1 INDONESIA GAS/LNG DEVELOPMENT POLICY BY : DIRECTORATE OF PROCESSING AND COMMERCE DIRECTORATE GENERAL OF OIL AND GAS REPUBLIC OF INDONESIA APEC EGCFE WORKSHOP TAIPEI, MARCH 21-23, 2005

2 Outline of Presentation The Role of Natural Gas in Indonesia Domestic Export (LNG and Pipeline) Indonesia Gas Reserves Indonesia Gas Production and Utilization Government Policy on Natural Gas The Future Market Development of Indonesia LNG Conclusion

3 OIL SOURCES OF ENERGY FOR DOMESTIC THE ROLE OF GAS FOR INDONESIAN DEVELOPMENT INDONESIAN DEVELOPMENT SOURCES OF GOVERNMENT’S INCOME FEEDSTOCK TO STRATEGIC INDUSTRIES GAS ENERGY SECTOR

4 Gas Reserve (TSCF) P1+P2+P3 TOTAL INDONESIA = 178,1 TSCF INDONESIA GAS RESERVES ( STATUS JANUARY 2003 ) 8.8 0, ACEH Central Sumatera PAPUA NATUNA East Java North Sumatera South Sumatera East Kalimantan West Java 4.1 SULAWESI

5 INDONESIA GAS RESERVES ( ) INDONESIA GAS RESERVES ( )

6 INDONESIA GAS PRODUCTION AND UTILIZATION YEAR 2003 PROD. 8,42 BSCFD PSC 7,49 BSCFD PERTAMINA 0,93 BSCFD 57.6% 42,4% DOMESTIC EXPORT GASUT2001/

7 INDONESIA GAS PRODUCTION AND UTILIZATION

8 INDONESIA’S LNG PLANT Bontang Capacity : mtpa (8 Trains) Start up 1977 Plant to be expanded : Train I TANGGUH GAS RESOURCES Capacity : 7 mtpa Status:Under Construction ARUN Capacity : mtpa (6 Trains ) Start Up 1977

9 LNG INDONESIA Train MMTon/yr 1978 Train MMTon/yr 1978 Train MMTon/yr 1978 Train MMTon/yr 1983 Train MMTon/yr 1984 Train MMTon/yr 1986 EXISTING FACILITIES ARUN Train A 2.62 MMTon/yr 1978 Train B 2.62 MMTon/yr 1978 Train C 2.62 MMTon/yr 1978 Train D 2.62 MMTon/yr 1983 Train E 2.73 MMTon/yr 1984 Train F 2.73 MMTon/yr 1986 Train G 2.74 MMTon/yr 1986 Train H 2.95 MMTon/yr 1986 BONTANG PLANT TO BE DEVELOPED LNG Tangguh (2 x 3.5 MMTon/yr) Bontang Train I (3 MMTon/yr)

10 INDONESIAN LNG EXPORT (Million Tons)

11 INDONESIA LNG CONTRACTS

12 INDONESIA LNG CONTRACT CONTRACTVOLUME (MTPA) MARKETLNG PLANT TERM ARUN II3,51JAPANARUN 1/1984 – 12/2004 ARUN III2,33KOREA BONTANG/ARUN 1986 – 2007 KOREA II1,95KOREA BONTANG/ARUN 7/1994 – 6/2014 JAPAN 1981 (Ext)3,47JAPANBONTANG 8/1983 – 3/2003 BADAK III1,76TAIWANBONTANG 1/1990 – 12/2009 BADAK IV2,30JAPANBONTANG 1/1994 – 12/2013 JAPAN 1973 (Ext)8,34JAPANBONTANG 1/2000 – 12/2010 TAIWAN1,90TAIWANBONTANG 1/1998 – 12/2017 BADAK V1,05KOREABONTANG 1/1998 – 12/2017 MCGC0,34JAPANBONTANG 3/1996 – 12/2015 TOTAL26,96 EXISTING NEW / EXISTING JAPAN 1981 (Ext)3,47JAPANBONTANG 4/2003 – 3/2011 ARUN (Ext)1,00JAPANBONTANG 1/2005 – 12/2009 FUJIAN2,60CHINATANGGUH 1/2007 – 12/2031 KOGAS1,10KOREATANGGUH 1/2005 – 12/2024 SEMPRA ENERGY3,70US WEST COASTTANGGUH 6/2008 – 6/2028 TOTAL11,87

13 INDONESIA GAS TRANSMISSION MAP

14 GRAND STRATEGIES TO GUARANTEE THE SUSTAINABILITY OF GAS SUPPLY AND DEVELOPMENT OF ITS INFRASTRUCTURE TO EXPAND CURRENT GAS PIPELINE TRANSMISSION AND DISTRIBUTION NETWORKS IN A SCHEDULE STEP WISE MANNER. TO UTILIZE GAS RESERVE AT CERTAIN LOCATION OPTIMALLY, BY TAKING INTO ACCOUNT FACTOR SUCH AS THE SIZE, AVAILABILITY AND LOCATION OF THE RESERVE, GAS DEMAND, REQUIRED INFRASTRUCTURE AND TECHNICAL AND ECONOMICAL FEASIBILITY

15 TO CREATE A CONDUCIVE INVESTMENT CLIMATE TO GUARANTEE THE SUSTAINABILITY OF GAS SUPPLY AND DEVELOPMENT OF ITS INFRASTRUCTURE. THIS HAS BEEN REALIZED BY MINISTER OF ENERGY AND MINERAL RESOURCES (MEMR) BY PROVIDING A MORE ATTRACTIVE FISCAL INCENTIVES; TO EXPAND TRANSMISSION PIPELINE SYSTEM AND DISTRIBUTION OF NATURAL GAS THAT THEIR DEVELOPMENT ARE CONDUCTED GRADUALLY AND IN LINE WITH SCHEDULE TO OPTIMIZE THE UTILIZATION OF NATURAL GAS RESERVE EXISTING IN A CERTAIN AREA BY CONSIDERING THE AVAILABILITY/RESERVES (AMOUNT AND LOCATION), DEMAND/MARKET (AMOUNT AND LOCATION), REQUIRED GAS INFRASTRUCTURE AND TECHNICAL FEASIBILITY (SPECIFICATION, DELIVERABILITY, ETC) AND ECONOMICS (INVESTMENT, ETC ) OPTIMIZING UTILIZATION OF NATURAL GAS

16 GAS POLICY’S PLATFORM FOR DOMESTIC TO ROLL BACK PETROLEUM FUEL SUBSIDY TO INCREASE ROLE OF GAS IN THE ENERGY MIX INCREASE ADDED VALUE OF GAS NEW LNG CENTRES TRANS ASEAN GAS PIPELINE PROJECT IMPLEMENTATION FOR EXPORT STRATEGIC STEPS GAS FOR VEHICLES  CNG, LPG GTL TECHNOLOGY (METHANOL, DME) FOR ENERGY GAS FOR POWER GENERATION, CITY GAS AND PETROCHEMICAL INDUSTRY “INCENTIVES” FOR GAS PRODUCER : INCREASE EXPLORATION AND DEVELOPMENT OF FRONTIER AREA AND MARGINAL FIELDS

17 PREVIOUSLY LARGE GAS RESERVES ARE AIMED FOR EXPORT OBJECTIVE AND SMALLER GAS RESERVES ARE INTENDED FOR DOMESTIC USE. THIS PARADIGM HAS CHANGED, THE GAS RESERVES EITHER HUGE OR SMALL AMOUNT, CAN BE UTILIZED FOR DOMESTIC NEEDS DEPENDING ON ITS ECONOMICS. GAS INFRASTRUCTURE (ALIGNED WITH THE MASTER PLAN OF THE ASEAN GAS GRID) IS DEVELOPED TO CONNECT SUPPLY POINT WITH CONSUMER POINT. THE UTILIZATION OF NATURAL GAS IS BASED ON THE MOST ECONOMIC OPTIMIZATION OF THE NATIONAL ENERGY SUPPLY. GOVERNMENT BASIC POLICY

18 DOMESTIC VS EXPORT ISSUE DEVELOPMENT OF LNG BUSINESS ROLE OF GAS IN INDONESIA’S ENERGY MIX SHIFTING PARADIGM FOR LARGE GAS RESERVES THE LOCATION OF GAS RESERVES FROM DEMAND CENTER (GEOGRAPHICAL ISSUE) PRICING MECHANISM AND POLICY GAS INFRASTRUCTURE INDONESIA INTEGRATED GAS PIPELINE SYSTEM TRANS ASEAN GAS PIPELINE (TAGP) KEY ISSUES

19 In early 2000, LNG market experienced a tight competition, indicating over-supply situation, and lower price of LNG. The expected growing LNG demand worldwide, particularly in some countries has brought a new dynamics on LNG market. The potential market for LNG is huge For Indonesia, the world LNG market is the opportunity to diversify Indonesian LNG to a new market that provides challenging Terms and Conditions, including LNG pricing. THE MARKET DEVELOPMENT OF INDONESIA’S LNG

20 Future Indonesian LNG development will be focused on : Expanding Capacity in the existing LNG plants and developing new LNG Centers Maintaining the existing LNG supply for traditional market (Japan, South Korea, and Taiwan) Entering new market, US west coast and China Providing sufficient gas supply for domestic market CONCLUSIONS

21 THANK YOU