Foreword from the IPA Board

  Newsletter August 2012

  22 Professional Division Section Foreword from the IPA Board Dear IPA Members..

  IPA Vice President Chevron Indonesia Co.

  Jeff Shellebarger

  To continue with a tradition which was started last year, the IPA held a Buka Puasa with all stakeholders on August 7, 2012. On this auspicious occasion, the IPA took the opportunity to continue its “IPA Care Program” by giving support to “Sekolah Kami”, a school dedicated for scavenger and disadvantaged children located in the Bekasi area. A donation was symboli- cally handed over by the IPA to Ibu Irina Amongpradja, the principal of the school, to provide funds to renovate the school facilities. Dear IPA Members, I wish you an informative and enjoyable reading of this newsletter and hope our industry will continue to prosper and grow for the benefit of Indonesia, its people and all stakeholders.

  The industry is ready to invest billions of dollars to achieve the national production target and to increase oil and gas reserves but to enable this investment to be realized, a stable invest- ment and regulatory environment is needed which, in turn, will drive the economic growth of the country. The message that the IPA wanted to convey at this convention was that to meet Indonesia’s growing energy needs, it is im- portant that there is increased collaboration between the gov- ernment and all stakeholders. It is the IPA’s continuous hope that in line with the spirit of Presidential Instruction No. 2 Year 2012, the government and industry can work together in con- sultation, cooperation and coordination in a spirit of true part- nership to develop Indonesia’s energy resources for the benefit of Indonesia and its people. As Exploration is the future of the oil and gas industry in Indo- nesia, the IPA jointly organized an Exploration Forum with the Directorate General of Oil and Gas on July 10, 2012 to discuss how to increase exploration investment, activity and perfor- mance. You may read the summary of key points and recom- mendations that resulted from the forum in this newsletter. It is envisaged that follow up meetings will be convened for fur- ther discussion and drafting of proposals on key issues.

  The 36th IPA Convention and Exhibition 2012 was completed with great success. Thanks are due to all members of the Con- vention Committee who have worked very hard to make this event a success and also to all participants from the govern- ment and industry who have participated in the exhibition, technical programs and other activities of this convention. I would also like to convey my congratulations to all of the win- ners at this event: Best Booths, Best Oral Presentations, Best Poster Awards and Best Pictures in the 1st IPA Photography Competition. Congratulations on your great achievement! The 36th IPA Convention and Exhibition achieved its objectives of holding an open and frank dialogue between all stakehold- ers and providing a platform for the government and industry to discuss the challenges to meet the country’s energy needs.

  On this joyous occasion for all Moslems around the world and on behalf of the IPA Board of Directors, i would like to take this opportunity to wish all of our Moslem members a “Selamat Hari Raya Idul Fitri, Mohon Maaf Lahir dan Bathin.” May you have a very happy and peaceful Eid. We will soon be entering the last quarter of this year and many activities have been conducted by the IPA since the beginning of this year which you can read about in this 5th edition of the IPA Newsletter.

  21 News Flash

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  18 CSR Total E&P Indonesie

  16 Company Profile Shell Indonesia

  13 Ditjen Migas-IPA Exploration Forum

  2 The 36th IPA Convention & Exhibition

  Features

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

  Minister EMR, Jero Wacik officially opened The 36th IPA Convex, accompanied by BPMigas Chairman, R. Priyono; DG MIGAS, Evita Legowo & IPA President, Elisabeth Proust.

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• The Government of Indonesia is open to further talks with industry stakeholders to provide incentives to stimulate future growth in the petroleum sector.
• The government also recognizes the huge contribu- tion of the industry to the economy and encourages all stakeholders to think positively, develop trust and work together to achieve the targets set by the government.

• The National Energy Council forecast that energy demand in Indonesia will rise threefold by 2030 from the current annual consumption of 150 mil- lion tons of oil equivalent, including a large increase in electricity demand to power the growing popula- tion and economy. This energy challenge has been heightened by a geographical supply-demand mis- match, with energy consumption very heavily focused in densely-populated Java, but fossil fuel resources most strongly focused in Sumatra and Kalimantan.
• Panelists agreed that demand is increasing rapidly and that by expediting the offering of exploration and development acreage to willing and capable investors by MIGAS, together with improvements in the regula- tory environment, the country can respond to these challenges and generate the energy that is needed to support future growth.
• It was also agreed that the government needed to have clearer targets and incentives for energy infra- structure, to ensure the security of the country’s long term energy supplies.

• More than 8,000 visitors to the Convex, including over 2,300 registered participants
• Exceptional industry participation with more than 150 ex- hibiting companies
• More than 135 technical papers and posters from profes- sionals and students covering Geosciences, Engineering and Business/Commercial
• An exceptional media turnout with over 400 journalists registered from a range of national, international, local and specialist media outlets
• Opening Ceremony by H.E. the Minister of Energy and Natural Resources, Mr Jero Wacik • An “Empowerment Center” with educational cinema pre- sentations on the process of oil and gas exploration and production, the PSC concept and CSR efforts by the oil and gas companies to support the environment and communi- ties where they operate.

  Indonesia Stock Exchange Building, Tower II, 20 ^th Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia “The 36th IPA Annual Convention & Exhibition 2012”

  The 36th Annual Convention and Exhibition of the Indo- nesian Petroleum Association (IPA) was held between May 23rd - 25th in Jakarta, Indonesia with the theme:

  “Working Together to Meet Indonesia’s Energy Needs”

  As the biggest annual regional event for the oil and gas industry, this year’s Convex attracted : Opening address was provided by the Minister for Energy and Mineral Resources, Jero Wacik, who official- ly opened the Convention and raised several key points during his opening address;

  In her opening remarks, IPA President, Elizabeth Proust said: “The IPA believes that, in order for the oil and gas industry to continue to supply energy to sup- port Indonesia’s economic growth, it is necessary for all stakeholders, from government institutions, cen- tral and local government representatives, NGOs and communities, as well as the industry itself, to focus on the 3 Cs - Consultation, Cooperation and Coordination”.

  1. Plenary Session First Plenary Session - “What Are Indonesia’s Current and Future Energy Needs ?”

  HIGHLIGHTS

  Panelists:

  Mr Herman Agustiawan - National Energy Council Mr Nur Pamudji - President Director, PLN Mr Suryo Bambang Sulisto - Chairman KADIN Mr Hendy Santoso – President Director PGN Moderator : Mr Muhamad Husen -

  IPA Board Member. Facilitator : Mr Kong Ming Tek - Boston Consulting Group. Ibu Evita Legowo plays gamelan with IPA BODs to mark the closing of The 36th IPA Convex.

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• The need for a collaborative approach amongst all stakeholders to deal with the gap between sup- ply and demand was highlighted, along with the pressing need to increase production in order to meet the target stated in the decree.
• The industry requires swift resolution to issues relat- ing to regulations, licensing, security and land over- lapping concerns so that development plans can be implemented to increase production. The need to es- tablish a task force between government and industry under the coordination of the Coordinating Minister of the Economy was discussed.
• The Coordinating Minister of the Economy is due to report on the decree’s progress to the President by July 2012. The industry hopes that through increased collaboration and coordination, government and in- dustry can work together in partnership to achieve the production target detailed in the Presidential decree.
• The Boston Consulting Group noted that Indonesian exploration success and drilling activity have lagged behind their peers and that a collaborative approach is needed to develop a mix of resources to close the production-consumption gap. Attendees heard that 50 to 70 Billion US dollars of Capex investment needs to be approved over the next 3-4 years if Indonesia is to meet its ongoing energy needs.
• In his Keynote Speech, Mr. R.Priyono remarked that to support economic growth, adequate supplies of energy are needed and that although oil has played a major role in the past and despite Indonesia becomi– ng a net oil importer, oil’s share in the energy mix is still high. Renewables have great potential but if pro- duction cannot be increased rapidly, then fossil fuels need to feed the gap and Indonesia will come to rely more and more on gas.
• Panelists agreed that gas demand is growing – the country must develop and produce more, rather than rely on increasing imports of primary energy. The government should address its pricing policy, par- ticularly for natural gas and also encourage explora- tion, which is the key to future success. Attendees also heard from speakers from Malaysia and Norway who highlighted the innovative fiscal and technical in- centives that have been initiated by their respective governments to encourage and accelerate investment and stimulate activity.
• In summary, broad based efforts by multiple stake- holders are required to raise investment and activity levels, requiring a stable and favorable investment environment to increase production of oil and gas, contribute to Indonesia’s energy security and provide essential revenues for the nation.

  Indonesia Stock Exchange Building, Tower II, 20 ^th Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia Second Plenary Session - “How to Create An Environment to Meet the Demand?” Keynote Speaker: Mr. R. Priyono - Chairman BPMIGAS

  Third Plenary Session - “How Do We Work Together to Achieve Presidential Instruction No. 2 Year 2012?” Keynote Speaker: Mr Bambang Brodjonegoro - Head of Fiscal Policy Body (BKF), Ministry of Finance Mrs. Evita Legowo - Director General MIGAS

  Panelists :

  Mr Sugiharto – President Commissioner Pertamina Mr Soeprapto – Special Staff to Minister of Forestry Mr Edy Hermantoro – Director Upstream Development MIGAS Moderator : Mr Sammy Hamzah –

  IPA Board Member Facilitator : Mr Philip Whittaker - Boston Consulting Group.

  Panelists:

  Mr Hary Karyuliarto – Gas Director Pertamina Mr Ramlan Malek – Vice President PMU (Petroleum Ma– nagement Unit) Petronas

  Mr Tor Fjaeran – President Director Statoil Mr Lukman Mahfoedz – President Director Medco Energi Internasional Mr Ahmad Yuniarto -

  Chairman Schlumberger Moderator : Mr Jeff Shellebarger –

  IPA Board Member Facilitator : Mr Kong Ming Tek - Boston Consulting Group. Second Plenary Session.

  Keynote speakers and panelists at the Plenary Session 3. th

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  Newsletter

2. Special Session on Revisions to Oil and Gas

  3. Media Talk Show with BPMIGAS Law No. 22 Year 2011 Mr Pieter P. Gero - Kompas Mr Arif Budisusilo - Bisnis Indonesia

  Mr Satya W. Yudha – Member of Commission VII, DPR; Ms. Evita Legowo – Mr Wahyu Muryadi - Majalah Tempo Director General MIGAS Mr Primus Dorimulu - Suara Pembaruan Mr Pri Agung Rakhmanto –

  Exec Director Reforminer Ins. Mr Anggito Abimanyu – Mr Gde Pradnyana - BPMIGAS UGM, Jogjakarta

  Moderator : Mr Kornelius Purba - Jakarta Post Moderator: Mr Suyitno Patmosukismo –

  IPA

• The attendees were informed on the background of • The speakers highlighted the need for transparency the Oil and Gas Law revisions, that the existing law from companies, government and agencies. The me- had been relatively successful and that a major revi- dia also needs better information on the industry in sion now would only increase uncertainty for future order to be objective and to better educate the public. investment.
• It was also noted that there is a certain amount of mis- understanding on the oil and gas industry amo>The DPR position was explained, including a summa- ry of the complex issues involved, the legal basis and the media. the projected timeline for implementation of the new
• Perceptions exist that most oil and gas fields are revision of the law. In summary, the DPR position is owned by foreign companies, and that communities that strategic national assets must be protected and are not sufficiently benefiting from the production of managed by the government of Indonesia as the hold- oil and gas. er of the mining rights.
• The overall conclusion was on the need for greater communication to the media from the relevant Go&nd
• Attendees also heard that increased signature bo- nuses and participating interests are to be given to vernment Ministries and from the industry. regional government, with Pertamina and local enter- prises to be given 1st right of refusal for relinquished

  4. Lifetime Achievement Award fields.

  At the Gala Dinner held on 25 May 2012, the IPA present-

• Other speakers reaffirmed the desire to have a big- ed a “Lifetime Achievement Award” to Mr Baihaki Ha- ger participation of national companies in the oil and kim, former President Director of PT Caltex Pacific In- gas sector, noting that that this could still be achieved donesia, President Director of Pertamina and President without amendments to the law, but rather through of the IPA (1999). The award was handed to Mr. Baihaki implementing regulations.

  Hakim by Mr. R. Priyono.

• Also that the oil and gas business should be Business to Business ventures in line with the 1945 Constitu- tion, prioriti–zing national interests but at the same time providing legal certainty and respect for existing contracts.

  Ibu Evita Legowo poses with IPA BODs and Convention Committee. _th Indonesia Stock Exchange Building, Tower II, 20 Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia

  Newsletter August 2012

  “Advantages in Depth Imaging Technology: Rock Phys- ics Guided Migration of Seismic Data in 3D”, by Nader C. Dutta, Schlumberger

  Best Overall Professional Oral Presentation

  “Thickness Estimation Using Gradient of Spectral Am- plitudes from Spectral Decomposition”, by Tri Wuri Asri Sulistyoati, Lita Novitasari, Sonny Winardhi, Institute of Technology Bandung

  Student Poster Presentation

  “Jurassic Sandstone Characteristic of Bobong Forma- tion in Taliabu Island, Eastern Indonesia: Outcrop and Petrography Observation”, by Septriandi, University of Padjadjaran

  Student Oral Presentation

  “Geological Review To Identify Petroleum System In Pati Basin”, by Aveliansyah, Dini Andriani, Rizky Syawal, Per- tamina Hulu Energi, Patra Nusa Data, ETTI

  Professional Poster Presentation

  “Driving Business Excellence with Purposeful Collabo- ration Network Excellence at ConocoPhillips”, by Stein Wolden, ConocoPhillips

  HSE, Community Development, Business & Commercial

  Geophysics

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  “Developing a Large Carbonate Buildup Oil Field Banyu Urip, Cepu Block”, by Frank Musgrove, Mobil Cepu Limited

  Geology

  “Determination of Residual Gas Saturation and Relative Permeability in the Modeling of the Abadi Gas Field”, by Masahiko Nomura, INPEX Corporation

  Best Oral Presentation and Best Poster Awards, Profes- sional and Student were as follows: Professional Oral Presentation Engineering & Formation Evaluation

  Pulling the 30 session program together could not have been possible without the dedicated effort of 27 Tech- nical Program Committee professional volunteers who had been working on the technical program since De- cember 2011; 42 manuscript editors; 48 convention ses- sion chairpersons and 90 oral presentation and poster judges. And of course, all of the effort was backed up by the excellent staff in the IPA Secretariat.

  level members and delegates. Geosciences related pre- sentations numbered 69; Engineering related numbered 34; Business/Commercial related numbered 6 and Oth- ers related numbered 7. In addition, there were 7 oral presentations, within 2 sessions, and 12 poster presen- tations given by geosciences and engineering students.

  sions , and 20 poster presentations given by professional

  Overall there were 96 oral presentations , within 28 ses-

  One of the cornerstones related to the success of any convention of people is the exchange of ideas and knowl- edge. And that is especially true regarding the conven- tion of technical professionals. Once again the IPA was able to bring together professionals intent on sharing ideas and knowledge through oral and poster presenta- tions and those hoping to learn from the offerings during the 36th IPA Convention and Exhibition.

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

  “Pressure Transient Analysis in Unconventional Re- sources”, by George Stewart, Weatherford International The 36th IPA Convention and Exhibition Technical Pro- gram Committee wishes to thank all oral and poster presenters for their contribution towards making this year’s IPA Convention a resounding success. And we wish to thank members and delegates for their partici- pation in the exchange of ideas and knowledge through the insightful questions asked during the oral presenta- tions and poster presentations. Stephen M. Scott Chairman Technical Program Committee 2012 Ambiance at the technical oral presentation. th

  5 Edition August 2012

  Newsletter

  The criteria for the best booth judgment are:

  “WINNERS OF THE BEST BOOTH CONTEST”

  1. Compliance with rules and regulations 15%

  2. Safety measures 15%

  Every year, the IPA has a Best Booth Contest as part

  3. Creativity, imagination and originality 15%

  of the annual Convention and Exhibition. However this

  4. Contents including informative materials, promo-

  year, with the aim of always improving the judging cri-

  25% tion and booth programs when applicable

  teria and selection process, we appointed 3 independent

  5. Esthetics in façade, interior design and space

  judges who worked from before the start of the exhibi-

  10% utilization

  tion through to the closing hours of the Exhibition on 25

  6. Booth staff’s aptitude, enthusiasm, friendlines

  May to accumulate their scores and make their expert

  5% and interaction with visitors

  choices. The judges were experienced M.I.C.E. lecturers

  7. Overall appearance and attractiveness 15%

  (Meetings, Incentives, Conventions & Exhibitions) from the University of Indonesia as follows:

  TOTAL 100%

  1. Mrs. Aris Miyati Nasution The categories for the booth contest are:

  2. Mrs. Maharani

  3. Mr. Didik Ardian

  Category 1:

  Best Booth with large size of 50 sqm and above

  Category 2:

  Best Booth with medium size between 18 and 50

  sqm Category 3:

  Best booth with small size of 9 sqm

  Booths activities at The 36th IPA Exhibition _th Indonesia Stock Exchange Building, Tower II, 20 Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia th

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Here are the nominees for each category.

  

CATEGORY 1:

LARGE SIZE BOOTH:

The Top 11 nominees are (in random order) with two having the same score .

  CHEVRON

EXXONMOBIL MEDCO

  PERTAMINA

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

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BP INDONESIA

  INPEX

STATOIL

  

THE TOP 5: l TOTAL l EXXONMOBIL l MEDCO l CONOCOPHILLIPS l CHEVRON

THE WINNER OF CATEGORY 1 :

PT Medco Energi International Tbk.

Contractor: PT Kreatif Set Indonesia (SET Production)

  

Mr. Joang Laksanto Senior Manager of Relations

accepting the award from Mr. Shunichiro Sugaya, IPA

BoD (Board of Directors) Member

th

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

  Newsletter August 2012

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

CATEGORY 2:

MEDIUM SIZE BOOTH:

  

The Top 10 nominees are:

LUNDIN

JX NIPPON SANTOS

  SALAMANDER Newsletter August 2012

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PARADIGM STAR ENERGY

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

  

THE TOP 5: l LUNDIN l JX NIPPON l SANTOS l HESS l ELNUSA

THE WINNER OF CATEGORY 2 :

Hess Indonesia

  

Contractor : TRIEKSIS

Mr. Artis Waluyono, Vice President - Government & Ex-

ternal Affairs from Hess Indonesia, accepting the award

from Mr. Erec S. Isaacson, IPA BoD Member

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

CATEGORY 3:

SMALL SIZE BOOTH:

  

The Top 10 nominees are:

  INOVA

WELACO PROWELL

  JGI th

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CLG ARGOS TUGU PRATAMA INDONESIA SDC GEOLOGIX

  PANALPINA

THE TOP 5: l INOVA l PROWELL l WELACO l DAHANA l OPAC

  

AND THE BEST BOOTH AWARD OF CATEGORY 3 GOES TO

PT DAHANA (Persero)

with the contractor PT Kanya Prima Mandiri

  

Ms. Lies Kurniasih from IPA Committee acting on behalf

of DAHANA, accepted the award from

_th

Mr. Gary Ford, IPA BoD Member

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

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• Exploration is the future of the oil and gas industry in Indonesia • Realizing the potential of exploration involves techni- cal, economic and political challenges
• Stakeholders understand the current situation of declin- ing production, reserves and investment.
• This forum to address what is missing “Accelerating Exploration Investment” Bapak Haposan Napitupulu Deputy Planning BPMIGAS
• 293 active work areas of which 218 are in explora- tion stage and of these 50 are CBM PSC’s. 78 PSC’s in Exploitation stage
• Only 23% of PSC’s had satis- fied their firm commitments.
• Exploration WP&B drilling realization <50%
• After land access issues, the most common cause of fail- ure to satisfy commitments were contractor’s poor finan- cial, technical and operational capability.
• Situation was hindering block success ratio’s, drilling activ- ity and reserve additions and ultimately future production
• Facilitating and enabling the exploration farm out process was seen as an important step to ameliorate the situ- ation “Roadmap Oil and Gas Explora- tion” Bapak Yunus Kusumabrata Secretary to Head of Badan Geologi KESDM
• Improve access to data and information by KESDM to en- able greater G&G evaluation and, integration to ultimately reduce industry risk.
• Focus on adding work areas in Eastern Indonesia through great data and information availability<
• To communicate the results of the IHS analysis of
• To articulate and assess the implications of the above trends in relation to the role of exploration in meeting national oil and gas production targets.
• For Government and IPA to jointly brainstorm and dis- cuss issues and recommend actions to increase ex- ploration investment in Indonesia.

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

  On Tuesday, July 10, 2012 at the Nusantara Ballroom, The Dharmawangsa Hotel, the Directorate General of Oil and Gas together with the IPA organized an exploration forum with the following objectives:

  Regional Exploration trends (2001 to 2010) commis- sioned by the IPA in 2011 as an independent, objective third party assessment of trends and insights relating to Regional and Indonesian oil and gas exploration.

  Attended by more than 40 participants from MIGAS, BP- MIGAS, the Geological Agency of ESDM, the Fiscal Policy Body (BKF) of the Minister of Finance and IPA, the forum provided the opportunity for participants to hear pre- sentations by speakers from the government and the in- dustry highlighting the internal and external challenges in accelerating and boosting exploration investment in Indonesia. It was intentionally planned as a small group discussion in order to have a fruitful and mutually ben- eficial discussion.

  The Forum was opened by a welcoming address from Elisabeth Proust, IPA President who emphasized that one of the roles of the IPA is to offer opportunities to ex- change views between members and government insti- tutions on the major issues and challenges of the indus- try and that this occasion was dedicated to the subject of exploration.

  She highlighted that exploration is the future of the oil and gas industry in Indonesia but also one of the key contributors to the welfare of Indonesia’s next genera- tion. Exploration in Indonesia is a technical challenge – as resources are becoming more difficult to find, being located in deep offshore and remote locations. Explora- tion is also an economic challenge as the companies are taking the risk of exploration by self-financing and in- vesting huge amount of money in an attempt to discover the resources and generate an opportunity to produce a profitable investment. In addition, to perform explora- tion in these frontier areas, companies need high levels of financial and technical capability.

  Please find below summary of Key Points of each Pre- senter:

  Title and Presenter Key Points “IPA President’s Welcoming Address” Ibu Elisabeth Proust

  IPA President

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• More data means more pros- pects, reduced risk and more drilling
• Multi-client seismic acquisi- tion activity levels in Indo- nesia well below Australia which significantly increased investment by extending exclusivity period from 10 to 15 years. Indonesia needs to follow.
• Introduce mechanism to al- low cost recovery of multiline data
• Extend lead time for bid sub- mission of regular tenders to 12-18 months to allow use of multi-client data.
• Significant resource potential remaining in explored and under explored basins.
• Oil &amp; Gas still expected to comprise 50% of 2025 na- tional energy mix.
• Securing domestic fuel sup- ply a critical component of national security.
• Key initiatives include: 1. oIncrease the number of offered working areas and exploration activity.
• Norway similar to Indonesia with advanced exploration maturity and experiencing production and reserves decline.
• Easy and attractive to invest with stable fiscal terms, easy data access and no ring- fencing of licenses
• In 2004 Government incentiv- ized exploration risk taking by providing a 78% exploration drilling rebate, paid in cash if no tax offset available.
• Exploration drilling activity in- creased by 60% and reserves additions increased by 120%
• Government received an ap- proximately 400% return on its investment
• Promoting risk taking through the exploration cost
• MoF provides support to increase oil and gas lifting’s with fiscal and non fiscal incentives based on economic analysis.
• Upstream Focus has been on VAT, Customs and import duties but it is acknowledged that Indonesia has limited tax facilities
• Proper governance of cost recovery is required to safe- guard state revenue.
• Sanctity of contract must be taken into account
• BPT disputes on old PSC will need to be resolved through contract renegotiation and not tax treaty renegotiation which is much too hard. PSC Investors should come and talk to us on the treaty issue.
• On the issue of VAT to be borne by the Government, we will try to find a solution for the future
1
• – risk – reward equation and drilling commitment flexibility drove the success, not new technology.
• MoF invites IPA and all other petroleum stakehold- ers to work together towards improvement of the relevant laws and regulations; and the enhancement of mutual trust and good cooperation.
₁ The IPA notes that the matter of such VAT is covered in our letter No.412/ BOD/11 dated on 22nd December 2011 to the Minister of Finance, Bapak Agus Martowardojo concerning Minister of Finance Letter No. S-604/MK.017/1998 which regulates that tax on overhead, TSA and related charges coming from Home Office shall be borne by the Government of Indonesia.

  Indonesia Stock Exchange Building, Tower II, 20 ^th Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia “ Multi-client Seismic Invest- ment To Boost Exploration Activity in Indonesia” Ranjit Pannu WesternGeco

  “Norway Case History : Incentivizing Exploration and Reserves Growth in a Mature Areas” Jeffrey J. Lobao Exploration Advisor (Fmr. GM SEAsia for Lundin)

  “Promoting Exploration Invest- ment” Ibu Evita H Legowo Director General of Oil and Gas

  2. oAccelerate field develop- ment. 3. oImprove development of unconventionals. 4. oImprove coordination with relevant agencies to resolve issues related to regulation, licensing, security and land overlap- ping. 5. oWillingness from the government to give special incentive for increasing exploration (fiscal &amp; non- fiscal). “Indonesian Fiscal Policies to Support Oil and Gas Sector” Astera Primanto Bhakti Director of Centre for State Revenue Policy, Fiscal Policy Office, MoF

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• In 2011 IPA engaged IHS to provide credible and inde- pendent third party data and analysis on Indonesian explo- ration trends, performance and competitive position.
• Indonesia had increased its global share of block awards and seismic activity but lost market share within SE Asia.
• The increased global share of new blocks and seismic activity DID NOT TRANSLATE
• Exploration has contributed less than 20% to Indonesia’s proven reserves replacement ratio over the last 5 years.
• This low contribution from exploration was driven by declining wildcat explora- tion drilling activity and poor exploration efficiency (BOE’s added / NFW).
• With declining production and growing demand ex- ploration will have to play a much great role in satisfying future oil and gas supply in the national energy target.
• New field wildcat drilling levels will have to increase by at least 3X current levels by 2015 and 5X times by 2020 if conventional exploration is to satisfy only half the supply – demand gap.
• Oil and gas exploration investment in Indonesia is in crisis and radical measures are needed to enhance in- vestment and ensure future oil and gas supply for the nation’s energy needs.
• Indonesia’s exploration effi- ciency (boe’s added / explora- tion well drilled) is a standout poor performer globally and regionally.
• Structural shift in upstream participation as the role of the majors was gradually replaced by local companies,
• Consideration to reduction of micro-management of PSC’s during exploration phase to speed up exploration operations cycle time and cut costs.
• Data access and manage- ment procedures could be thoroughly over-hauled and replaced by a system which promotes rather than deters investment.
• Consideration to elimination of all forms of taxation from exploration phase activities.
• Consideration to removal of requirement to utilize PTK-007 during Exploration Phase.
• Award of blocks in bid rounds should be made to bona fide companies having “financial ability, technical competence and professional skills necessary to carry out the Petroleum Operations…”
• Promote a business culture which encourages and favors bona fide exploration compa- nies rather than attempting to penalize the delinquent companies. Such practice significantly decreases exploration operational ef- ficiency and destroys value.
• Indonesian government take from oil and gas is second highest quartile regionally while recent exploration per- formance is bottom quartile.
• Exploration investment will continue to decline until the fundamentals of exploration risk and reward are rebal- anced to the new realities of exploration maturity, gas propensity, reduced prospec- tivity and a more challenging operating environment.

  Indonesia Stock Exchange Building, Tower II, 20 ^th Floor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia “Indonesian Upstream Perfor- mance 2001 - 2010 A Review of Activity, Results &amp; Investment Trends.

  Chris Newton Advisor to IPA Board

  INTO AN INCREASED SHARE FOR INDONESIA IN GLOBAL EXPLORATION DRILLING. In- donesian exploration drilling declined in absolute terms and in global and regional share.

  INOC’s and small indepen- dents with generally lower exploration capability, risk appetite and exploration funding capacity.

  “The Role of Exploration in Meeting Indonesia’s Future Oil and Gas Needs” John Bates

  IPA Exploration Committee

  IPA High Graded Recommenda- tions to increase exploration In- vestment and Reserves growth.

  The forum concluded with a brainstorming session and capturing of ideas during which the IPA presented its recommendations solicited from member companies and consolidated into 4 categories respectively : Attrac– ting New Investors, Exploration Operational Efficiency, Data Access &amp; Management and Fiscal Regime &amp; Go– vernment.

  It is envisaged that follow-up meetings will be convened for further discussion and drafting of proposals on key issues.

  Newsletter August 2012

  5 ^th Edition

SHELL INDONESIA

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

  “Shell sees Indonesia as a key growth country in Asia and important to the Shell’s long term global strategy. We look forward to partnering with the country to deliver benefits to the nation and develop energy to meet the country’s and world’s growing needs.” said Peter Voser, Royal Dutch Shell Chief Executive following his meeting with President Yudhoyono at the State Palace last June. This visit to Indonesia marks a milestone in cementing the more than a century-long partnership between Royal Dutch Shell and Indonesia. Over 120 years ago, following its first oil discovery in Pangkalan Brandan, North Sumatra, the embryo of what is today the number one company in the Global Fortune 500 list was born. “As an Indonesian, I am proud of this achievement because Shell and Indonesia share a rich history”, commented Darwin Silalahi, Shell Indonesia Country Chair and President Director.

  Shell has a strong downstream presence in Indonesia. It was the first international petroleum retail brand in the country and is now a leading international oil company (IOC) with more than 62 operating sites in Greater Jakarta and Surabaya. In 2006, Shell started its commercial fuels, marines and bitumen businesses in Indonesia, providing oil products and related technical support to the industrial, transport and mining sectors.

  Shell is also recognised as a leading international company with the largest lubricant market share, after Pertamina, serving motorists and industrial customers. Shell brings in significant investment to build fuels supply chain infrastructure in Indonesia, in cooperation with its local partners. The fuel storage facilities in Gresik and Pulau Laut, the lubes warehouse facility in Bekasi, Surabaya and Balikpapan, and the bitumen storage facility in Cirebon, are examples of successful joint ventures with leading Indonesian companies such as Astra International and Adaro Energy. Last year, Shell re-entered the upstream business in the country of its birthplace. It signed an agreement to be the strategic partner with Inpex who operates the Masela PSC which includes the Abadi gas field. Shell’s participation in the Abadi field underpins its growth strategy and recognizes its world leader position in both LNG and Floating LNG (FLNG) developments.

  By joining the venture, Shell is bringing its worldwide experience and technological innovation. With over $1 billion invested in research and development (R&amp;D) each year, Shell stands out as the biggest investor in R&amp;D amongst its peers. One of the results of this investment is indeed the game-changing FLNG technology. Shell’s total investment stands at more than $30 billion per year. “We are very keen to work together with the capable company Inpex to materialise this very challenging project as fast as we can. We are contributing our global mega-project experience as well as our FLNG technology expertise, to further enable Indonesia to develop its natural gas resources in a sustainable manner. Natural gas is the cleanest burning fossil fuel – and the world, including Indonesia, needs every low-carbon source of energy it can find”, said Koert Vonkeman, Managing Director for Shell Upstream Indonesia.

  Company Profile Shell has been working on FLNG technology for more than a decade, drawing on more than five decades of expertise in LNG technology, LNG shipping and operating offshore oil and gas installations. Shell was the first to go ahead with an FLNG project – making FLNG a reality. th

  5 Edition August 2012

  Newsletter The length of the Shell FLNG facility will be more than the height of the Petronas Towers in Malaysia.

  FLNG opens opportunities to develop offshore gas small scale LNG technologies, where Shell can uniquely fields that before were not possible because of their leverage its integrated upstream-downsteam strength. remoteness. Shell believes that FLNG will enable the Shell is working actively to identify new upstream development of gas resources ranging from clusters opportunities in Indonesia. In our business development of smaller more remote fields to potentially larger effort we focus on areas where we can deploy our strong fields via multiple facilities where for a range of technical capabilities such as our extensive Deep Water reasons an onshore development is not viable. This experience, our LNG &amp; FLNG capabilities and our can mean faster, cheaper, more flexible development experience in execution of major Projects. and deployment strategies for resources that were previously uneconomic, or constrained by technical or Shell looks forward to deploying its cutting edge other challenges. technology and apply its global experience in Indonesia, or as Peter Voser puts it, “As a leading global energy

  Leveraging on Shell’s almost 50 years experience in LNG company, we intend to strengthen our presence in technology, LNG shipping and offshore operations, Shell growth countries and we will forge strong partnerships is the first company that took Final Investment Decision with Indonesia.” to build an FLNG facility – to develop the close by Prelude gas field in Australia. In developing its FLNG technology, Shell adopts the approach that provides the opportunity and flexibility to customise in specific areas. It provides one basic design that can be tailored to specific environments and circumstances. Each subsequent Shell FLNG facility will benefit from repeatability gains, benefiting cost and schedule during construction and procurement – and lead to faster production of LNG and therefore revenue stream. Shell believes that natural gas will become increasingly important to meet the rapidly rising energy demand in road and marine transportation as well as power and industrial sectors in the emerging markets. An

  Shell FLNG has a mature design basis – standardised where

  archipelagic country such as Indonesia is also well

  possible: our designs focus on safety, robustness and high

  positioned to embrace the innovative application of availability to enable continuous, stable LNG production.

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

  Newsletter August 2012

  5 ^th Edition

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

  For 43 years TEPI has sustained a strategy of concen- tration and cooperation with the communities located around its operating areas as well as with all stakehold- ers. These CSR programs have followed the evolution of the society and have moved gradually from donation based CSR programs to empowering the communities by creating jobs , improving their welfare and increas- ing economic capacity. To achieve success, the company has to answer not just to the expectations of the local communities but also to the expectations of the local and regional Authorities. The importance of CSR to TEPI is reflected in the organization structure today with a dedicated Division attached to the President Director &amp; General Manager reflecting the great attention to these activities that are an integral part of the growth strategy of the company. In the community development programs, as part of its Corporate Social Responsibility, TEPI is intensely involved in Education, Research and Capacity Building (ERC), Health and Nutrition (HN), Community Economic Empowerment (CEE), Environment and Alternative En- ergies (EAE) and has established a foundation called “Yayasan Bhakti TOTAL Bagi Indonesia Lestari” for Cul- tural Heritage Preservation. All of these programs and activities are in line with TOTAL’s commitment in re- sponding to the challenges of sustainable development.

  Several highlights of the TEPI CSR program are among others: Education and Research

  TOTAL recognizes the importance of preparing pro- fessional and highly qualified personnel. This can be achieved through improved access to higher education within the country as well as overseas through various scholarship programs. In the last ten years, the TOTAL scholarship program has benefitted more than 4,300 students from various levels in Indonesia. There are several scholarship categories i.e. Abroad for Doctor- ate, Masters degree and dual degree Indonesia-France, In country for Masters degree and Off Campus Masters, Undergraduates, junior and senior high-schools.