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EXECUTIVE AGENCY for UPSTREAM OIL & GAS BUSINESS ACTIVITIES (BPMIGAS) - Republic of Indonesia

EXECUTIVE AGENCY for UPSTREAM OIL & GAS BUSINESS ACTIVITIES (BPMIGAS) - Republic of Indonesia. Sustainable Marine Business Solution: BPMIGAS Perspective. Coral Triangle Initiative – Regional Business Forum 2011 Kuala Lumpur, October 10th 2011. AGENDA.

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EXECUTIVE AGENCY for UPSTREAM OIL & GAS BUSINESS ACTIVITIES (BPMIGAS) - Republic of Indonesia

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  1. EXECUTIVE AGENCY for UPSTREAM OIL & GAS BUSINESS ACTIVITIES (BPMIGAS) - Republic of Indonesia Sustainable Marine Business Solution: BPMIGAS Perspective Coral Triangle Initiative – Regional Business Forum 2011 Kuala Lumpur, October 10th 2011

  2. AGENDA Up-stream Oil and Gas Industry: Legal Framework BPMIGAS Roles and Function BPMIGAS Policy on CSR: from Charity to Operational Support Conclusion Kuala Lumpur Jakarta

  3. STRUCTURE GOVERNANCE LAW of PRODUCTION SHARING CONTRACT National Constitution 1945 Ch.5 (1),(2),4(5) Ps 33 (2),(3) Treaties, Laws and international conventions Other Laws (environment, tax, regional law) Law No. 22 of 2001 GR 35 of 2004 GR 42 of 2002 PRODUCTION SHARING CONTRACT

  4. Production Sharing Contract (PSC) Signed Status : August, 2011

  5. Governance Relationship • Policy on upstream • Set Terms and conditions • Designate Contract Areas • Determine PSC Contractors Government c/o MEMR • Implement the Gov’t policy • To control and manage PSC • Contracting party to PSC BPMIGAS Responsible for preparation and execution of Work Program and Budget PSC contractor’s

  6. BPMIGAS Roles & Responsibilities To approve WP&B, POD, AFE, Procurement Plan and Human Resources Deployment Plan To represent The Gov’t on Contractual stand position Technical and Financial Audit Routine consultation Negotiating partners on commercial deal Responding and Tackling isues as one side front Facilitating required authorities permits Assist Contractors dealing with local communities Expedite approval process Support services facilitators Managerial Roles Partnership Roles

  7. INDONESIAN PRODUCTION SHARING CONTRACT on Environment Aspect (1) • Contractor “shall conduct an environmental baseline assessment at the beginning of CONTRACTOR’s activities”; • Contractor “shall take the necessary precautions for protection of ecological systems, navigation and fishing and shall prevent extensive pollution of the area, sea or rivers and other as the direct result of operations undertaken under the Work Program; • Contractor “shall after the CONTRACT expiration or termination, or relinquishment of part of the Contract Area, or abandonment of any field, remove all equipment and installations from the area in a manner acceptable to BPMIGAS and GOI, and perform all necessary site restoration activities in accordance with the applicable Government regulations to prevent hazards to human life and property of others or environment...”

  8. INDONESIAN PRODUCTION SHARING CONTRACT on Environment Aspect (2) • Contractor “shall include with requisite Plan of Development for each commercial discovery, an abandonment and site restoration program required after relinquishment of any part of Contract Area or abandonment of any Field together with a funding procedure for such program....... • Contractor “shall include in the annual Budget of Operating Costs, an estimate of the anticipated abandonment and site restoration costs for each exploratory well in the Work Program...” • Contractor “shall comply with all applicable laws of the Republic of Indonesia. It is also understood that the execution of the Work Program shall be exercised so as not to conflict with obligations imposed on GOI by international laws”

  9. INDONESIAN PRODUCTION SHARING CONTRACT on Social Aspect • “Contractor furnish such other funds and be responsible to conduct a community development programs relating to the community surrounding and/or adjacent of the Contract Area during the term of the Contract.“ • Contractors “shall prepare and carry out plans and programs for industrial training and education of Indonesians for all job classifications with respect to operations contemplated hereunder”. • Contractor “shall agree to employ qualified Indonesian personnel in its operation and undertake the schooling and training of Indonesian personnel for labor and staff positions including administrative and executive management positions”

  10. INDONESIA OIL & GAS WORKING AREA

  11. Shiting Paradigm: From West to East Deep Water mostly in eastern part Indonesia Mostly Tertiary Western part Eastern part • 6 PSC’s : • StatOil • Chevron • ExxonMobil Oil • Marathon • TalishmanSageri • COPHI Deep Water Area > 200m from Onshore in the West to Offshore in the East

  12. Upstream oil and gas Industry Sustainable Performance objectives economic Growth Efficiency Innovation Shareholder value Sustainable Growth environmental objectives social objectives Cultural identity Health & safety Fraud & corruption Community development Empowerment & equity Energy, waste & water use Emissions & climate change Design, reuse & recycle Ecosystem integrity Biodiversity Courtesy of Novo Nordisk & WRI

  13. Drivers & Dimensions of Business Sustainability Business Drivers License to Operate Cost Reduction Market Growth New Markets Profitable Growth Competition Organizational Leadership Vision Values Business Models Measurement Change Business Sustainability Economic Value Social Value Environmental Value External Forces Environmental Change Demographic Trends Technological Change Political Pressure

  14. GAS & OIL SHIFTING THE PARADIGM: From Revenue to Sustainable Growth Indonesia’s Sustainable Economic Development Security Stability Sources ofrevenues Sources ofenergy and feedstock Creating Sustainable Multipliereffect Current approach: People prosperity Pro poor, pro job, pro growth, pro environment Past approach: Maximize revenues

  15. BPMIGAS BRIGHT AND GREEN INITIATIVES LICENSE to OPERATE • BRIGHT: • ENERGY SUPPY FOR SURROUNDING AREAS • SOCIO-ECONOMIC ENLIGHTMENT & EMPOWERMENT • GREEN : • ENVIRONMENT PROTECTION RESTORATION • SOCIO-ECONOMIC BENEFIT

  16. BPMIGAS POLICY on CSR: from Charity to Operational Support • COMMUNITY DEVELOPMENT • ECONOMY • EDUCATION & CULTURE • HEALTH • SOCIAL INFRASTRUCTURE • ENVIRONMENT • SOCIAL PROGRAM FOR OPERATIONAL SUPPORT • INFRASTRUCTURE • COMPENSATION • LICENSE • REGULATION Synergy with local authorities to prevent duplication, public consensus, continuos benefit to the society, in-kind, no ideology or politic agenda

  17. COMMUNITY DEVELOPMENT EXPENDITURES Budget Actual Mio IDR

  18. Community Development Activities 2010 Education Education Economy Health Social Infrastructre Environment

  19. Social Program for Operational Support 2010 Infrastructure Compensatioin License Regulation

  20. 32.4% Rupiah 67,7% Total: IDR 265.053.617.700 eq USD 29,450.402

  21. CONCLUSION BPMIGAS WILL ENCOURAGE THE PARTICIPATION OF ALL PRODUCTION SHARING CONTRACTORS OPERATING IN SURROUNDING OPERATION AREAS TO SUPPORT ANY PROJECT IN LINE WITH THE BRIGHT AND GREEN POLICY BPMIGAS IS WILLING TO GET INVOLVED IN MULTI STAKEHOLDERSDIALOG OR WORKING GROUP TO SEARCH FOR SUSTAINABLE FINANCING SOURCES TO SUPPORT RELEVANT PROJECTS WITHIN THE UP-STREAM OIL AND GAS ACTIVITIES

  22. THANK YOU

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