Indonesia  Gas  Industrial  Gathering.  Jakarta  13  May  2015        |    www.medcoenergi.com    |    Energy  Company  of  Choice    

Eka  Satria,  Development  Director  PT  Medco  Energi  Internasional  

“Global  Oil  &  Gas  Outlook  and  impact  to  Indonesia  Industry    -­‐  Perspec:ve  from  Na:onal  Investor  ”  

Indonesia  future  energy  needs  increase  rapidly  

0 1 2 3 4 5 6 7 8 9

10

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Oil Gas Coal

Source  :  ESDM,  KEN,  SKKMIGAS  

Oil  and  Gas  Demand  

2,5  million  boepd    

•  Energy  demand  in  2010  is  3.3  million  boepd  and  will   increase  to  7.7    million  boepd  in  2025,  in  which  oil  and  gas  will  consHtute  for  47%  

•  The  country’s  economic  growth  drives  energy  demand  increase  annually    •  Energy  per  capita:  0.65  TOE  (2010),  increases  to  1.90  TOE  (2025)  

•  If  do  nothing,  Indonesia  will  become  a  net  energy  importer,  starHng  in  2019.  Energy  demand  in  2019  will  reach  6.19  million  boepd  while  energy  supply  will  reach  6.04  million  boepd  

•  The   main   challenge   is   to   provide   supply   to   meet   increasing   energy   demand   which   require  massive  investments  

   

Energy  Demand  

Million  bo

epd  

Net  Energi  importer  

Increasing  gas  domes:c  supply  :  triple  since  2005  

Shifting from export to domestic market requires more supporting infrastructure and favorable pricing policy

Future  development  in  Indonesia  will  be  more  challenging  

(Source  :  ESDM,  Woodmac,  BP  StaDsDcal  Review))  

Resources by theme

0%

20%

40%

60%

80%

100%

Produced Remaining

Onshore Shallow water

Deepwater Ultra Deepwater

75%    offshore  

Source  :  Woodmac  

Resources by type

0

5

10

15

20

25

30

35

40

Produced Remaining

Bn

boe

Liquids Gas

85%  gas    

0   5   10   15   20  

2000s  

1990s  

1980s  

1970s  

Time  between  discovery  and  start-­‐up  

Years  

Time to Production

Indonesia  s:ll  have  abundant  resources  2013  proved  oil  &  gas  reserves  of  3.7  Billion  barrels  and  103  TCF.    Undeveloped  resources    17.9  billion  BOE  and  UnconvenHonal  (Shale  Gas  574  TCF  and  CBM  453  TCF)        

However,    remaining  resources    75%  located  in  offshore  (shallow  &  deepwater),  Eastern  Indonesia  and  dominated  by  85%  gas    Time  to  produc:on  nowadays  is    much  longer  than  previous  eras  

Long  :me  process  from  Discovery  to  Produc:on  

   POD          Process        

POD  Approval  (Central)  

POD  Approval  (Local)  

AFE  Process  

WP&B  Process  

Procurement  Process  

       Land            Process  

(Local  &  Central)  

Indonesia  Par:cipa:on  

 NaHonal        Share  

Regional-­‐1  Share  

Regional-­‐2  Share  

Permibng  Process    

(Local  &  Central)  

Gas  Contracts  Process  

Export                  Share  

Producing  Region(s)  Share  

Other  DomesHc  Share  

Gas  Discovery  &  Appraisal  

Commerciality/  CerHficaHon  

Gas  Contracts  Approvals  

EPCI  

Gas  Delivery  

GOI    Post  Audits  

PSC  Extension  

 NaHonal        Share  

   Regional      Share  

24-­‐30  mo’s  

12-­‐18  mo’s  

6-­‐12  mo’s  

24-­‐36  mo’s  

48-­‐60  mo’s  

Gas  Trans-­‐  portaHon  Agreement  Process  

6-­‐12  mo’s  

Infrastructures  is  the  key  for  gas  development  

Planned  LNG  Receiving  Terminal  

ExisHng  Pipeline  

Planned  Pipeline  

CNG  Plant  

LNG  Plant  

ExisHng  

Project  

PotenHal  

Gas  Supply:   Gas  Demand:  

Contracted  

Commited  

PotenHal  

Further gas development in Indonesia’s upstream industry should be supported by strong gas infrastructure

Challenges  in  Gas  Development  internal  assessment    

  All  “easy  gas”  has  been  discovered,  produced  and  contracted.  Remaining  gas  resources  is  technically  challenges  and  more  expensive  

  More  complex  regulatory  environment,  discourage  investment.  

  Lack  of  domesHc  energy  supply    :    Low  exploraHon  acHviHes    Slow  moneHzaHon  of  discovered  &  stranded  gas,  and  exisHng  gas  

projects        Complex  gas  moneHzaHon  process  

  In  long  term,  we  need  to  increase  energy  supply.      Imported  gas  plays  key  important  role  in  meeHng  Indonesia  energy  demand.  Issues  on  clear  regulatory  framework  and  infrastructures.    

 

 

Breakthroughs  in  accelera:on  of  gas  development  

•  Improve  exploraHon  acHviHes  and  accelerate  exisHng  gas  projects  is  a  must  

•  Streamlining  the  regulaHons  and  promoHng  conducive  investment  climate.    

•  Shorter  Hmeline  for  Seller  and  Buyer  appointment  and  relevant  approvals  

•  Promote  creaHve  business  judgments  :  •  Gas  swap  arrangement    

•  Integrated  gas  chain  moneHzaHon  which  involve  strategic  midstream  and  downstream  partners  

 

•  Imported  gas  plays  key  important  role  in  meeHng  Indonesia  energy  demand,  however,  below  are  the  key  :    

•  Clear  gas  importaHon  regulaHon  

•  Gas  infrastructures        

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Thank  You  

10

Conclusions  

•  Indonesia’s   future   energy   needs   increase   rapidly.   The   main   challenges   in  Indonesia  are  to  increase  oil  &  gas  exploraHon  and  oil  producHon.  Gas  is  the  main  energy  resources  for  oil  subsHtuHon.  

•  Future   development   in   Indonesia   will   be   more   challenging,   remaining  resources   75%   located   in   offshore   (shallow   &   deep   water),   Eastern  Indonesia  and  dominated  by  85%  gas.  Lack  of   recent   large  scale  upstream  success  and  regulatory  environment    cause  concern.  

•  DomesHc  gas  demand  growth  will  be  strong  in  Indonesia;  Gas  remains    fuel  of  choice;  Breakthroughs  are  required  in  acceleraHon  of  gas  development.  

•  Further   gas   development   in   Indonesia’s   upstream   industry   should   be  supported  by  strong  gas  infrastructure  and  suitable  regulatory  environment,  including  gas  import  regulaHon.  

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Gas

Pric

e, U

S$/

mm

btu

PLN Average Gas Purchase PGN Average Gas Sales Fuel Oil Diesel

Source: Wood Mackenzie and Medco in-house data Electricity Industry

Domes:c  market  affords  to  buy  gas  at  higher  price  

• DMO (Domestic Market Obligation) is pressing, however domestic gas price is also encouraging • PLN, PGN and other industries’ affordability on gas purchase increasing

Oil  price  decline  forecast  

Gas  Commercializa:on  Process  

Approval  of  Gas  Reserves  

Approval  of  Gas  AllocaHon  &  UHlizaHon  

Approval  of  Seller  

Appointment  

Approval  of    HOA  /  GSA  

Approval  of  Gas  Price  

SKK Migas SKK Migas/Migas/ESDM SKK Migas SKK Migas SKK Migas/Migas/ESDM

18 – 30 Months

Suggestions from PSCs for Improvement of Gas Commercialization Process: 1.  Timeline, criteria and approval process that are faster, efficient and integrated. 2.  For gas reserves determination:

•  Not contradict certification bodies (domestic or international); •  Not too overly conservative beyond the methods internationally used; •  Mitigate the potential reserves change via gas contract terms.

3.  Gas allocation and utilization should take into account the project economics. 4.  The specially appointed buyer must have capabilities. 5.  Appointment of non-PSC seller done with transparent and justifiable criteria. 6.  Approval process of the HOA/GSA and Gas Price done in coordinated and timely

manner based on project economics. 7.  Open access of mid/downstream infrastructure for upstream and gas buyers. 8.  Clarity of process/timeline of PSC extension for long term GSA.

Indonesia  at  a  glance    

•  2013  energy  consumpHon  reached  134  MTOE  •  Industry  and  transportaHon  sector  are  major  energy  consumers,  accounHng  for  82%    •  Oil,  gas  and  coal  dominate  energy  uHlizaHon  in  industry  sector  •  Oil  fuel  is  dominate  fuel  uHlizaHon  in  transportaHon  sector,  accounHng  for  98%  

   

Indonesia  at  a  glance    

By 2030, we expect to see:

•  Total population is 285 million (National Economy Committee, Indonesia Vision 2030)

•  GDP of US$ 2.9 Trillion and GDP per capita is US$18,000 (World Bank)

•  Total energy consumption 480 million TOE or 9.6 million BOEPD (MEMR)

•  The energy demand supplied by oil 25%, gas 22%, coal 30% and renewable energy 23% (MEMR)

•  Coal remains dominant in energy mix (MEMR)

•  Oil demand reaches 2.1 million barrel per day (MEMR)

•  Electricity demand growth of 9.5% per year and will reach 777 TWh (RUKN PLN)

Indonesia  remains  a  key  producing  country  in  the  region    

0

200

400

600

800

1,000

1,200

Indonesia Malaysia Thailand Australia Vietnam Brunei

2013 Oil Production (in 000 BOPD)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Indonesia Malaysia Australia Thailand India

2013 Gas Production (in MMSCFD)

Source  :  BP  StaDsDcal  Review  2014  

Source  :  BP  StaDsDcal  Review  2014  

•  Indonesia  oil  and  gas  producHon  is  leading  in  Asia  Pacific  region  

•  Large  areas  remain  underexplored,  parHcularly  in  eastern  part  of  Indonesia:  gas  with  technical  challenges  (e.g.  high  CO2),  deepwater  and  unconvenHonal  hydrocarbons  

•  As  of  January  2013,  Indonesia  total  commercial  reserves  stood  at  45.5  billion  BOE.  77%  of  commercial  reserves  already  produced  –  remaining  commercial  reserves  dominated  by  gas  (Source:  Woodmac)  

•  Undeveloped  discovery  resources  amount  to  17.9  billion  BOE  (Source:  Woodmac)  

•  UnconvenHonal  potenHals:  CBM  resources  of  453  TCF  and  Shale  gas  resources  of  574  TCF  (Source:  MEMR)  

To  increase  future  supply  requires  huge  investment  and  conducive  investment  climate  

•  Supply  and  demand  gap  in  both  energy  and  oil/gas   in  2025  at   least  reach  2.4  –  2.5  million  boepd  

•  Oil  and  gas  industry  requires  US$  40-­‐50  billion   annual   investment   in   the   next  five  years  for  exploraHon,  producHon  of  exisHng   fields   and   development   of   oil  and   gas   megaprojects   (IDD,   Abadi,  Tangguh  train  III  and  East  Natuna).    

•  Megaproject  development   is  needed  to  close  future  oil/gas  demand  and  supply  gap  

•  Providing  oil  and  gas  investment  of  US$  200-­‐250  billion  in  the  next  five  years  is  not   easy,   a   conducive   investment   climate   to   abract   oil/gas   investors   to  Indonesia  must  be  created