1

INDONESIAINDONESIAGAS/LNG DEVELOPMENT POLICYGAS/LNG DEVELOPMENT POLICY

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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

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OIL

SOURCES OFENERGY FOR

DOMESTIC

THE ROLE OF GAS FOR INDONESIAN DEVELOPMENT

INDONESIAN DEVELOPMENTINDONESIAN DEVELOPMENT

SOURCES OFGOVERNMENT’S

INCOME

FEEDSTOCKTO STRATEGIC

INDUSTRIES

GAS

ENERGY SECTOR

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Gas Reserve (TSCF)P1+P2+P3

TOTAL INDONESIA = 178,1 TSCF

INDONESIA GAS RESERVESINDONESIA GAS RESERVES( STATUS JANUARY 2003 )( STATUS JANUARY 2003 )

8.8

0,73

7.5

26.6

5.95.7

54.8

44.5

19.3

ACEH

CentralSumatera

PAPUA

NATUNA

East Java

NorthSumatera

South Sumatera

EastKalimantan

West Java

4.1

SULAWESI

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INDONESIA GAS RESERVESINDONESIA GAS RESERVES(1984-2003)(1984-2003)

0

20

40

60

80

100

120

140

160

180

200 TSCF

Potential 22,43 17,4 20,1 27,6 22,7 19,55 23,75 38,9 36 46,71 45,9 51,3 58,7 61,6 83,3 65,78 66,2 75,8 86,2 86,9

Proven 48,68 66,42 68,54 69,35 74,32 71,9 67,42 76,23 64,4 67,35 68,92 72,27 77,2 76,17 77,07 92,49 80,3 92,1 90,3 91,2

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

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INDONESIA GAS PRODUCTION AND INDONESIA GAS PRODUCTION AND UTILIZATIONUTILIZATION

YEAR 2003YEAR 2003

PROD.8,42 BSCFD

PSC 7,49 BSCFD

PER

TA

MIN

A0,9

3

BS

CFD

57.6%

42,4%DOMESTIC

EXPORT

GASUT2001/14-01-2002

MMSCFD (%)

FERTILIZER 696.5 8.3

REFINERY 63.0 0.7

LPG/LEXPLANT 77.1 0.9

STATE GAS COMPANY 435.4 5.2

CEMENT 7.9 0.1

ELECTRICITY 500.2 5.9

STEEL INDUSTRY 71.5 0.8

ANOTHER INDUSTRY 273.2 3.2

OWN USE 968.8 11.5

FLARING/LOSSES 473.7 5.8

3,567.3 42.4

LNG 4516.2 53.6

LPG 15.5 0.2

GAS PIPE 321.5 3.8

TOTAL EXPORT 4853.2 57.6

8420.5

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INDONESIA INDONESIA GAS PRODUCTION AND GAS PRODUCTION AND

UTILIZATIONUTILIZATION

0

500

1000

1500

2000

2500

3000

3500 BCF

Export 826 842 854 928 1037 1108 1243 1439 1519 1555 1684 1612 1683 1857 1718 1815 1589 1524 1741 1843

Domestic 198 230 257 258 272 290 296 324 321 356 479 585 608 598 596 702 747 763 794 806

Own Use 359 378 382 396 403 430 454 516 526 541 594 658 701 520 469 381 397 383 373 358

Production 1521 1580 1630 1732 1847 1975 2159 2482 2582 2662 2942 2999 3164 3166 2979 3058 2901 2807 3036 3155

1984 1985 1986 187 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

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INDONESIA’S LNG PLANT

BontangCapacity : 21.64 mtpa(8 Trains)Start up 1977Plant to be expanded : Train I

TANGGUHGAS RESOURCESCapacity : 7 mtpaStatus:Under Construction

ARUNCapacity : 12.85 mtpa(6 Trains )Start Up 1977

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LNG INDONESIA

Train 1 2.14 MMTon/yr 1978

Train 2 2.14 MMTon/yr 1978

Train 3 2.14 MMTon/yr 1978

Train 4 2.14 MMTon/yr 1983

Train 5 2.14 MMTon/yr 1984

Train 6 2.14 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)

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INDONESIAN LNG EXPORT INDONESIAN LNG EXPORT

Taiwan 0,7 1,6 1,7 1,7 2,3 1,9 1,5 1,5 1,6 2,0 2,9 3,2 3,5 3,5

Korea 0,1 1,7 2,1 2,0 2,3 2,7 3,4 4,2 5,3 5,3 6,3 6,9 7,0 8,2 6,1 3,1 5,1 5,1

Japan 0,6 3,7 6,3 8,6 8,7 9,1 9,6 14,2 15,1 15,2 15,1 16,5 16,6 17,7 18,2 18,6 18,2 18,7 17,6 18,6 18,4 19,5 19,8 18,0 16,8 17,9 17,8

'77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

(Million Tons)

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INDONESIA LNG CONTRACTSINDONESIA LNG CONTRACTS

0

5

10

15

20

25

30

USA 0 0 0 0 0 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7

China 0 0 0 0 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6

Taiwan 3.41 3.41 3.41 3.41 3.41 3.41 3.41 1.84 1.84 1.84 1.84 1.84 1.84 1.84 1.84

Korea 5.36 5.36 6.46 6.46 6.46 4.17 4.17 4.17 4.17 4.17 4.17 3.15 2.12 2.12 2.12

Japan 18.25 17.99 15.74 15.63 15.74 15.63 15.74 14.75 3.51 2.69 2.69 0.39 0.39 0 0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Million Tonnes

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INDONESIA LNG CONTRACT

CONTRACT VOLUME (MTPA)

MARKET LNG PLANT

TERM

ARUN II 3,51 JAPAN ARUN 1/1984 – 12/2004

ARUN III 2,33 KOREA BONTANG/ARUN 1986 – 2007

KOREA II 1,95 KOREA BONTANG/ARUN 7/1994 – 6/2014

JAPAN 1981 (Ext) 3,47 JAPAN BONTANG 8/1983 – 3/2003

BADAK III 1,76 TAIWAN BONTANG 1/1990 – 12/2009

BADAK IV 2,30 JAPAN BONTANG 1/1994 – 12/2013

JAPAN 1973 (Ext) 8,34 JAPAN BONTANG 1/2000 – 12/2010

TAIWAN 1,90 TAIWAN BONTANG 1/1998 – 12/2017

BADAK V 1,05 KOREA BONTANG 1/1998 – 12/2017

MCGC 0,34 JAPAN BONTANG 3/1996 – 12/2015

TOTAL 26,96

EXISTING

NEW / EXISTING

JAPAN 1981 (Ext) 3,47 JAPAN BONTANG 4/2003 – 3/2011

ARUN (Ext) 1,00 JAPAN BONTANG 1/2005 – 12/2009

FUJIAN 2,60 CHINA TANGGUH 1/2007 – 12/2031

KOGAS 1,10 KOREA TANGGUH 1/2005 – 12/2024

SEMPRA ENERGY 3,70 US WEST COAST TANGGUH 6/2008 – 6/2028

TOTAL 11,87

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INDONESIA GAS TRANSMISSION INDONESIA GAS TRANSMISSION MAPMAP

Pacific Ocean

AUSTRALIA

Indian Ocean

Bangkok

Phnom Penh

Ban Mabtapud

Ho Chi Minh City

CAMBODIA

VIETNAM

THAILAND LAOS

KhanonSongkhla

Erawan

Bangkot

Lawit Jerneh

WESTMALAYSIA

Penang

Kerteh

Kuala Lumpur

Manila

Philipines

South

China

SeaSin

gap

or

e G

as

Tru

nkl

ine

Natuna

Alpha

Kota KinibaluBRUNEI

Bandara Seri BegawanBint

uluEASTMALAYSIA

Kuching

Banda Aceh

Lhokseumawe

Medan

Duri

Padang

S U M A T R A Jamb

i

Palembang

Bintan

SINGAPORE

Samarinda

Balikpapan

Bontang LNG Plant

& Export Terminal AttakaTunuBeka

pai

KALIMANTAN

Banjarmasin

Manado

SULAWESI

Ujung Pandang

BURU SERAM

Ternate HALMAHERA

Sorong

IRIAN JAYA

Ardjuna Fields

Jakarta

SemarangJ A V A Surab

aya

Bangkalan

MADURA

BALI SUMBAWA

Pagerungan

LOMBOK

Cirebon

FLORES

SUMBATIMOR

I N D O N E S I A

Duyong

West Natuna

Port Dickson

Port Klang

Existing Gas Pipelines

Planned Gas Pipeline

INDONESIAFUTURE REGIONAL

GAS TRANSMISSION SYSTEM

Mogpu

Dumai

TRANSMISSION PIPELINE & FLOW

1. Grissik – Duri : Ø 28” x 530 Km,

500 MMSCFD

2. West Natuna – P. Sakra : Ø 28” x 656 Km,

325 MMSCFD

3. Hangtuah (Mogpu) – Duyong : Ø 28” x 96 Km,

250 MMSCFD

4. Grissik – P. Sakra : Ø 28” x 490 Km,

350 MMSCFD

5. Pagerungan – Grissik : Ø 28” x 380 Km,

450 MMSCFDBatam

Guntong

Grissik

L-9

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GRAND STRATEGIESGRAND 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

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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 OPTIMIZING UTILIZATION OF NATURAL GASUTILIZATION OF NATURAL GAS

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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

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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 GOVERNMENT BASIC POLICYPOLICY

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DOMESTIC VS EXPORT ISSUEDEVELOPMENT OF LNG BUSINESS ROLE OF GAS IN INDONESIA’S ENERGY MIXSHIFTING PARADIGM FOR LARGE GAS RESERVES THE LOCATION OF GAS RESERVES FROM DEMAND CENTER (GEOGRAPHICAL ISSUE)PRICING MECHANISM AND POLICYGAS INFRASTRUCTURE INDONESIA INTEGRATED GAS PIPELINE SYSTEM TRANS ASEAN GAS PIPELINE (TAGP)

KEY ISSUESKEY ISSUES

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• 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 THE MARKET DEVELOPMENT OF INDONESIA’S LNG INDONESIA’S LNG

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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

CONCLUSIONSCONCLUSIONS

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THANK YOU