Private and Confidential Review on Energy Opportunity in Indonesia This document is confidential and is intended solely for the academic purposes only. No copies shall be made without permission Achmad Zaenal P Hendratmi Susilowati Rum Martani Saptianta Ari Sabaris Tri Fitriani Yoga Wicaksono 07/266274/PEK/12183 07/263707/PEK/11603 07/266252/PEK/12161 07/266253/PEK/12243 07/266254/PEK/12163 07/2663/PEK/12243

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

Energy Demand vs Supply Efficiency Demand Growth World oil shortfall scenarios Transport mode shifts Pricing / taxes City design/lifestyle Past Production of Oil Other petroleum fuels gas, tar-sands Other fuels Forecast Production Deprivation, war 2008 Peak Oil: Impacts on MDGs and options for Australia Bruce Robinson, Convenor 15th March 2008 2

Energy Usage 3 Aktivitas Shell Energy Usage (equal to Millions bbls per day) Aktivitas Shell 3

Oil & Gas Demand February 2004 By 2015, we will need to find, develop and produce new oil and gas equal to eight out of every 10 barrels being produced today. 4

Oil Depletion Blue is water, green is water and oil mixed and red/purple is “dry” oil with little water in it Ghawar is Saudi Arabia's and the world's biggest oilfield If it is at peak, then global peak is probably very close Peak Oil: Impacts on MDGs and options for Australia Bruce Robinson, Convenor 15th March 2008 4/24/2017 5:36:43 AM 5

Need on energy potential (oil and gas) Alternative Energy Need on energy potential (oil and gas) Need on diversification of energy supplies

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

Oil In Indonesia Peak 1977 Peak 1995 700 600 500 400 300 200 100 8 Decline since1995 600 500 400 Millions BBLS per annum 300 200 100 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Chevron Pacific Indonesia Other 8

Industry Updates

Indonesia Oilfield Development Indonesia Production Fact Industry Updates Upstream Catalyst Indonesia is couple hundreds BOPD bellow OPEC quota. Acquisitions are likely to be greenfield, which requires further cash flow for development Indonesian onshore oil is well explored and western part of Indonesia is historically the larger oil producer Indonesia does have plenty of Proven and Potential Recoverable Oil. Indonesia Oilfield Development Indonesia Production Fact New potential prospects in Indonesia are more likely to be located offshore, implying higher capital needs Indonesia’s oil production has declined from 1,6Mbbl.day in 1994 to 969,000bbl/day in 2007 Regulator strive to increase and prepare a set of supportive regulation to help increase production

Consecion & Production by Acreage Industry Updates Upstream Catalyst Consecion & Production by Acreage Pertamina has the biggest acreage in Indonesia, however it produces the less compare to PSC It shows that Pertamina still have lost of Potential in its Field Pertamina Upstream has 64 oil and gas contracts of joint operation arrangements.: 6 JOB-EOR contract systems 12 JOB-TAC contract systems 34 TAC contract systems 12 other Pertamina’s Partner Among 64 of oil and gas contracts within the joint operation arrangement, only 30 contracts are in the commercial-producing stage and the other areas are still in the exploration stage. More than 50% TAC are not properly operated, due to: Lack of fund Bank Loan No implementation on the proper technology and using right resource

PSC Fiscal Term Production 100% (-) Investment Credit FTP 20 % Max Cost Recovery Equity To Be Split Indonesia Share Contractor Share DMO DMO Fee Taxable Income Tax 44 % Contractor Take Indonesia Take (-) (+)

TAC Fiscal Term Gross Production SO NSO (-) (+) Pertamina Share Investment Credit Taxable Income Contractor Take Gross Production SO Equity to be Split Contractor Share NSO Pertamina Share Tax Pertamina Take Indonesia Take Tax 44 % DMO Fee DMO Cost Recovery (-) (+)

Declining in Investment Source : 2005 Schlumberger Information Solution

Declining in Investment Fiscal Regime in Indonesia not attractive enough compare with other countries (based on Price Water House’s Survey) Source : 2005 Schlumberger Information Solution

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

Oil and Gas Operation - Hydrocarbon Hydrocarbon = 85% of Carbon (C) + 15% Hydro (H)

Oil and Gas Operation - EOR Enhanced Oil Recovery (EOR) merupakan teknik lanjutan untuk mengangkat minyak jika berbagai teknik dasar sudah dilakukan tetapi hasilnya tidak seperti yang diharapkan atau tidak ekonomis.

Oil and Gas Operation – Lifting Process

Alternative Energy Source

Alternative Energy Source - CBM Coal Bed Methane Fuel  green electricity for power plant In China : CBM used vehicle and it can reduce 50% of oil consumption There is no producing field in Indonesia, exploration is conducted by some companies (Medco pilot project at Rambutan field and Vico at …field, etc) Estimated Indonesian CBM Deposit : ± 453,3 TCF ( trillion cubic feet ) It is high investment regarding the process (dewatering cycle takes ± 2 years CBM Production stage Source : www.layneenergy.com

Alternative Energy Source - CBM Estimate Indonesian CBM Deposit Medco Rambutan Field

Alternative Energy Source - CBM

Alternative Energy Source - Geothermal Geothermal energy is a source of heat energy contained in hot water, water steam and rocks together with associated minerals and other gases that cannot be separated genetically from one another in a geothermal system and a mining process is needed for its utilization. Coal : USD 0.06 / kWh Geothermal : USD 0.06 / kWh Oil/gas : USD 0.24 / kWh In producing electricity per kWh, it requires such cost : Other facts : Clean, renewable, and environmental friendly energy than coal Geothermal Potential : 40 % of the world potential Equivalent with 27,140 MW 219 billion of Oil Barrel Current capacity : 3.8% of total potential

Alternative Energy Source - Geothermal Direct Use of Geothermal

Alternative Energy Source – Bio Fuel

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

Domestic Political Environment Existing Oil and Gas Industry Debate on UU Migas No 22 tahun 2001 (BP MIGAS) LNG pricing phenomenon ; LNG Tangguh ( USD 3.3 /MMBTU) vs LNG Arun & Bontang (USD 17 / MMBTU) Some of contract area are still attracting investor (G&G point of view) Indonesian political Stability, uncertainty factor and regulatory risk is high for Investor (PWC / Schlumberger research on it) Alternative Energy Regulator...? Political will in alternative energy...? Infrastructure...?

DIT. GEN. OIL AND GAS/IMPLEMENTING BODY Domestic Political Environment DIT. GEN. OIL AND GAS DIT. GEN. OIL AND GAS/IMPLEMENTING BODY POST CONTRACT CONTRACT PRE CONTRACT CURRENT CONDITION (AFTER UU 22/2001) PAST CONDITION (BEFORE UU 22/2001) DIT. GEN. OIL & GAS FUNDAMENTAL DUTIES & FUNCTION According to Pres. Decree No. 165 of 2000 and others related Regulation PERTAMINA Imp. Body PT. PERTAMINA (PERSERO Reg. Body Upstream Function Downstream Pertamina LAW No.8 of 1971 Gov. Upstream Function Gov. Do.stream Function Pre Contract, Contract and Post Contract Gov. Downstream Fuction LAW 22/2001 CONCERNING OIL & GAS Source : Schlumberger Information System

Fiscal Term (MIGAS) Petroleum Fiscal Arrangements Contractual Systems Concessionary Systems Risk Service Contracts Pure Service Contracts Prod. Sharing Contracts Service Contracts (Flat fee arrangement - state assumes the risk; i.e. Mideast) (Profit arrangement) (Cash fee) (“in-kind” fee) (Allows private ownership) (State retains ownership)

Government Revenue - Oil

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

Regional Economy Existing Oil and Gas Industry Alternative Energy The Fiscal Term / Business Model in Oil and Gas have been developed. Many adjustment and models are applied in Indonesia (PSC, KSO, TAC, JOB, JOA). Oil : Local Gov Take : 15.5 % Cent Gov Take : 84.5% Gas : Local Gov Take : 30.5 % Cent Gov Take : 69.5% The basic model of Split revenue related to local autonomy in Oil and Gas industry Alternative Energy The Fiscal Term / Business Model in alternative energy has not developed as well as in Oil Industry. The regulator should accommodate and develop fiscal term in generating production in alternative energy to increase investment both FDI and Local Investment Opportunity in alternative energy business should trigger the increase in regional economy

Natural Environment PROPER - Peringkat Kinerja Perusahaan dalam Pengelolaan Lingkungan Hidup In Oil and Gas Industry : Source : Men KLH

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

Natural Environment PROPER - Peringkat Kinerja Perusahaan dalam Pengelolaan Lingkungan Hidup Source : Men KLH 2008 GREEN : Total E&P Indonesie (Handil, Tatun, Tunu), VICO - Nilam Asset , Premier Oil Natuna Sea, BP West Java dan Star Energy. BLUE : 40 fields of PSC RED : 6 fields of PSC BLACK : 1 (Kalrez Petroleum) => Sludge and poisonous waste.

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

CSR in Oil and Gas Industry as Stake holder Obligation Social Environment Existing Oil and Gas Industry Corporate Social Responsibility is no longer operating cost of the business unit, it include the 17 of negative lists that not entitled to petroleum operation It is under corporate responsibility on cost of Community development and CSR CSR in Oil and Gas Industry as Stake holder Obligation

Agenda Introduction Indonesian Updates (Ind) Oil and Gas Industry World Supply and Demand Energy Challenge of Energy Demand Alternative Energy Indonesian Updates (Ind) Industry Updates Fiscal Term (business model) Declining in Oil and gas Investment Oil and Gas Industry Hydrocarbon, EOR, Lifting Process Alternative Energy Potential Alternative Energy Potential – CBM Alternative Energy Potential – Geothermal Alternative Energy Potential – Bio Fuel GBE related to Energy Industry Domestic Political Environment Regional Economy Natural environment Social Environment Summary

Summary

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