LPG: OPPORTUNITIES AND CHALLENGES (Round Table Discussions)

1. LPG: OPPORTUNITIES AND CHALLENGES(Round Table Discussions) 22nd World LP Gas Forum October, 7th-9th 2009 Hanung Budya - SVP Marketing PT. Pertamina (Persero)

2. LPG Industry will have a significant growth for the next 20 years; however some challenges needs to be covered to ensure the promotion of LPG usage. My thought will cover : demand & supply, opportunities & challenges DEMAND: LPG demand is still growing, especially in Asia both in household, industrial and petrochemical. • Between 2005-2030, Asia will contribute to 74 % increase in global primary energy consumption because of their economies and population growth (World Energy Outlook 2007). • LPG demand in Asia will rise 27% for the next 5 years as Asia consuming LPG from 86 Mio Tons to 110 Mio Tons(Purvin & Gertz) • Fastest growing is in Middle East, China and India. • In South East Asia, Indonesia will become the largest consumer and importer after LPG Conversion Program estimated around 5 – 6 Mio Ton/year in 5 years time (2013).

3. SUPPLY: LPG Supply is expanding very fast with the new emerging players try to repositioning Saudi Aramco dominant position. • Qatar's LPG production will reach more than 12 million tonnes per year by 2012 (Purvin&Gertz 2008), making Qatar one of the world's leading LPG exporting countries. • Nigeria also still has so many opportunities to produce LPG from their flared up gas. • New refining capacity is rising in China and India. • Total world LPG exports are expected to rise by about 15 Mio tones by 2012 and total LPG supply surplus will rise up to 6 Mio tonnes/year (Purvin&Gertz 2008).

4. OPPORTUNITIES: There is some opportunities to expand LPG demand by converting non LPG users, such as kerosene and biomass especially in developing contries. • For example: Indonesia has been successfully convert 40 Millions Household and micro enterprises (as of October 1st 2009) from kerosene to LPG, there is another 12 millions households and micro enterprises to be converted in the next one year. When the convertion finish, it will create 4.0 million ton per year additional LPG demand. • Consumption of biomass and waste continues to grow in absolute terms between 2005 and 2030 from 1.15 Millions Ton Oil Equivalent (Mtoe) to 1.62 Mtoe, Their use remains highly concentrated in poor households in developing countries, where modern fuels are too expensive or, in the case of some rural areas, simply not available. The share of biomass in household energy use gradually declines as, with rising incomes, they are replaced by modern commercial fuels. LPG will become the easiest fuel to reach them.

5. CHALLENGES: LPG will face challenges from growing use of alternative energy: • The use of biomass for the production of biofuels grows from 19 Mtoe in 2005 to 102 Mtoe in 2030, an average annual rate of 7%. The use of biomass for power and heat generation increases, particularly in OECD countries will challenge LPG industry. • DME will emerge as a cheaper LPG substitution, some contries has decided to use DME as replacement of LPG or as mixture for LPG. These countries include China, Japan, and Indonesia. • Indonesia will start using DME to mix with LPG (20% mixture and can be expanded to 40%) in 2012. • DME has been used as diesel substitution in some countries OBRIGADO