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

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

2009 © BPMIGAS – All rights reserved PRODUCTION SHARING CONTRACT STRUCTURE GOVERNANCE LAW of PRODUCTION SHARING CONTRACT National Constitution 1945 Ch.5 (1),(2),4(5) Ps 33 (2),(3) National Constitution 1945 Ch.5 (1),(2),4(5) Ps 33 (2),(3) GR 42 of 2002 GR 35 of 2004 Law No. 22 of 2001

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

2009 © BPMIGAS – All rights reserved 5 Government c/o MEMR Government c/o MEMR BPMIGAS PSC contractor’s Governance Relationship

2009 © BPMIGAS – All rights reserved 6 BPMIGAS Roles & Responsibilities Managerial Roles 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 Partnership Roles Routine consultation Negotiating partners on commercial deal Responding and Tackling isues as one side front Support services facilitators Facilitating required authorities permits Assist Contractors dealing with local communities Expedite approval process

2009 © BPMIGAS – All rights reserved 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...” INDONESIAN PRODUCTION SHARING CONTRACT on Environment Aspect (1)

2009 © BPMIGAS – All rights reserved 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”

2009 © BPMIGAS – All rights reserved 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”

INDONESIA OIL & GAS WORKING AREA

2010 © BPMIGAS – All rights reserved Shiting Paradigm: From West to East Deep Water Area > 200m Western part Eastern part Deep Water mostly in eastern part Indonesia 6 PSC’s : -StatOil -Chevron -ExxonMobil Oil -Marathon -Talishman Sageri -COPHI Mostly Tertiary from Onshore in the West to Offshore in the East

2010 © BPMIGAS – All rights reserved

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

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

2009 © BPMIGAS – All rights reserved Security Stability Sources of revenues Sources of energy and feedstock Creating Sustainable Multiplier effect Indonesia’s Sustainable Economic Development SHIFTING THE PARADIGM: From Revenue to Sustainable Growth GAS OIL & Past approach: Maximize revenues Current approach: People prosperity Pro poor, pro job, pro growth, pro environment

2009 © BPMIGAS – All rights reserved 16 BPMIGAS BRIGHT AND GREEN INITIATIVES BRIGHT: (1)ENERGY SUPPY FOR SURROUNDING AREAS (2)SOCIO-ECONOMIC ENLIGHTMENT & EMPOWERMENT GREEN : (1)ENVIRONMENT PROTECTION RESTORATION (2)SOCIO-ECONOMIC BENEFIT LICENSE to OPERATE

BPMIGAS POLICY on CSR: from Charity to Operational Support 1.COMMUNITY DEVELOPMENT 1)ECONOMY 2)EDUCATION & CULTURE 3)HEALTH 4)SOCIAL INFRASTRUCTURE 5)ENVIRONMENT 2.SOCIAL PROGRAM FOR OPERATIONAL SUPPORT 1)INFRASTRUCTURE 2)COMPENSATION 3)LICENSE 4)REGULATION Synergy with local authorities to prevent duplication, public consensus, continuos benefit to the society, in-kind, no ideology or politic agenda

Budget Actual COMMUNITY DEVELOPMENT EXPENDITURES Mio IDR

Community Development Activities 2010 Education Economy Health Social Infrastructre Environment

Social Program for Operational Support 2010 Infrastructure License Compensatioin Regulation

©2010 BPMIGAS. All rights reserved. The information consist in this document is exclusively designed and prepared for BPMIGAS’ purposes only. No part of this publication can be reproduced, stored in an information access system, used in a spreadsheet, or distributed in any format or media – electronic, mechanical, photocopy, recording, or any other form – without the written permission from BPMIGAS 21 Rupiah Total: IDR eq USD 29, % 67,7%

CONCLUSION 1.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 2.BPMIGAS IS WILLING TO GET INVOLVED IN MULTI STAKEHOLDERS DIALOG OR WORKING GROUP TO SEARCH FOR SUSTAINABLE FINANCING SOURCES TO SUPPORT RELEVANT PROJECTS WITHIN THE UP-STREAM OIL AND GAS ACTIVITIES

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