Switching from Kerosene to LP Gas : Lessons from Indonesia 22nd World LP Gas Forum October, 7th-9th 2009 Hanung Budya - SVP Marketing PT. Pertamina (Persero)

BACKGROUND SOLUTION Huge Fuel Subsidy (~USD 8.0 billion /year) 1,360 BACKGROUND Huge Fuel Subsidy (~USD 8.0 billion /year) Transportation : Mogas & Gasoil (~30% subsidy) Residential : Kerosene (~70% subsidy) Huge Kerosene Consumption (10~12 Mio KL /year) Environment Issue + + SOLUTION Kerosene / LPG Conversion Program To Convert residential fuel from kerosene to LPG by distributing intial package (3 kg LPG Bottle, stove, and regulator set) for free Withdraw kerosene to replace by LPG (both subsidized)

THE FACT 2. LPG is cheaper and better 1. Kerosene subsidy increases eventhough the government reduce its volume significantly (Cents USD) Remarks Kerosene LPG Volume based on calorific Value 1 liter 0.4 kg Market Price 58 73 Retail Subsidized Price 25 42 Subsidized Price 33 31 Amount of subsidy 12.4 Conversion start Volume (million KL) Subsidy (Billion USD) 2001 02 03 04 05 06 07 Saving per liter 20.6 cents Target Converted 8,000,000 KL/year Potential Subsidy Saving 1.65 Billion USD /year 2008 3

THE SWITCHING JOURNEY …. Before 2007 2007 - 2010 2011 ~ …. Kerosene is widely used by 90% of Indonesian Household (9.9 Million KL) and heavily subsidized by Govt, ( 4.2 billion USD/year). LPG only 10%, more expensive than subsidized kero at retail price. Govt, Program: 52 Million LPG Conversion Packages will be distributed to eligible households. 2 Million KL of Kerosene has been withdrawn and 19 Million of Packages has been distributed in 2008. In 2009, 4.1 Million KL of Kerosene will be withdrawn and 23 Million of packages will be distributed. LPG will be the main cooking fuel with estimated total volume 4.1 Million Ton/year. 8 Million KL of Kerosene will be withdrawn. Non-PSO 2007-2008 (19 Mio) 2009 (23 Mio) 2010 (10 Mio) No Conversion 4

THE KEY ACHIEVEMENTS (as of Oct 1st 2009) 786 THE KEY ACHIEVEMENTS (as of Oct 1st 2009) # Households & SME Converted Will be Converted 23,7 39 out of 52 Millions Converted 5,6 2007 08 09 2010 Total Replacement Factor: Kerosene vs. LPG Kerosene LPG 1 liter Kero ~ 0.3 kg LPG 2007 08 09 2009 Target 2010 Target Gross Saving Conversion Cost State’s Gross Subsidy Saving Nett Saving Up to 1.7 Bio USD 2007 08 09 2009 Target Total 1 USD = IDR 10,431

THE KEY BENEFITS 529 # of Trees saved *) 46.6 Mio Value of Investment 786 THE KEY BENEFITS Indonesia Government Business Environment End Users Environment CO2 Reduction State’s Gross Subsidy Saving Up to 1.7 Bio USD # New Investor 529 Energy Cost Saving) 42% (4 USD/Month) # of Trees saved *) 46.6 Mio Net Saving 884 Mio USD Value of Investment 1.4 Bio USD % of program Supporter *) 89.9 % # of Cars taken Equivalent *) 2.8 Mio *) Modified from GreenworksAsia Report on Emission Reduction from Conversion Program, November 2008

1. Strong Government Policy KEY SUCCESS FACTORS 1. Strong Government Policy 2. Strong & Effective Implementation 3. Readiness of Logistic & Infrastructures LPG Producers Terminal LPG Refrigerated Land Terminal (Tg Uban) Floating Storage Offloading (FSO) LPG Pressurized Depot Filling Station Agent Sub Retailer End User Retester Workshop LPG Bottle Producers

CONVERSION’s IMPACT TO THE LPG DEMAND-SUPPLY (MT)   Demand - Supply 2009 2010 2011 A Demand PSO (3 kg) /Conversion Program 1,682,234 2,973,342 3,484,159 non PSO 1,388,818 1,261,280 1,305,424 Total Demand 3,071,052 4,234,622 4,789,584 B Supply Pertamina’s Refinery 952,740 1,020,816 907,024 Pertamina’s Upstream 47,000 Other Domestic Producers 918,847 1,292,787 1,292,085 Import *) 1,152,465 1,874,019 2,543,474 Total Supply *) Import volume will decrease as production from domestic producers increase,

LPG BUSINESS GROWTH vs INFRASTRUCTURE 1,360 LPG BUSINESS GROWTH vs INFRASTRUCTURE Post Conversion /hari Pre Conversion Conversion Periode 1995 1996 1997 2006 2007 2008 2009 2010 2011 2012 Infrastructure Pre Conversion (Before 2007) Conversion Periode (2007-2010) Post Conversion (After 2010) Storage * 136,000 Mton 267,000 Mton 345,000 Mton Vessel 6 Vessels Pressurized @ 1,800 Mton 5 Vessels Semiref @ 10,000 MT 3 FSO Vessels Refrigerated @ 45,000 MT 6-8 Vessels 10 Vessels 1 FSO Vessels Filling Station Filling Capacity 5,000 Mton/day 9,000 Mton/day 17,000 Mton/day Skid Tank Transport Capacity 5,000 Mton 1 2 3 4 * As per Government’s Requirement : LPG Stockpile 7.5 days for NPSO, 11 days for PSO

INFRASTRUCTURE DEVELOPMENT OUTLINE Pre Conversion Present Post Conversion LPG Depo/ LPG Terminal/ Floating Storage Tank Capacity : On Shore Tank : 136,000 MT Throughput : 3,700 MT/day On Shore Tank 147,000 MT* Floating Storage 120,000 MT Total 267,000 MT Throughput : 9,000 MT/day Pressurized Storage Construction Progress : 1, Semarang 10,000 MT: ~90%, Onstream Okt’09 2, Gresik 10,000 MT: ~90%, Onstream Okt’09 On Shore Tank 205,000 MT Refrigerated Terminal: - West Java 60,000 MT - East Java 80,000 MT Total 345,000 MT Throughput : 17,000 MT/day Pressurized Storage Development : Tg, Sekong, Bali, Medan, Makassar, Lampung total capacity 38,000 MT on progress, Onstream 2011-2012 Semarang & Gresik LPG Pressurized Terminal @ 10.000 Mton Development Progress Tg. Priok LPG Depo 9.900 Mton

INFRASTRUCTURE DEVELOPMENT OUTLINE Pre Conversion Present Post Conversion LPG Vessels 6 Vessels LPG Pressurized @1800 MT 6 Vessels LPG Pressurized @1800 MT 5 Vessels LPG Semiref @11,400 MT 3 Vessels VLGC (FSO) @45,000 MT 10 Vessels LPG Pressurized @1800 MT 6-8 Vessels LPG Semiref @11,400 MT 1 Vessels VLGC (FSO) @45,000 MT Filling Station 66 stations (12 kg) Capacity  6,000 MT 127 stations : Total Capacity  9,300 MT 439 stations: total capacity 21,900 MT/day Skid Tank 5,000 Mt/day 9,000 Mt/day. 17,000 MT/day Mill Reef VLGC 3 Kg’s LPG Filling Station 15.000 Kg LPG Skid Tank

CONCLUSION Reduce subsidy on fuel Improve quality of life Reduce CO2 emission Create more job and investment Increase World LPG additional demand

Abrigado ! DISCLAIMER : The information in this presentation is general in nature and it is not intended to be relied upon for any specific purpose. All information provided by Pertamina in connection to this material, whether oral or written, represents the current view of Pertamina, and will be subject to change, completion or amendment without notice. No part of it may be circulated, quoted, or reproduced for distribution outside Pertamina without prior written approval from Pertamina. None of Pertamina or any of its employees can be held directly or indirectly liable for any consequences of reliance upon or use of the information herein.