INDONESIA GAS SITUATION MINISTRY OF ENERGY AND MINERAL RESOURCES DIRECTORATE GENERAL OF OIL AND GAS INDONESIA GAS SITUATION by : Agus Cahyono Adi Deputy Director for Oil and Gas State Revenue Delivered at: WORKSHOP ON UNCONVENTIONAL GAS APEC ENERGY WORKING GROUP (EWG 41th ) VANCOUVER, CANADA, May 9-13, 2011

AGENDA OIL AND GAS CONDITION GAS POLICY GAS INFRASTRUCTURE PLAN AND DEVELOPMENT GAS BALANCE UNCONVENTIONAL GAS DEVELOPMENT GAS DEVELOPMENT CHALLENGE I have divided my presentation into five sections. I’d like firstly to talk about the role of oil and gas industries in Indonesia. In Indonesia, Oil and gas are as strategic non-renewable natural resources which are controlled by the State and constitute vital commodities that control the livelihood of the people at large and so play important role in the national economy. Therefore, their management should be able to provide the maximum prosperity and welfare for the people. My second part will concern the delegation in the oil and gas authorities scheme. In the third part, I deal with Oil and Gas Regulatory Framework in Indonesia. The fourth part of my talk will concern the current condition of oil and gas in upstream and downstream sector. And finally, allow me to raise the issues of the investment opportunities as the main subject in my presentation. 2 2

OIL AND GAS CONDITION 3 3

INDONESIA’s GAS PRODUCTION 2000 – 2011*) *) Data s.d. Maret 2011

INDONESIA’s GAS SUPPLY 2000 - 2010

NATURAL GAS RESOURCES - RESERVES & CBM RESOURCES ACEH (NAD) 5.74 NATUNA NORTH SUMATRA 51.46 1.28 CENTRAL SUMATRA 8.56 18.33 PAPUA EAST BORNEO SOUTH SUMATRA 4.23 24.32 17.90 CELEBES WEST JAVA 3.70 6.40 MOLUCCAS 15.22 EAST JAVA (Advance Resources Interational, Inc., 2003 processed) GAS RESOURCES = 334.5 TSCF CBM RESOURCES = 453.30 TCF GAS RESERVES (TSCF) Total CBM Basin = 11 (Advance Resources Interational, Inc., 2003) Signed Contracts up to 2010: 23 CBM PSCs PROVEN = 108.4 TSCF POTENTIAL = 48.74 TSCF TOTAL = 157.14 TSCF (AS OF JANUARY 1st 2010)

GAS POLICY 7 7

ROLE OF OIL AND GAS FOR NATIONAL DEVELOPMENT OIL &GAS INDUSTRI INDUSTRIAL RAW MATERIAL RESOURCES Sustainable National Development FULFILL DOMESTIC FUEL DEMAND High Capital High Risk SOURCE OF STATE REVENUE High Technology CREATING MULTIFLIER EFFECTS

NATIONAL GAS POLICY IMPROVING EXPLORATION ACTIVITY TO INCREASE NEW RESERVE (CONVENTIONAL AND UNCONVENTIONAL) GAS ALLOCCATION POLICY GAS PRICING POLICY (TO SECURE SUPPLY AND GROW INVESTMENT) INFRASTRUCTURE DEVELOPMENT Masukan prioritas alokasi adalah untuk pemanfaatan di hulu (antara lain listrik, pupuk) c. Urutan tidak perlu dicantumkan Judul kebijakan gas bumi nasional khususnya alokasi (kata-kata dilihat lagi)

POLICY IMPLEMENTATION NO OUTLINE DETAILS 1 improving exploration activity to increase new reserve Opening new working area with the target singed contracts 40 working area per year baru pertahun In 2009, signed contracts 34 Working Area and in 2010, signed contracts 38 Working Area Develop unconventional gas resources (CBM dan shale gas) 2 Gas allocation policy Gas utilization is prioritized for domestic use by keeping considering economic field development A new found gas reserve utilization allocation is prioritized for fulfilling local needs. if there is an excess can be utilized for fulfilling the need outside the local. Gas utilization for domestic needs is done by considering the availability of the infrastructure, reserve and the economic of field by prioritized upstream utilization ( electricity and fertilizer) if there is a shortage (less gas supply) in certain area as result of lack of gas resources and infrastructure, so it can be done gas reallocation or swap as one form of contingency plan.

POLICY IMPLEMENTATION CONTINUATION ...... NO OUTLINE DETAILS 3 Gas pricing policy (to secure supply and grow investment) Government regulate and determine gas price Gas price depend on the economic of gas field development and availability of infrastructure Gas price can be increased related to oil price, product’s price and the combination of product and oil price Gas price model selection consider state revenue by considering optimum of economic growth Determine gas price by considering balance between gas’ producer and consumer 4 Infrastructure Development Continue contruction transmission and distribution Contruction of LNG Receviing termina in Jawa and Sumatra POLICY IMPLEMENTATION CONTINUATION ......

GAS INFRASTRUCTURE PLAN AND DEVELOPMENT

Infrastructures: Existing and Planned

GAS BALANCE

INDONESIA GAS BALANCE 2011-2025

INDONESIA GAS BALANCE MAP 2011-2025 (EXISTING SUPPLY + PROJECT SUPPLY VS CONTRACTED DEMAND) REG I (NAD) Year 2011 2020 2025 Supply 235 78 19 Demand 25 75 15 Balance 210 3 4 Keluar Region 197 Net Balance 13 THAILAND REG XI (KEPULAUAN RIAU) Year 2011 2020 2025 Supply 550 150 Demand 103 36 7 Balance 447 114 -7 Keluar Region 575 318 80 Masuk Region 78 Net Balance -50 -126 -87 LAOS REG VII (KALIMANTAN BAGIAN TIMUR) Year 2011 2020 2025 Supply 2889 1351 273 Demand 522 140 20 Balance 2367 1211 253 Keluar Region 1695 333 Net Balance 672 878 REG VIII (SULAWESI BAGIAN SELATAN) Year 2011 2020 2025 Supply 48 62 23 Demand 38 Balance 10 24 Keluar Region Net Balance REG IX (SULAWESI BAGIAN TENGAH) Year 2011 2020 2025 Supply 410 403 Demand Balance Keluar Region 335 Net Balance 75 68 MANILA BANGKOK CAMBODJA VIETNAM REG X (PAPUA) Year 2011 2020 2025 Supply 880 1039 1024 Demand 2,5 5 Balance 877,5 1034 Keluar Region 943 1028 Net Balance -65,5 6 - 4 NAD EAST NATUNA BRUNEI DARUSSALAM SUMUT KUALA LUMPUR EAST MALAYSIA SUMTENG SINGAPORE KALTIM DURI REG II (SUMATERA BAGIAN UTARA) Year 2011 2020 2025 Supply 52 27 4 Demand 85 2 Balance - 33 25 Keluar Region Net Balance SULAWESI PAPUA Grissik SUMSEL UJUNG PANDANG MALUKU SELATAN JATENG JABAR JATIM PAGERUNGAN Blok Masela REG IV (JAWA BAGIAN BARAT) Year 2011 2020 2025 Supply 616 131 54 Demand 1440 583 Balance -824 -452 Masuk Region 619 604 Net Balance -205 152 REG II (SUMATERA BAGIAN TENGAH &SELATAN) Year 2011 2020 2025 Supply 1723 1451 106 Demand 870.1 385 Balance 852.9 1066 Keluar Region 1172 780 Net Balance - 319 286 REG V (JAWA BAGIAN TENGAH) Year 2011 2020 2025 Supply 1.8 148 50 Demand 3.5 130 Balance - 1.7 18 Keluar Region Net Balance REG VI (JAWA BAGIAN TIMUR & BALI) Year 2011 2020 2025 Supply 467 342 149 Demand 573 275 42 Balance - 106 67 107 Keluar Region Net Balance REG XII (MALUKU BAGIAN SELATAN) Year 2011 2020 2025 Supply 450 Demand Balance Keluar Region Net Balance

INDONESIA GAS BALANCE MAP 2011-2025 (EXISTING SUPPLY + PROJECT SUPPLY VS CONTRACTED DEMAND + POTENTIAL DEMAND) REG I (NAD) Year 2011 2020 2025 Supply 235 78 19 Demand 185 229 Balance 50 -151 -210 Keluar Region 197 Net Balance -147 THAILAND REG XI (KEPULAUAN RIAU) Year 2011 2020 2025 Supply 550 150 Demand 247 234 Balance 303 -84 -234 Keluar Region 575 318 80 Masuk Region 78 Net Balance -194 -324 -314 LAOS REG VII (KALIMANTAN BAGIAN TIMUR) Year 2011 2020 2025 Supply 2889 1351 273 Demand 535 784 561 Balance 2354 567 -288 Keluar Region 1695 333 Net Balance 659 234 REG VIII (SULAWESI BAGIAN SELATAN) Year 2011 2020 2025 Supply 48 62 23 Demand 83 111 110 Balance 35 -49 -87 Keluar Region Net Balance -35 REG IX (SULAWESI BAGIAN TENGAH) Year 2011 2020 2025 Supply 410 403 Demand 30 145 Balance -30 265 258 Keluar Region 335 Net Balance -70 -77 MANILA BANGKOK CAMBODJA VIETNAM REG X (PAPUA) Year 2011 2020 2025 Supply 880 1039 1024 Demand 18.5 221 216 Balance 861.5 818 808 Keluar Region 943 1028 Net Balance -81,5 -210 - 220 NAD EAST NATUNA BRUNEI DARUSSALAM SUMUT KUALA LUMPUR EAST MALAYSIA SUMTENG SINGAPORE KALTIM DURI REG II (SUMATERA BAGIAN UTARA) Year 2011 2020 2025 Supply 52 27 4 Demand 260 203 201 Balance - 208 -176 -197 Keluar Region Net Balance PAPUA SULAWESI Grissik SUMSEL UJUNG PANDANG MALUKU SELATAN JATENG JATIM JABAR PAGERUNGAN Blok Masela REG IV (JAWA BAGIAN BARAT) Year 2011 2020 2025 Supply 616 131 54 Demand 1858 2281 2207 Balance -1242 -2150 -2153 Masuk Region 619 604 Net Balance -623 -1546 REG II (SUMATERA BAGIAN TENGAH &SELATAN) Year 2011 2020 2025 Supply 1723 1451 106 Demand 1015.5 915 673.9 Balance 707,5 536 -567.9 Keluar Region 1172 780 Net Balance - 464.5 -244 REG V (JAWA BAGIAN TENGAH) Year 2011 2020 2025 Supply 1.8 148 50 Demand 168 449 Balance - 166.2 - 301 -399 Keluar Region Net Balance REG VI (JAWA BAGIAN TIMUR & BALI) Year 2011 2020 2025 Supply 467 342 149 Demand 821 1165 1125 Balance - 354 -823 -976 Keluar Region Net Balance REG XII (MALUKU BAGIAN SELATAN) Year 2011 2020 2025 Supply 450 Demand Balance Keluar Region Net Balance

UNCONVENTIONAL GAS DEVELOPMENT

ROAD MAP OF CBM DEVELOPMENT IN INDONESIA Minister Decree No.036/2008, revision to Minister Decree No. 033/2006 Ministerial Regulation No. 036, revision to Ministerial Regulation No. 033/2006 PP: CBM – 1 Rambutan (GOI Sponsor) CBM Estimated Production ~1500 MMSCFD – 1.0 BcfD CBM Estimated Production ~500 MMSCFD Ministerial regulation No.1669 CBM for Electricity Pilot Project CBM Estimated Production ~1000 MMSCFD 1.8 BcfD 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 1998 2003 2004 2005 2005 2006 2007 2007 2008 2008 2008 2009 2009 2010 2010 Increasing number of CBM Contract Average production = 250 MSCFD/ well Minister Decree No. 033/2006 Ministerial This slide shows us the road map of CBM development program. As you can see, started year 2004, LEMIGAS assigned to lead CBM pilot project development worked with MEDCO, who operates oil and gas working area in South Sumatera, including Rambutan Field. In this regards, CBM is expected to contribute for electricity start in 2011 and production estimate increasing being around 1-2% of the total energy in year 2025. Government Participation Start of Commercial Period (Exploration) Estimated CBM Production PP: Pilot Project Legend: Feasibility study Technical and Economical Start of CBM era (1st CBM PSC Contract ) 19

CBM UTILIZATION PLANNING CBM for electrical power CBM for another domestic consumption CITY GAS CNG for TRANSPORTATION There are so many reason for Indonesia to develop energy alternative. As we know, demand for oil and conventional gas is progressively increasing but its reserves are decreasing year by year. In order to keep sustainable energy supply, Indonesia has to diversified energy, one of that is CBM. Indonesia has huge CBM potential as we mentioned earlier with total resources about 450. Beside that, Indonesia already has available data and issued regulation to develop CBM. INDUSTRY CBM for LNG 20

SHALE GAS POTENTIAL AND GAS INFRASTRUCTURE Grissik Semarang Pacific Ocean AUSTRALIA Indian Ocean Bangkok Phnom Penh Ban Mabtapud Ho Chi Minh City CAMBODIA VIETNAM THAILAND LAOS Khanon Songkhla Erawan Bangkot Lawit Jerneh WEST MALAYSIA Penang Kerteh Kuala Lumpur Manila Philipines South China Sea Singapore Gas Trunkline Natuna Alpha Kota Kinibalu BRUNEI Bandara Seri Begawan Bintulu EAST Kuching Banda Aceh Lhokseumawe Medan Duri Padang S U M A T R A Jambi Bintan SINGAPORE Samarinda Balikpapan Bontang LNG Plant & Export Terminal Attaka Tunu Bekapai KALIMANTAN Banjarmasin Manado SULAWESI Ujung Pandang BURU SERAM Ternate HALMAHERA Sorong IRIAN JAYA Jakarta J A V A Surabaya Bangkalan BALI SUMBAWA Pagerungan LOMBOK FLORES SUMBA TIMOR I N D O N E S I A Duyong Port Dickson Port Klang Mogpu Dumai Batam Guntong Ardjuna Fields MADURA Jayapura Maluku Selatan West Natuna Palembang Cirebon Existing Pipeline Planned Pipeline LNG Receiving Terminal CNG Plant LNG Plant Shale Gas Highlight Areas NAD BAONG SHALE KLASAFET FORMATION TELISA SHALE This slide shows the shale gas potential and gas infrastructure. As you can see, there are shale gas highlight areas in Sumatera and Irian Jaya (Baong Shale, Telisa Shale, Gumai and Klasafet) associated with conventional oil and gas data GUMAI SHALE WEST JAVA EAST JAWA Merauke 21

GAS DEVELOPMENT CHALLENGE

INDONESIA GAS DEVELOPMENT CHALLENGE Indonesia endowed with potential of variety energy resources conventional as well as unconventional gas Domestic and Global Natural Gas demand increased Government of Indonesia is obliged to guarantee the availability of domestic feed stock and fuel supply (including natural gas). Adequate infrastructure support is required to assure smooth supply and distribution of domestic feed stock and fuel. Source of oil and gas in Indonesia located far from demand centre. Limited oil and gas infrastructures currently hinder feed stock and fuel supply and distribution. Optimizing benefit of natural gas utilization for foreign exchange trade balance and driver of domestic economic growth Now, let’s take a brief overview about the background of natural gas utilization in Indonesia: Government of Indonesia is obliged to guarantee the availability of domestic feed stock and fuel supply. Adequate infrastructure support is required to assure smooth supply and distribution of domestic feed stock and fuel. Indonesia’s geographical condition consists of the wide spread lands among Indian Ocean with uneven population distributions. Limited oil and gas infrastructures currently hinder feed stock and fuel supply and distribution. Investment in infrastructure development absorbs huge fund, hence private important role as infrastructure investors is necessary. The increasing feed stock price and fuel consumption resulted in the increasing state budget. Energy has not been valued as its economical price. The Government should arrange oil and gas infrastructure blueprint which contains its adequate and integrated development scheme.

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