collection by VAT collector and on Implementation on Tax Borne by the Government on Head Office & Affiliated Offices Charges • In collaboration with IADC (International Association Drilling Contractors) and BPMIGAS, met the Tax Office to push back recent tax office proposal to impose new taxation on drilling activities (WHT Art. 22 and Art. 23) which was never imposed before and would be detrimental to investors • Prepared Issues Briefing Paper for the meeting with Finance Minister on 20th July 2010

  5. 1. IPA COMMITTEES ACTIVITIES • 3. Convention Committee: • The 34th IPA Convention and Exhibition was held on 18 - 20 May 2010 with the theme “Investing Together For Future Growth”. • Officially opened by Vice President Boediono, the event attracted • 3380 Convention participants • 138 booths exhibitors • 120 technical papers • 113 participants for 5 pre-Convention short courses 4. Professional Division: • Very active since the start of the year in enriching knowledge and education • of national oil and gas practitioners with : • 5 Luncheon Talks : 431 participants • 4 Field Trips :65 participants • 7 Short Courses : 150 participants • Currently the Professional Division comprises 1,909 members.

  6. 1. IPA COMMITTEES ACTIVITIES 5. Human Resources Committee: • Provided input to BPMIGAS for development of Implementation Guidelines related to extension of retirement age from 56 to 58 years. • Assisted BPMIGAS by participating in task force to design & develop a program forNational Capacity Building related to competency acceleration of core disciplinesin the oil and gas industry • Continued support to university students with one day technical courses 6. Data Management Committee: • Closure of oil and gas data submission to PUSDATIN : • Circular letter will be sent to all IPA Members • Will follow up with MIGAS for implementation • Meeting with Patra Nusa Data (PND), a subsidiary of PT. Elnusa which was appointed by the Government for open data market, and discussed the following : • Open data quality, license period and payment process • To follow up with more engagement meeting with PND

  7. 1. IPA COMMITTEES ACTIVITIES • 7. Environment and Safety Committee: • Actively involved in discussions with relevant regulators pertaining to environmental regulations, in an attempt to maintain oil & gas operations while safeguarding the environment and complying with prevailing regulations. • Facilitating discussions and communications between MIGAS, State Ministry for the Environment (KNLH) and BPMIGAS with regards to the implementation of Law No. 32/2009 on Protection and Environment Management which took effect on October 3, 2009. The last meeting on 21 April 2010 has generated an agreement to provide PSCs and other business entities a transitional period to enable them to adhere to stipulation on environmental quality standard. • KNLH and IPA ESCommittee also agreed to continue conducting periodic communications, giving feedback and providing regulatory proposals which will be further reviewed by KNLH.

  8. 1. IPA COMMITTEES ACTIVITIES • 8. Supply Chain Management Improvement Committee • Participate in BPMIGAS Workshop on “Cabotage Implementation for Oil & Gas Upstream Activities” on 18-19 February 2010. Active followup with BPMIGAS, MIGAS and DG of Sea Transportation to resolve cabotage issue for specific vessels and rigs required by the oil and gas industry. • Discussions on new Min.of Industry Decree No. 102 / 2009 about Local Content which is not yet accomodated in PTK-007. BPMIGAS issued letter on 21 June 2010 that this new decree becomes a part of procurement regulation. • Participate in discussions on implementation of the MOU between BPMIGAS and PT Garuda Indonesia for the PSC’s • Workshop on sharing best practices in implementaion of PTK-007 Rev.1 was conducted in March 2010 at ConocoPhillips attended by 40 participants from PSC’s nvolved in Supply Chain /Procurement activities • On 25 May 2010, BPMIGAS socialized its plan to revise again PTK-007. There are concerns on plan to decrease threshold value from 5 MUSD to 2 MUSD for Tender • Plan and Recommendation of Tender Winner which needs BPMIGAS approval.

  9. 2. IPA SECRETARIAT ACTIVITIES • 1. IPA VAT Lawsuit Case • In November 2009, IPA filed a lawsuit against the Badora tax office followingits decision to appoint IPA as a Taxable Entrepreneur (PKP) retroactive 1stJanuary2008. • After four (4) sessions at the Tax Court, the panel of judges decided on 29thJuly 2010 that : • There was no basis to justify the decision of Badora tax office to appointIPA as a Taxable Entrepreneur (PKP). • Due to the above, the lawsuit filed by IPA to revoke the decision of Badora tax office appointing it as PKP is accepted in its entirety • With this court decision, IPA will not be subject to VAT and penaltiesestimatedat Rp 5,042 billion for the period 2008 - 2009 in the 2009 Audit Report.

  10. 2. IPA SECRETARIAT ACTIVITIES • 2. Recruitment of IPA Communications Executive • On 1st April 2010, Ferita Kanter was recruited for this position. • Her main responsibilities are to support IPA Board in managing: • IPA External Communications (media relations, media monitoring,preparing talking points / presentations for IPA President formedia/external engagements). • Internal Communications (populating, updating and managing thewebsite, liaising and working with all Committees). • Publishing the Quarterly IPA Newsletter on the website which nowincorporates the Professional Division Newsletter. This Newsletter will be printed for limited distribution to IPA stakeholders.

  11. 2. IPA SECRETARIAT ACTIVITIES • 3. The IPA Website

  12. 2. IPA SECRETARIAT ACTIVITIES • The IPA Website covers: • News about IPA from Media • Updated information about IPA Professional Division activities (Luncheon Talks, Courses, Field Trips) and activities report and its presentations. • IPA Annual Convention & Exhibition Report & Pictures • IPA E-Newsletter • Database of the Oil and Gas Government Regulations (Bilingual) • Access to Board of Directors Minutes of Meeting (restricted) • Updated List of Company Members and Associate Members • Etc. Please Visit IPA Website for further info

  13. 2. IPA SECRETARIAT ACTIVITIES • 4.EITI • On 23rd April 2010, the PresidentYoedhoyono signed Presidential Regulation No. 26 / 2010 regarding “Transparency of State and Regional Revenues Obtained from Extractive Industries”. • The IPA was requested to nominate its representative who will sit as amember of the Implementation Team consisting of senior governmentofficials from Coordinating Ministry for the Economy, MOF, ME&MR, MinistryofHome Affairs and 3 representatives from associations and regions producers of minerals, coal, oil and gas. • The Implementation Team reports to a Steering Committee which reports to the President of R.I. • On 17th May 2010, the IPA Board meeting appointed the IPA Executive Director as its representative to the EITI Implementation Team.

  14. 2. IPA SECRETARIAT ACTIVITIES • 5. Deloitte Project • In May 2010, Deloitte was selected to review / developIPA AccountingSystems consisting of (a)Policies and Standard Operating Procedures(SOP’s) and (b)Accounting Manual. • Time frame of the project : May – September 2010. • Current status of the project : • Final draft of Policies and SOP’scovering Membership, Committees,Purchasing, Finance, Payroll and Taxes were completed and submitted. • Final draft of AccountingManual was completed and submitted. • The above documents have been socialized to allIPA personnel. • The project is now entering the implementation stage to discuss howthese new business processes can be incorporatedinto the Accurateaccounting system.

  15. 3. MEETINGS WITH SENIOR GOVERNMENT OFFICIALS • Recently the IPA Board of Directors has met thefollowing senior government officials : • On 29 July 2010 withVice President of R.I. Boediono • On 21 July 2010 with Commission VII of the DPR • On 6 May 2010 with Coordinating Minister for theEconomy Hatta Rajasa • On 20 July 2010 with Minister of Finance Agus Martowardoyo • On 14 July 2010 with Minister of Transportation Freddy Numberi • Regular meetings with the Director General of MIGASEvita Legowoand BPMIGAS Chairman R. Priyono Main issues : • Draft GR on Cost Recovery and Income TaxNo Cost Recovery capping or retroactive application to existing PSC’s • Gas Price Competitiveness • Price is the key issue – it must be competitive and essentially market driven 3. Exploration Investment • Exploration activities need to be encouraged and accelerated

  16. 3. MEETING WITH SENIOR GOVERNMENT OFFICIALS 4. Regulatory Environment • The approval and regulatory process needs to be accelerated, provide morefacilitation and less bureaucracy and micro-management • Greater coordination between Ministries and with Regional Governments 5. Fiscal Certainty • The tax and fiscal regime should provide Clarity, Consistency and Certainty • Tax implementation in the oil and gas sector to be under special taxation regulation (Lex Specialis) 6. PSC Extension Establish a clear and transparent process to extend the PSC 7. Cabotage Establish special exemption procedure for specific vessels and rigs required by the oil and gas industry 8. Revisions to Oil and Gas Law No. 22 / 2001 In the hearing with Commission VII of the DPR, IPA presented its views onthe impending revisions to Oil and Gas Law No. 22 / 2001 initiated by the DPR

  17. 4. Participation in Oil & Gas National Forums • National Gas Dialogue • On 13th April 2010, BPMIGAS organized the National Gas Dialogue which has gathered representatives of the government, producers and consumers of natural • gas to brainstorm the current situation of the industry. • Some of the conclusions were : • There should be an updated energy blueprint (latest one issued was in 2004) • A comprehensive gas demand management (what is done now is managing supply to fulfill the demand). • A minimum return to the investor guaranteed by a comprehensive pricing policy. • A comprehensive gas supply management by BPMIGAS implementing and Indonesia Inc. concept • MIGAS National Symposium • On 9-10 August 2010, MIGAS held a National Symposium to gather input and recommendation for the planned revisions to the Oil and Gas Law No. 22/2001 initiated by the DPR. Speakers at this symposium were former senior officials from MIGAS, Pertamina, BPPKA (predecessor of BPMIGAS) as well as representatives of the industry, economists, academia and think tanks/NGOs. In this symposium, IPA was represented by Sammy Hamzah. A wide range of views were expressed by the speakers, among others, minimum changes to the current oil and gas law and questioning the existence of BPMIGAS and BPHMIGAS.

  18. THANK YOU FOR YOUR ATTENTION

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