Foreword from the IPA Board

  Newsletter January 2012

  16 Elisabeth Proust

  IPA Convention and Exhibition on 23rd - 25th May 2012 at the JCC and at various other IPA events and gatherings during 2012!

  I wish you an informative and enjoyable reading of this newsletter and look forward to seeing you at the 36th

  I am confident that with the same solidarity among the members we had in 2011, constructive debates and positive behaviours, we can impact favourably our environment and make 2012 a successful year.

  with Government Authorities and the DPR to try to resolve industry’s issues and challenges. We have made the government aware of the challenges facing the industry as well as the challenges and expectations of both domestic and foreign investors. We believe that the Industry is now in urgent need for the government of Indonesia to create the positive investment climate that is needed to increase investment and production, and the IPA is well placed to work collaboratively with the government to meet the challenges ahead for the benefit of Indonesia, its people and all industry stakeholders. We hope for the best in 2012. The government is trying to implement policies that foster Indonesia’s economic growth and because oil and gas investment, from initial investment to production, can take a significant number of years, it is important for the right policies to be put in place now in order to secure Indonesia’s future energy security. As the primary source of credible information and the representative association for the industry in Indonesia, the IPA is ready to work closely with respective government institutions to achieve our mutual objectives, we need to bring valuable information to all the stakeholders and act as problem solver.

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  For all our members and their families, I wish health, prosperity and a lot of pleasure at work. May also this year be a year of positive growth and development for the oil and gas industry in Indonesia and a year of hope and success to us all. As you may see in this edition of IPA newsletter, the IPA has been conducting many activities and new initiatives in 2011. The IPA organized the biggest IPA Annual Convention and Exhibition ever held in 2011 and took strategic steps to convey industry’s key messages and concerns for the development of oil and gas industry in Indonesia. In this 4th edition of IPA newsletter, you may find a special section on the Professional Division Activities which promote and facilitate the transfer of technical information and advancing new technologies to individuals and companies working in the upstream oil and gas industry in Indonesia In 2011, the IPA Board and Committees have conducted numerous meetings and have initiated advocacy efforts

  Dear IPA Members... On this special occasion, I would like to wish you a very Happy New Year on behalf of the IPA Board of Directors.

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  40th Annual General Meeting 35th IPA Convention & Exhibition Committee Highlights Company Profile Talisman Energy CSR Statoil’s CSR: Leaving Sustainable Footprints News Flash Professional Division Section

  Features Foreword from the IPA Board

IPA Officer TOTAL E&P INDONESIE

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  Newsletter January 2012

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The 40th IPA Annual General Meeting

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  On December 7, 2011 the IPA held its 40th Annual Gen- eral Meeting (AGM) at the Dharmawangsa Hotel to de- liver the IPA President’s Report, the Financial Report and the IPA Committee representatives reports on the various activities undertaken during the year as well as the plan for future activities to the IPA members.

  The event was attended by 110 industry representatives from the IPA Company Members and Associate Mem- bers groups. In his President’s Report, Jim Taylor highlighted that in 2011 Indonesia has shown strong economic growth of around 6.5% which is expected to continue in future and that the country needs energy to fuel this future growth. A sustainable, growing energy supply is a prerequisite to achieving the sustained economic growth that is tar- geted by the government. Jim added that to secure Indonesia’s future energy sup- ply, aggressive efforts, major new exploration and in- frastructure investment and a supportive regulatory environment are essential. Without further significant investment, exploration activity will continue to decline and Indonesia’s oil and gas potential will not bring any additional value and benefits to the State and its people. Jim also highlighted other key issues that are currently being faced by the industry in Indonesia and that are be- ing addressed by the IPA, including Government Regula- tion No 79/2010, Revisions to the Oil and Gas Law, Gas Price competitiveness, PSC Licence extension policy and the new Bank Indonesia regulation of Foreign Exchange proceeds. The IPA’s summary view is that the Government’s priori- ties and concerns should be moved from “managing cost recovery” to the “managing and creation of new supplies of oil and gas to benefit Indonesian economic growth for the people of Indonesia.” 2011 has also been a very busy year for most of the IPA Committees, with attention being focused on the newly issued Government Regulations No. 79/2010 on Cost Re- covery, the planned revision of the Oil and Gas Law and other regulations that have created uncertainty amongst investors. Numerous meetings, lobbying activities and ongoing negotiations with the respective government institutions have been conducted by the IPA committees to deal with these respective industry issues in order to help create a positive investment climate within the oil and gas industry and to improve the performance of this industry for the benefit of all stakeholders. In his concluding remarks, Jim Taylor conveyed his thanks and gratitude to the IPA Committees who have continued to contribute valuable time and resources to support the IPA. In addition, he also mentioned the need to work collaboratively with government to achieve the principle objective of promoting the petroleum industry in Indonesia to achieve the essential exploration invest- ment that is so critical to sustaining and growing future energy supplies. Collectively, these messages reinforced the IPA Mission which is “To maximize the hydrocarbon potential of Indonesia for the benefit of all stakeholders; the contractors, the government and the people of Indo- nesia. “ This year AGM was also marked by the organization of the first IPA year-end press conference which was at- tended by 25 international and national media represen- tatives. The press conference has generated almost 50 items of positive media coverage that conveyed a con- sistent IPA message for the development of oil & gas in- dustry in Indonesia.

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• Government has a clear understanding of the need to attract investment into the energy sector and their determination to support industry in addressing any issues causing concern.
• With regard to regulations, the government be- lieves that issues raised last year on cost recovery and income tax and cabotage have been adequately addressed. However, there is recognition that other areas have not improved perceptibly, notably the process of approval of a variety of implementation permits involving both central and local institutions.
• A recognition that gas is the energy resource of the future – a step change in exploration activity is needed to unlock untapped reserves and gas infra- structure development is also a priority, including gas pipelines on Java and additional Floating Stor- age and Regasifications Units in several locations in Java and Sumatra to supply gas for power genera- tion, manufacturing activities, transportation and domestic use. In addition, pricing of the gas must be market driven to attract investors.
• Government also acknowledged that it needs to de- velop unconventional gas and renewable energy, if necessary under terms appropriate to the nature of the resources to achieve energy self-sustainability.
• HE the Vice President also expressed a measure of disappointment that oil targets were not being met but reiterated that he is certain that all of us, indus- try and government alike, will do everything possible to redress that situation.
• Indonesia is poised for strong economic growth and needs energy to fuel it. It also needs to secure en- ergy supplies for the future and to do so in a sustain- able manner.
• The country has huge natural resources and can be self sustaining in its energy requirements by un-
• 150 companies exhibiting in 4,200 square meters of space compared to 120 companies in 3,300 sqm last year.
• The visitors this year also doubled to 7,000 people compared to 4,000 people last year.
• The new feature in the IPA Convex which is the Ener- gy Edutainment Corner also recorded an additional 1,420 visitors to the event.

  Indonesia Stock Exchange Building, Tower II, 20 ^th Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia “35th Annual IPA Convention and Exhibition 2011: The Biggest in Its History”

  The 35th Annual IPA Convention & Exhibition 2011 which was held on May 18-20, 2011 at the Jakarta Convention Center with the theme :

  “Indonesia Energy: Growth, Security and Sustainability”

  Our theme was all about the country being poised for economic growth; needing energy to fuel this growth while also ensuring the security and sustainability of future energy supply. It was agreed that Indonesia can be self-sustaining in its energy supply as Indonesia does have that potential. It’s a question of realizing that po- tential to provide its own energy requirements. And then it is about policies and regulations to ensure that the energy supply continues to be secured, which in turn is about reinvestment, exploring for the future, exploring to unlock the untapped resources both in conventional oil and gas, non-conventional gas, CBM, shale gas, new and renewable energy. It is also about the proper use and the efficient use of that energy.

  The 35th IPA Convention and Exhibition (Convex) was the biggest IPA Convention & Exhibition ever held in its 34 years of history. It was officially opened by H.E. Vice President Boediono for the second consecutive years and has set several records as follows:

  The large numbers of visitors in this year IPA Convex has reflected the strong enthusiasm and hope from within the industry for the development of the oil and gas in- dustry in Indonesia.

  In their Opening Addresses, H.E. Vice President Boediono and the then Minister of Energy and Mineral Resources, Darwin Z. Saleh, conveyed the following messages:

  In his Opening Address, the then President of IPA Ron Aston emphasized that :

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• • GR 79 on Cost Recovery: strong cooperation be-
• Industry needs to explore for, develop and produce gas in increasingly difficult frontier areas in order to meet domestic needs and still generate valuable export revenues. To achieve this, will require a step change in exploration activity and huge additional investment. Policies should be aimed at encourag- ing this and the IPA’s principal role is to coordinate with the government to ensure it happens.
• The oil and gas sector is the true enabler of the economy, the key to future economic growth and success as it makes an enormous contribution to the economic wellbeing of the country; it accounts for 7% of Indonesia’s GDP and contributes over 25% to state budget revenues. The sector also provides direct employment for over 300,000 Indonesian workers and indirect employment for the countless more. It contributes almost US$19 billion in direct investment.
• • Fiscal Regime: that is tailored to a maturing oil sec-
• • Regulatory regime that facilitates approvals in
• • PSC Extensions: a clear and transparent process
• • Early engagement: as a partner of the Government,
>There is a change of paradigm in the role of oil and gas: from merely being a source of State Revenue to becoming the driver of economic growth as indus- trial feedstock, domestic fuel and in generating a multiplier effect.
• For Indonesia to reach energy Independence, the country has
• • Exploration: is the key to future production and it is essential to encourage as much activity as possible.
• increase exploration and production activities to improve oil and gas reserves
• develop oil and gas infrastructure
• develop unconventional oil and gas
• have a reliable and affordable oil and gas price and ensure oil and gas conservation
• establish effective management of oil and gas development based on the principles of sustain- ability.
• In order to grow and be independent, the country
• In conclusion, the Government should ensure that

• • Gas: represents the future focus in Indonesia, but

  MUST attract significant investment, not only in oil and gas, but in all forms of energy.

  Plenary Session 1 - “How Can Indonesia Re-Establish Energy Independence in a Growing Economy”:

  the IPA welcomes early engagement in energy policy formulation and ongoing collaboration in the regu- latory process. The three (3) Plenary Sessions were very well attend- ed and achieved their objective of providing a forum for distinguished speakers and guests to have an open exchange views and opinions on industry 3 (three) key issues. A brief summary of the Presentations and key discussion points is shown below:

  for extending the Production Sharing Contract should be established. The absence of a transparent process will lead to a slowdown of investment in the final years of the PSC and a consequent deceleration of production.

  would have the greatest impact on increasing cur- rent production.

  speedy fashion – the IPA strongly believes this

  tor whilst incentivizing gas development and explo- ration activity.

  tween the Government and industry is required in finalizing the implementing guidelines to the GR which continues to concern the industry.

  In order to obtain the level of funding needed to secure Indonesia’s future energy requirements (US$ 23 billion per annum from 2020 onwards – Source:BCG), it is es- sential to keep the investment climate positive.

  The Policies Needed to Boost Investment :

  Exploration terms offered should be competitive to attract investment in an increasingly challenging and competitive global environment. Industry must also be encouraged to explore for and develop the extensive Unconventional Gas Resource that Indonesia possesses. In doing so, it need to be supported by appropriate regulations, incentives and partnerships to ensure that the necessary in- vestment is forthcoming.

  brings with it more complexity and a need for far greater financing particularly when the gas is found in remote and very challenging areas. To supply do- mestic requirement, it needs domestic infrastruc- ture- transmission pipelines, liquefaction plants, receiveing terminals – all of which must be under- pinned by long term supply agreements to secure the necessary financing. The principal driver will be price – the gas price must be market driven and not limited by producers providing indirect subsidies to end users.

  What’s needed to secure energy supply:

  locking them. Focus needs to move from mature oil production to realising the potential of gas reserves, both conventional and unconventional and other forms of energy and renewables.

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• Proven material and accessible resources
• Clear and consistent regulation
• A stable judicial and political environment • Competitive economics. These key areas are becoming more and more criti- cal as companies focus on return over growth and all of the distinguished speakers endorsed the view that through cooperation and collaboration, these goals can be achieved. Then in the afternoon session, the Plenary Session 2 discussed “the Role of Gas in Meeting Indonesia’s Eco- nomic Growth Potential”. As Pak Priyono outlined in his speech, with a view that was endorsed by the distinguished speakers from the Parliament, PLN, PGN and industry stakeholders;
• Domestic demand for Gas is increasing at a project- ed 24% per year
• Remaining large gas reserves to be discovered are likely to be located in eastern areas within Indone- sia, often in deepwater locations that are technically challenging and expensive to develop
• there is a clear requirement for an integrated Na- tional Gas Policy in Indonesia encompassing sup- ply management, transportation management and demand management, including domestic pricing policy, to support the huge investment that is need- ed to produce the estimated 400 MMscf per day of additional production that is required to fulfill this demand.
• Indonesia has proven, world-class potential in re- newable and unconventional resources but they need to be developed in conjunction with conven- tional resources within an overall Energy Policy and also by learning from the experiences of other coun- tries
• Again, we heard of the need for Government and In- dustry stakeholders to work in strong partnership and create the demand for Renewables in order to stimulate Supply and Infrastructure development for the benefit of all stakeholders
• And finally, a recognition that the time to act is NOW to establish the regulatory framework and pricing policies that will encourage investment in these technically challenging areas so that renewable and unconventional resources can take their place alongside conventional resources in Indonesia’s fu- ture energy mix.

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  the energy must become available, accessible and affordable As endorsed by the independent view from the Boston Consulting Group during this plenary session, the large investment that is needed in Indonesia demands 4 “Must Haves” :

  And finally at the Plenary Session 3 in the discussion on:

  “The Role of Unconventional and Renewable Resources to Indonesia’s future Energy Security and Sustainabil- ity”, we heard a stimulating discussion and numerous

  questions on how to turn the Unconventional’s of today into the Conventional’s of tomorrow. It was remarked that;

  The Energy Edutainment Corner (EEC) was also achieved its goal as to advocate the public, specifically the young generations, with regard to the history and development of oil and gas industry in Indonesia. EEC has attracted more than 1,400 visitors, of which 60 percent were stu- dents from 22 schools and universities. As a follow up initiative, the movie shown at the EEC was donated to the Indonesian Oil & Gas Museum Graha Widya Patra at Taman Mini Indonesia Indah. This is inline with IPA’s mission which is to promote education and knowledge transfer to the public. Furthermore, as part of IPA’s commitment to promote higher education for underprivileged students, at the Closing Ceremony of the IPA Convex, the IPA awarded scholarships worth 100 million rupiah to the selected under-privileged high-school students in Jakarta areas in cooperation with YKAI (Yayasan Kesejahteraan Anak Indonesia).

  AWARDS PRESENTATION at THE CLOSING OF 35th IPA CONVEX : TECHNICAL PROGRAM BEST PRESENTATION AWARDS:

  1. Category of Engineering and Formation Evaluation: ‘Successful application of combined impact ham- mer and hydraulic shifting tool run on coil tubing for SSD manipulation in highly deviated wells – A case history from Offshore North West Java’ presented by Hermawan Susanto (Pertamina Hulu Energi, ONWJ).

  2. Category of HSE, Community Development, Busi- ness, and Commercial: ‘Managing overlapping land usage’ presented by Surya Safari (VICO).

  3. Category of Geology: ‘A sequence stratigraphic frame work of the Sunda region based on integra-

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  tion of bio-stratigraphic lithological and seismic

  7. Category of Student (oral): ‘3D modeling of Kerek data from Namconson basin, Vietnam’ presented by turbidite sand bodies based on out crop studies in

  Robert J Morley (Palynova Limited). Kedung Jati area, Central Java : An analogue for

  sandy miocene formation in Western Kendeng Zone’

  4. Category of Geophysics: ‘Filling the inversion “gap” presented by Fery Andika Cahyo (UPN Veteran, without well data : Multi-level sources and stream- Yogyakarta). ers help improve inversion’ presented by Martin Bayly (WesternGeco, Schlumberger).

  8. Category of Student (poster): ‘Hydrocarbon produc- tion during underbalance drilling – A mathemati-

  5. Best Award of Overall (Professional): ‘Early carbon- cal model to predict well productivity’ presented by ate growth in the East Java basin Indonesia : A case Samuel Zulkhifly Sinaga (ITB, Bandung). study from the Jimbaran field’ presented by Stefan Van Simaeys (ExxonMobil Exploration company).

  EXHIBITION:

  6. Category of Poster (Professional): ‘True amplitude BEST BOOTH AWARD preserved multi-azimuth pre-stack deth migration Best Booth 50 sqm or larger: INPEX for structural and reservoir characterization (Sisi Best Booth 18 sqm-50 sqm: ELNUSA Nubi field, Indonesia)’ presented by M. Baturin Best Booth for smaller size 9 sqm: SCOMI

  (Total E &P Indonesie). Most Favourite Booth by Public Votes: MEDCO th

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Communications Committee

• Building public awareness on the IPA organization
• Enhancing IPA reputation as the reliable partner of the Government of Indonesia
• Supporting key-issues advocacy
• Outreaching through community engagement programs
• Environmental Impact Assessment and Environment Permit • Air Pollution Controlling Management • Water Pollution Controlling Management • Hazardous Material, Hazardous Waste and Dumping Related to these draft regulations, one of the committees’ priorities will focus on the mechanism of dumping of Drilling Cutting or waste for offshore operations. On top of the four draft implementing regulations, the Committee has also identified some concerns regarding Tier 3 Response for Oil Spill Response Management, specifically regarding the support from GOI to establish an effective international assistance mechanism. The Committee has completed a “White paper” on Oil Spill Response. This paper is intended to provide the current update or information on the existing related regulatory issues on oil spill response management, together with the existing Practice and Challenges. Following several fatality accidents in 2011, the committee also has an initiative to cooperate with the Indonesian Safety Professional Association (ISPA/IAKKI)
• Feeding the Board with industry news and media briefing materials
• Leveraging expertise within the IPA to provide knowledge contribution to universities, media and other stakeholders
• Assisting in databank improvement, IPA website content and communication to members

• Building trust and understanding between the

Data Management Committee

• Start collaboration work in addressing data management challenge to improve oil and gas industry climate investment.
• Review PND services, including possibility for PND to also manage closed and hardcopy data.

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  Commitee Highlights

  The Exploration Committee is charged with providing recommendations to the IPA Board of Directors to promote increasing the level of exploration investment and also improving the efficiency of exploration activities. Three sub-committees have been established in order to

  Exploration Committee

  The discussion forum was established with a non blaming culture and was well facilitated to create values of sharing information among professionals, industries and the regulator, with the collective aim to lead the industry towards a world class safety culture.

  to organize a periodic safety discussion forum, identify lessons learnt and directly listen to details concerning these incidents from affected parties, discuss root causes and develop proposed actions to avoid recurrence.

  The IPA ESC was chosen as an important partner to be consulted by the KNLH office relating to the development of environmental implementing regulations. High level positions i.e. Deputy of Ministry, have attended in the IPA ESC session discussions or workshops. Currently the committee have been deeply involved in four (4) drafts of Implementing regulations as follows:

  (SPE) and Global Methane initiatives, Global Initiatives in Oil Spill Response Management. The IPA ESC is also represented in the ICCOSH- Institute Certifications of Competence of Occupation safety and Health and has become a member of the Board. Meetings have been held periodically to discuss many issues and to socialize standards of competence.

  3. Start discussion on the possibility of returning open area data that still kept by IPA members

  During 2011, periodic dialogue and developing partnerships have been done with related stakeholders through courtesy visits and formal or informal meetings. These sessions have been conducted with several regulatory bodies such as KNLH, MIGAS, Sea Communication Transportation, BPMIGAS and professional institution IAKKI/ISPA (Indonesian Safety Professional Association), IATMI (Indonesian Petroleum Engineers Association), Society of Petroleum Engineer

  2. Work with IPA Members and Patra Nusa Data on Data Disaster Recovery Plan

  1. Continue as liaison to Government and industry for Data Management issues • Involve in IPA Exploration Committee.

  3. Internal Communication activities

  IPA, Government and Media as well as other strategic stakeholders

  2. External communication activities to achieve IPA’s Vision and Objectives

  1. Stakeholder Awareness and Reputation Management

  For the second semester of 2011 the committee has set three main focuses of activities as follows:

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Environment & Safety Committee

  Finance and Tax Committee information meeting during the year. .

  focus on particular aspects of exploration activities:

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• Regulatory procedures and management of PSC activities, WP&B, AFE’s
• Data access and management
• Exploration investment climate, bid rounds, fiscal regime

Human Resources Committee

  3. Continued to provide inputs to BPMIGAS regarding implementation of the extension of employment for national employees after regular retirement age of 56 years. As each PSC may have different operational needs, PSC should be given flexibility on the timing and transition for smooth implementation of each PSC.

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  1. Interaction with the Indonesian Gas Association (IGA) and National Economy Commission (KEN)

  LNG & Gas Committee

  8. Established relations with new appointed official both MIGAS and BPMIGAS

  7. Strengthen the co-ordination between HR IPA committee with sub working groups to ensure alignment for inputs to BPMIGAS and support the sub working group program.

  6. Participated in Human Resources Annual Forum with participants consisting of HR professionals and management from BPMIGAS, PSC, and Services Company on October, 26-28, 2011 discussing various HR issues in the oil and gas sector including CDM Award, Lecturer, Sharing Best Practice from various industries, and HR service provider booths.

  5. Supported people development program such as global HR certification. Facilitated knowledge sharing among PSCs on HR related issues; industrial hygiene program, medical evacuation, industrial relation, fresh graduate program, mentoring program, etc

  4. Provided inputs to both BPMIGAS and MIGAS on RPTK/IMTA process. We expect an integrated review, coordination, and consistency between BPMIGAS/ MIGAS. Objective is to have more efficient process, such that there will be no business impact, cost and impromptu/sudden personnel mobilizations.

  The goal for the sub-committees is to seek constructive dialog on various aspects affecting exploration investment and efficiency in order to be able to recommend and implement measures which will result in an increase in exploration activity and ultimately lead to discovery of new hydrocarbon resources and provinces. This is particularly important to address given the poor industry response to recent bid rounds and the decade- long downward trend in new field wildcat exploration drilling activity in Indonesia.

  1. Supporting the IPA Board of Director in engaging various stakeholders of oil and gas industry to improve the understanding on cost recovery, the importance of cost recovery, and the impact of changes in cost recovery mechanism to the industry.

  1. Provided advocacy on GR 79/2010 related to HR items to BPMIGAS and other department. We raised in issue that remuneration both expat and national should not be capped, but based on competitive markets. Also, Pension and other employee benefits should honor existing Collective Labor Agreement of respective companies. We met also with APINDO chairman on this subject.

Finance & Tax Committee

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  6. To conduct regular meeting and/or teleconference with Finance and Tax Committee (core) team to share knowledge, to discuss issues and agree on the strategic action point to progress/resolve the industry issues and to conduct a wider industry

  5. Continue to proactively engage and conduct dialogue with the DGT to share the progress on industry cost recovery issues and progress on BPKP audit exceptions; and to coordinate and advocate audit issues raised by BPK, BPKP and BPMIGAS auditors for appropriate attention and resolution.

  4. To engage IPA Board of Director to provide input for BPMIGAS Management for the improvement of Work Program & Budget process, which should be more focus on the strategic issues with a longer term vision.

  b. to maintain the current tax treatment on cost sharing/cost allocation inter and intra PSC companies and on drilling services; and to obtain clarification on transfer pricing reporting requirements for oil and gas industry.

  a. to immediately issue the implementing procedure for tax borne by Government on Parent Company Charges and other charges coming from head office and the amendment/ revision of PMK 73/2010 (with the involvement of DG of State Budget and DGT).

  3. Continuously engage and collaborate with BPMIGAS, BKF and other stakeholders:

  2. Continuously working with BPMIGAS, MIGAS and DGT to ensure the principal of PSC income tax calculation is following the current tax principal under the existing PSCs.

  2. Provided inputs and subject matter experts on draft of BPMIGAS PTK-018 revision. We suggested the guidelines should be more strategic and not to give more burden administrative to PSC.

• Government Regulations 79/201
• Streamlining Regulators Roles &

  2. Independent consultant study on Indonesian Gas Policy and Investment Climate The idea to engage a consultant was initially suggested by KEN to provide independency, credibility and quantitative support on IPA’s position on the LNG and gas business climate in Indonesia.

  The Professional Division has continued to successfully carry out its mission during 2011. Eight (8) luncheon talks were held during the year, with attendance exceeding 780 professionals in Jakarta. In addition, eighteen (18) short courses were held on diverse technical topics throughout the year and all were well received and attended. The short courses presented in 2011 drew a total of 306 attendees, which is a significant increase over last year. The demand for educational services remains strong, and the excellent work of short course organizers and instructors, has resulted in a healthy surplus for the IPA. In addition, five (5) educational fieldtrips were successfully completed during 2011, which is one more than the previous year.

  4. Interaction with Regulatory Affairs Committee The LNG and Gas Committee has nominated a representative and alternate to coordinate with the Regulatory Affairs Committee on the impacts of the proposed revision of the Oil and Gas Law and the Law on Currency to the gas business.

Professional Division Committee

  IPA Proceedings volumes in digital format, both via an online website and on CD. This service can be accessed via the AAPG data pages, which is a highly efficient and cost effective method of disseminating technical information.

  Indonesia

  Several consultants were contacted and Wood Mackenzie is considered the right entity to do this type of work. The proposed scope of works includes:

  Responsibilities and their approval process

  The Publications group continues with distribution of the

  Following the meeting in September 2011 with the leaders of KEN, IPA and IGA formulated the top 3 issues of the oil and gas industry and the proposed solutions and the benefits to Indonesia to be forwarded to the President by Chairman of KEN:

  KEN is a commission which reports directly to the President of Indonesia and works with the Coordinating Minister of Economy to provide analysis and input on global and domestic issues related to the economy. Following the INDOGAS 2011, KEN asked IGA for inputs on efforts to accelerate development of gas fields and infrastructure. IPA, via the LNG and Gas Committee, was later included in the process to formulate the final input.

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• Challenges in fulfilling domestic gas demand The draft paper was presented to the IPA Board in October and comments are being incorporated to be forwarded to the IGA for final submission to KEN before the end of 2011.

  The 2011 IPA Membership Directory was published and distributed to members, as were two (2) informative newsletters, which now can be accessed exclusively through the IPA website.

• How current regulatory affect gas investment in
• Assessment of gas commerciality from upstream development and overall Indonesia gas market

Regulatory Affairs Committee

  3. Review of the possibility of gas/LNG equity lifting in Indonesia This idea was initially asked by MIGAS as a way for GOI to take its in-kind gas entitlement to meet domestic demand. The Committee compared the practices in other countries with the PSC fiscal regime in Indonesia and noted that the implementation of full equity gas lifting is probably not practical in Indonesia, nevertheless the committee will continue to look into the possibility of applying equity lifting for a portion of a PSC’s production. The findings were presented to the IPA Board of Directors in October.

  1. Regulation on Cost Recovery and Taxation A petition for Judicial Review on GR 79 on cost recovery and Income Tax Treatment in Upstream Oil and Gas Activities was filed by the IPA on 16 June 2011 after consultation with the GOI. The petition emphasizes the key arguments that the GR should be revoked since it violates higher laws and/or its formation does not comply with applicable laws. The IPA conducted an extensive media campaign in conjunction with the filing of the petition to seek to educate the public on the reasons for filing the petition.

  RAC sought to discuss and resolve ongoing implementation issues associated with the GR including those relating to WP&B pending the Supreme Court decision.

  On 18 October 2011 the petition was denied by the Supreme Court. The basis of the denial is not yet known as the judgment is not expected for another

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  The proposed scope and estimated costs have been presented to the IPA Board of Directors in October and comments are being incorporated for final scope to be sent to Wood Mackenzie. The Board also suggested that the report be also used for other purposes besides as input to KEN.

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  Indonesia Stock Exchange Building, Tower II, 20 ^th Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia

  one to three months. There are no rights of appeal from the decision of the Supreme Court. Individual contractors can avail themselves of the rights they have under their respective existing PSCs in response to GR 79. Despite this disappointing news RAC will continue to assist the IPA in its endeavours to seek the revocation of the GR.

  2. Oil and Gas Law Bill On April 29, pursuant to an invitation from the Parliament (DPR), the IPA attended a Parliamentary- initiated session to discuss the terms of a draft of a new Oil and Gas Law. With the assistance of RAC, the IPA advised the DPR about potential unfavorable impacts on investment due to the introduction of an entirely new law. The IPA formed a Task Force, on which the RAC is represented, to primarily advise the IPA Board on how best to proceed. The IPA continues to seek a confirmed version of the draft Bill to improve IPA’s ability to influence and continues to correspond with GOI stakeholders advocating the primary message that substantive change is not required and will act as a disincentive to investment in the future. The DPR has not as yet distributed any official draft Bill for comment to the IPA despite requests.

  3. Explosive Permitting

  IPA through the RAC is a primary participant in an Explosives Permitting Task Force, together with 19 PSCs, service companies and BPMIGAS. The Task Force is seeking to address the lack of transparency in procedure and costs relating to obtaining explosives permits and handling explosives to mitigate compliance risks. The Task Force is working with relevant government offices (Police Dept, BPMIGAS, MIGAS, Ministry of Finance, UKP4) to establish an appropriate legal instrument that will address concerns while complying with administrative laws. In the interim short term solutions have been proposed, (i) BPMIGAS to obtain the permits and services on behalf of the PSC pursuant to Section V of the PSC; (ii) BPMIGAS to elevate efforts to resolve permitting problems in each PSC to UKP4; and (iii) BPMIGAS to enter into an agreement with various Provincial Police Offices. Option (iii) is being progressed, BPMIGAS is to arrange a meeting with the Police Headquarters and explore whether option (iii) is at all possible. The meeting with Police Headquarters is expected to take place in December 2011.

  4. Procurement of Good and Services BPMIGAS is considering further revisions to BPMIGAS PTK 007-RevI-II/2011. To facilitate this exercise, BPMIGAS invited a number of PSCs to a meeting in Bandung to discuss and identify issues arising from BPMIGAS PTK 007-RevI-II/2011. The matter of domestic content dominates the list of issues. Other issues identified during the meeting are advance payment, bidder/contractor security (e.g. bid bond, performance bond, parent company guarantee), and processes during commercial negotiation (e.g. processes related to owners’ estimate). RAC is seeking to ventilate industry concerns through this process.

  5. Repatriation of Export Proceeds Bank Indonesia (BI) recently issued a regulation concerning export sales proceeds (BI Regulation No. 13/20, “PBI 13”). It seeks to capture export proceeds in domestic bank accounts. It appears that BI wishes to strengthen Indonesia’s domestic liquidity of foreign currency by requiring Indonesia’s sizeable export proceeds to be brought into the domestic banking system. PBI 13 contains no exemption to any industry including Oil and Gas. It is intended to be applicable for any export proceeds.

  The RAC worked together with the F&T Committee to define IPA’s position with regard to the PBI 13 which has been formally conveyed to BI. In essence, the IPA believes that the PSC Contractors should not be subject to the PBI 13 for several reasons but mainly because the PSC expressly provides a right to Contractors to retain Petroleum proceeds abroad.

  6. Cabotage The RAC together with the Communication Committee were actively involved in a task force initiated by BPMIGAS to secure an exemption from the cabotage requirement for vessels used in the oil and gas industry. Through active participation and effective lobbying, the task force was successful in securing the exemption prior to May 7th, thereby avoiding any disruption to oil and gas operations. The Government issued Government Regulation No. 22 of 2011 (GR 20) on 4 April 2011 which sets out the list of vessels (that are mostly used in the oil and gas industry) that are exempted from the cabotage requirement. The Ministry of Transportation subsequently issued an implementing regulation to the GR 20 on 18 April 2011 in the form of a Ministerial Transportation Regulation No. 48 of 2011 that further sets out the procedure to obtain a permit for foreign flag vessels operating in Indonesia.

  7. Regulated Increases in Production RAC was closely involved in consultations on the implementation of Ministerial Regulation on Oil and gas Production Increase (“the MR”) early in 2010. The MR requires non-producing fields and wells to be inventoried and new discoveries to be notified and seeks to impose an accelerated program for development inconsistent with prevailing law, applicable PSCs, and industry capability. Following consultations on the MR, in which RAC

  10 a. Draft MR on Put on Production for Oil and Gas, and b. Draft MR on Procedures for the Establishment and Offer of Work Area for Non-Conventional Oil and Gas Resources.

  IPA’s Unconventional Gas Committee is preparing feedback, RAC is committed to provide the necessary support to the Unconventional Gas Committee.

  Newsletter January 2012

• Feedbacks have been given by PSCs to BPMIGAS.
• Some clarifications have also been issued by BPMIGAS.

• Discussion on the implementation of cabotage law for specific vessels used in oil and gas upstream activities.
• Participation with other committees of IPA and related Government Institutions to find the solution.
• SIC concerns about article 13 point q, r and t concerning procurement that exceed 10% of AFE value, surplus of material stock and procurement without open tender.
• Waiting the result of Judicial Review proposed by IPA.

  8. Regulations On Put on Production and the Establishment of Work Area for Non-Conventional Oil and Gas On August 23, MIGAS invited a number of parties including the IPA to a socialization of the following draft Ministerial Regulations (“MR”):