OIL AND GAS EXPLORATION AND EXPLOITATION IN INDONESIA

Presented Presented by: by: SARYONO SARYONO HADIWIDJOYO HADIWIDJOYO

Head Head of of Exploitation Exploitation

DIRECTORATE GENERAL OF OIL AND GAS

MINISTRY MINISTRY OF OF ENERGY ENERGY AND AND MINERAL MINERAL RESOURCES RESOURCES

INDONESIA ARCHIPELAGO
NATUNA

INTRODUCTION

SUMATRA KALIMANTAN SULAWESI MALUKU PAPUA

JAVA NUSA TENGGARA

Archipelago Inhabited Total Area Land Water TOTAL POPULATIONS

: 17,508 islands : 6,000 islands : 741,096 sq mi : 705,188 sq mi : 45,907 sq mi : 220 Million Peoples

Comparative of Indonesia Archipelago to USA

UNITED UNITED STATES STATES OF OF AMERICA AMERICA

INDONESIA INDONESIA ARCHIPELAGO ARCHIPELAGO

GOVERNMENT'S VISION FOR OIL AND GAS SECTOR

The Government looks to the oil and gas sector to regain its prominence in the world market and increase at contributions to national wealth and prosperity. The Government expects that the upstream sector will increase its foreign currency earning that are essential to financing national development. The Government sees and oil and gas industry that will make oil and gas products available throughout the country in the most efficient, competitive and beneficial manner, restoring financial viability to the downstream and distribution activities. Many companies, both Indonesian and foreign, will be active in all segments of the oil and gas industry

NEW OIL AND GAS LAW NO; 22/2001 (Stipulated on Nov, 23, 2001)
OIL AND GAS BUSINESS ACTIVITIES ARE DIVIDED INTO UPSTREAM BUSINESS ACTIVITIES AND DOWNSTREAM BUSINESS ACTIVITIES THE EXECUTING BODY SHALL CONDUCT SUPERVISION ON THE IMPLEMENTATION OF UPSTREAM BUSINESS ACTIVITIES BASE ON THE COOPERATION CONTRACT THE REGULATING BODY SHALL CONDUCT SUPERVISION ON THE IMPLEMENTATION OF DOWNSTREAM BUSINESS ACTIVITIES BASE ON THE BUSINESS LICENSE WITHIN A MAXIMUM PERIODE OF 1 YEAR THE EXECUTING BODY AS WELL AS REGULATING BODY SHALL BE ESTABLISHED WITHIN A MAXIMUM PERIODE OF 2 YEARS PERTAMINA SHALL BE TRANSFORMED INTO A STATE OWNED LIMITED LIABILITY COMPANY

Oil Oil and and Gas Gas Business Business Activities Activities in in Indonesia Indonesia

Upstream
a. Exploration b. Exploitation
Conducted Conducted by by Business Business Entity Entity or or Permanent Permanent Establishment Establishment based based on onCooperation CooperationContract Contract

Downstream
a. Processing b. Transportation c. Storage d. Trading
Conducted Conducted by by Business Business Entity Entity based basedon onBusiness BusinessLicense License

Structure Structureof ofManagement Managementof of Oil Oiland andGas GasBusiness BusinessActivities Activities
Oil and Gas Resources Controlled by The State Oil and Gas Business Activities Managed by The Government

Development
Performing Govt. Affairs. Formulating Govt. Policies

Supervision

Upstream
DOEMR/MIGAS And Other Dept. Executing Body (BP MIGAS)

Downstream
DOEMR/MIGAS And Other Dept. Regulatory Body (BPH MIGAS)

DOEMR/MIGAS

Oil and Gas Business Activities

THE ROLE OF OIL AND GAS FOR INDONESIAN DEVELOPMENT

INDONESIAN DEVELOPMENT

SOURCES OF ENERGY FOR DOMESTIC

SOURCES OF GOVERNMENTS INCOME

FEEDSTOCK TO STRATEGIC INDUSTRIES

OIL

GAS

ENERGY SECTOR

EXPLORATION AND EXPLOITATION

THE GOVERNMENT AS THE HOLDER OF THE MINING, CONTROLS THE OIL AND GAS RESOURCES THE MINISTER SHALL DETERMINE THE BUSINESS ENTITY/PERMANENT ESTABLISHMENT WHICH WILL BE GIVEN THE AUTHORITY TO CONDUCT THE EXPLORATION AND PRODUCTION ACTIVITIES IN THE OPERATIONAL AREAS THE GOVERNMENT AS THE HOLDER OF THE MINING AUTHORITY ESTABLISH THE EXECUTING BODY TO PERFORM THE MANAGEMENT OF THE UPSTREAM BUSINESS ACTIVITIES THE BUSINESS ENTITY OR PERMANENT ESTABLISHMENT SHALL CONDUCT UPSTREAM BUSINESS ACTIVITIES BASED ON THE COOPERATION CONTRACT WITH THE EXECUTING BODY THE EXECUTING BODY SHALL APPOINT THE SELLER OF THE STATES PORTION OF OIL AND/OR GAS WHICH WILL GIVE THE MAXIMUM BENEFIT FOR THE COUNTRY

Tertiary Sedimentary Basins in Indonesia

100 105 110 115 120 125 130 135 140 5

-5

-10

Producing Basin Drilled and proven discovery, but not producing

Drilled basin, no discovery yet Frontier Basin

Sedimentary Basins in Indonesia (60)

Un-drilled (22)

Drilled (38)

Discovery (23)

No Discovery Yet (15)

Producing (15)

No Producing Yet (8)

Number of Contract Signed 1991 - 2001

35 30 25 20 15 10 5 0 PSC-STD PSC-EXT JOB/JOA TAC EOR 1 1 3 5 1 3 10 6 1991 18 3 1992 4 3 1993 6 1994 1 1995 9 1 1996 7 2 1997 17 1 4 7 4 3 4 1 1998 15 1999 4 2000 1 2 2001 9 2

EOR

TAC

JOB/JOA

PSC-EXT

PSC-STD

INDONESIA PETROLEUM WORKING AREA MAP

Status : July, 2002

250 Kilometers

500

2D Seismic Activity (thousands kms)

25000 20000 15000 10000 5000 0

1998
1998 19,753.44 3,507.14 23,260.58

1999 2000 2001 offshore onshore total

1999 8,179.45 1,758.97 9,938.42 2000 2,399.04 2,428.70 4,827.74

2002*)
2001 4,806.40 255.23 5,061.63 2002*) 4,401.25 3,598.05 7,999.30

Offshore Onshore Total

3D Seismic Activity (thousands kms)

9000 8000 7000 6000 5000 4000 3000 2000 1000 0
1998 1999
offshore

2000
onshore

2001
total

2002*)

1998 Offshore Onshore Total 5,815.51 3,180.86 8,996.37

1999 1,657.92 1,659.88 3,317.80

2000 3,742.17 699.02 4,441.19

2001 7,111.80 656.53 7,767.53

2002*) 1,436.56 1,061.66 2,498.22

EXPLORATORY WELLS STATISTIC 1997 - 2002

60 160 140 120 WELLS 100 80 60 40 20 0 Discovery Dry Total Wells Success Ratio (%) '97 46 54 100 46 '98 75 70 145 52 '99 50 39 89 56 YEAR Discovery Dry Total Wells Success Ratio (%) '20 54 38 92 54 '01 56 39 87 52 '02 37 38 75 46 50 40 30 20 10 0 SUCCESS RATIO

Exploration Drilling Activities

160 140 120 100 80 60 40 20 0

Oil Gas Dry Total

1995

1996

1997

1998

1999

2000

2001

2002

RECOVERY FACTOR OF OIL AND GAS FIELDS IN INDONESIA 2001

NORTH SUMATERA

NATUNA

31,8%
CENTRAL SUMATERA

38,7%

EAST KALIMANTAN

33,7%
SOUTH KALIMANTAN SOUTH SUMATERA

29,1%
IRIAN JAYA

35,1%
WEST JAVA

21,9%
SOUTH SULAWESI

32,9% 53,6%

23,2%
EAST JAWA

CENTRAL JAWA

37,3%

34,4% Areas Of Oil & Gas Field

INDONESIA OIL RESERVES 1990 2005

BSTB
12 10 8 6 4 2 0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

ACTUAL

FORECAST

Potential

Proven

INDONESIA OIL RESERVES ST January 2002) (Status 1ST

186.86 111.86

ACEH

NATUNA NORTH SUMATERA CENTRAL SUMATERA

308.30

EAST KALIMANTAN

956.81
SOUTH SUMATERA

1,247.50
IRIAN JAYA MALUKU SOUTH SULAWESI

136.01

649.67
WEST JAVA

10.20

7.47

1,259.90

EAST JAWA

270.08

OIL RESERVES (MMSTB)

PROVEN = 5,096 MMSTB POTENTIAL = 4,659 MMSTB TOTAL = 9,755 MMSTB

INDONESIA OIL AND CONDENSATE PRODUCTION

1994 2002
MBOPD
2,000

1,500

1,000

500

0 Production Oil

1994

1995

1996

1997

1998

1999

2000

2001

2002

1,611.96 1,606.20 1,591.97 1,580.72 1,558.31 1,494.74 1,413.91 1,340.57 1,249.40 1,434.48 1,436.39 1,419.57 1,417.40 1,408.22 1,344.59 1,272.49 1,208.70 1,117.60 150.15 141.41 131.41 131.80

Condensate 177.480 169.820 172.390 162.780 150.090

Production Versus Oil Consumption of Indonesia

1200 1000 800 600 400 200 0 1980
OPTIMISTIC PRODUCTION

Million barrel
CONSUMPTION 6%/YEAR

CONSUMPTION 3%/YEAR

ACTUAL

BASE PRODUCTION

PESIMISTIC PRODUCTION

1985

1990

1995

2000

2005

2010

2015

2020

Pesimistic Production Hight Consumption

Optimistic Production Actual Consumption

Actual Production

INDONESIA GAS RESERVES 1971 - 2002

TSCF

180 160 140 120 100 80 60 40 20 0

99 97 71 77 75 83 93 73 81 79 85 87 89 91 95 01 20 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 19 02

Potential

Proven

INDONESIA GAS RESERVES

(Status January 1st, 2002)
NATUNA

ACEH (NAD) 9.66

54.78
NORTH SUMATERA 1.05 CENTRAL SUMATERA SOUTH SUMATERA 9.53 EAST KALIMANTAN

48.70

PAPUA

19.55
21.23 SOUTH SULAWESI 0.58

7.19
WEST JAVA 4.32 EAST JAVA

PROVEN

= 90.30 TSCF = 176.59 TSCF

GAS RESERVES (TSCF)

POTENTIAL = 86.29 TSCF TOTAL

INDONESIA GAS PRODUCTION AND UTILIZATION

1994 2002
MMSCFD
10,000

8,000

6,000

4,000

2,000

1994

1995

1996

1997

1998

1999

2000

2001

2002

Production 8,059.24 8,217.07 8,644.85 8,674.07 8,161.24 8,406.40 7,867.90 7,690.82 8,318.70 Utilization 7,561.85 7,778.33 8,174.25 8,151.19 7,630.45 7,939.10 7,502.56 7,188.88 7,890.02 Flare 497.39 438.73 470.61 522.88 530.79 455.05 364.80 501.80 424.50

INDONESIA NATURAL GAS PRODUCTION & UTILITIES

(Year 2002)

Pertamina

0,71 BSCFD

MMSCFD FERTILIZER+PETROCHEMICAL REFINERY LPG/LEX PLANT PGN CEMENT ELECTRICITY 734.6 84.6 73.7 408.1 7.5 547.3 82.6 177.6 1,020.4 424.5 3560.900

(%) 8.8 1.0 0.9 4.9 0.1 6.6 1.0 2.1 12.2 5.1 42.7

PSC 7.62 BSCFD

PROD.
8.33 BSCFD

Domestic
42.7%

KRAKATAU STEEL OTHER INDUSTRIES *) OWN USE LOST/FLARING TOTAL

Export
57.3 %
LNG LPG GAS TOTAL
14-01-2002/gasut2001

4,539.4 6.8 226.4 4,772.6

54.5 0.1 2.7 57.3

PETROLEUM INCENTIVE PACKAGES IN THE PSC THIRD GENERATION

Element
Investment Credit

First Incentive Package (August, 1988)

Investment credit amounting 17% of the capital investment cost

Second Incencive Package (February, 1989)

For deep sea areas : 110% (oil) over (600 ft) 55% (gas)

Third Incencive Package (August, 1992)

Development areas : Pre -Tertiary reservoir rocks = 110% for oil and gas Water depth 200-1500 m = 110% for oil and gas Water depth below 1500 m = 125% for oil and gas Abolished

Fourth Incentive Package (*) (December, 1993)

No longer applied

Commerciallity

DMO Price First Tranche Petroleum

Split

Condition that the government has to obtain as minimum of 49% of the gross revenue no valid anymore. The minimum guarantee is 25% of the gross revenue for the government. 10% of export price after the first years 20% of production taken before deduction of cost recovery & will be split between government and Contractor For Oil : Frontiers production : < 50 MBOD=80% : 20% 50-150 MBOD=85% : 15% > 150 MBOD = 90% : 10% Conventional area : 85% : 15% For Gas : Frontier production : 70% : 30% Conventional area : 70% : 30%

Abolished

Abolished

No change No change

15% of export price after the first five years No change

For Oil : Marginal fields and EOR in Tertiary reservoir : areas : Conventional 80%:20% Frontier areas = 75%:25% Pre-Tertiary and deep sea (over 600ft) production : Incremental split as for frontier production in the first package. For Gas : no change

For Oil : Field developed in frontier areas = 80%:20% Field developed in areas with water depth > 1500 m = 75%:25% For Gas : developed in Field conventional areas = 65%:350% Field developed in frontier areas = 60%:40% Field developed in areas with water depth > 1500 m = 55%:45%

25% of export price after first five years 15% of production taken before deduction of cost recovery and will be split between government and Contractor. For Oil : 65%:35% without investment credit. For Gas : 60%:40% without investment credit. *) For Eastern Indonesia areas and part of Western Indonesia areas having similar geological and geophysical condition.

EXPLORATION AND PRODUCTION EXPENDITURE

1969 - 2001
CONTRACT SIGNED MILLION US$

35 30 25 20 15 10 5 0

6000 5000 4000 3000 2000 1000 0

69

71

73

75

77

79

81

83

85

87

89

91

93

95

97

Contract Signed

Exploration & Development

Total Expenditure

99

State Revenue From Oil & Gas ( 1998 - 2002 )

80000 70000
Oil and Gas Revenue (Bilion Rp.)

45 40
Contribution of Oil & Gas Revenue (%)

60000 50000 40000 30000 20000 10000 0 1998/1999 1999/2000 2000

YEAR

35 30 25 20 15 10 5 0 2001 2002

Crude Oil

Natural Gas

EFFORTS TO IMPROVE EXPLORATION AND EXPLOITATION ACTIVITIES

EXPLORATION 1. Restructure, in an integrated manner, the management of oil and gas data 2. Maintain business contract terms that are always competitive against other AsiaPacific countries. 3. Provide insentive to encourage spec survey for the frontier basin 4. To increase supervision of exploration activity

EXPLOITATION 1. Issued Incentive Package. 2. Provide incentives for development of marginal oil and gas fields and also for domestic gas utilization 3. To develop new field by reservoir management application 4. To increase oil production by EOR 5. To develop old oil field 6. To increase supervision of exploitation activity

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