EXECUTIVE AGENCY for UPSTREAM OIL & GAS BUSINESS ACTIVITIES (BPMIGAS) - Republic of Indonesia

Coral Triangle Initiative – Regional Business Forum 2011Kuala Lumpur, October 10th 2011

Sustainable Marine Business Solution: BPMIGAS Perspective

AGENDA

Up-stream Oil and Gas Industry: Legal Framework

BPMIGAS Roles and Function

BPMIGAS Policy on CSR: from Charity to Operational Support

Jakarta

Kuala Lumpur

Conclusion

PRODUCTION SHARING CONTRACT

STRUCTURE GOVERNANCE LAW of PRODUCTION SHARING CONTRACT

National Constitution 1945Ch.5 (1),(2),4(5)

Ps 33 (2),(3)

GR 42 of 2002 GR 35 of 2004

Law No. 22 of 2001

Production Sharing Contract (PSC) Signed

Status : August, 2011

5

Governmentc/o MEMR

BPMIGAS

PSC contractor’s

Governance Relationship

6

BPMIGAS Roles & ResponsibilitiesM

anag

eria

l Rol

es

To approve WP&B, POD, AFE, Procurement Plan and Human Resources Deployment Plan

To represent The Gov’t on Contractual stand position

Technical and Financial Audit

Part

ners

hip

Role

s Routine consultation

Negotiating partners on commercial deal

Responding and Tackling isues as one side front

Supp

ort s

ervi

ces

faci

litat

ors

Facilitating required authorities permits

Assist Contractors dealing with local communities

Expedite approval process

•Contractor “shall conduct an environmental baseline assessment at the beginning of CONTRACTOR’s activities”;

•Contractor “shall take the necessary precautions for protection of ecological systems, navigation and fishing and shall prevent extensive pollution of the area, sea or rivers and other as the direct result of operations undertaken under the Work Program;

•Contractor “shall after the CONTRACT expiration or termination, or relinquishment of part of the Contract Area, or abandonment of any field, remove all equipment and installations from the area in a manner acceptable to BPMIGAS and GOI, and perform all necessary site restoration activities in accordance with the applicable Government regulations to prevent hazards to human life and property of others or environment...”

INDONESIAN PRODUCTION SHARING CONTRACT on Environment Aspect (1)

INDONESIAN PRODUCTION SHARING CONTRACT on Environment Aspect (2)

•Contractor “shall include with requisite Plan of Development for each commercial discovery, an abandonment and site restoration program required after relinquishment of any part of Contract Area or abandonment of any Field together with a funding procedure for such program.......

•Contractor “shall include in the annual Budget of Operating Costs, an estimate of the anticipated abandonment and site restoration costs for each exploratory well in the Work Program...”

•Contractor “shall comply with all applicable laws of the Republic of Indonesia. It is also understood that the execution of the Work Program shall be exercised so as not to conflict with obligations imposed on GOI by international laws”

INDONESIAN PRODUCTION SHARING CONTRACT on Social Aspect

•“Contractor furnish such other funds and be responsible to conduct a community development programs relating to the community surrounding and/or adjacent of the Contract Area during the term of the Contract.“

•Contractors “shall prepare and carry out plans and programs for industrial training and education of Indonesians for all job classifications with respect to operations contemplated hereunder”.

• Contractor “shall agree to employ qualified Indonesian personnel in its operation and undertake the schooling and training of Indonesian personnel for labor and staff positions including administrative and executive management positions”

INDONESIA OIL & GAS WORKING AREA

2010 © BPMIGAS – All rights reserved

Shiting Paradigm: From West to East

Deep Water Area > 200m

Western part Eastern part

Deep Water mostly in eastern part Indonesia

6 PSC’s :-StatOil

-Chevron-ExxonMobil Oil

-Marathon-Talishman Sageri

-COPHI

Mostly Tertiary

from Onshore in the West to Offshore in the East

2010 © BPMIGAS – All rights reserved

socia

l obje

ctive

s

econ

omic objectives

environmental objectives

SustainableGrowth

Upstream oil and gas Industry Sustainable Performance

Courtesy of Novo Nordisk & WRI

GrowthEfficiencyInnovation

Shareholder value

Energy, waste & water use Emissions & climate change Design, reuse & recycle

Ecosystem integrity Biodiversity

Cultural identity Health & safety Fraud & corruption Community developmentEmpowerment & equity

Drivers & Dimensions of Business Sustainability

Business DriversLicense to OperateCost ReductionMarket GrowthNew MarketsProfitable GrowthCompetition

External ForcesEnvironmental ChangeDemographic TrendsTechnological ChangePolitical Pressure

OrganizationalLeadershipVisionValuesBusiness ModelsMeasurementChange Business

SustainabilityEconomic ValueSocial ValueEnvironmental Value

SecurityStability

Sources ofrevenues

Sources ofenergy and feedstock

CreatingSustainable Multiplier

effect

Indonesia’s Sustainable Economic Development

SHIFTING THE PARADIGM:From Revenue to Sustainable Growth

GAS

OIL

& Past approach: Maximize revenues

Current approach:

People prosperity Pro poor, pro job,

pro growth, pro environment

16

BPMIGAS BRIGHT AND GREEN INITIATIVES

BRIGHT:(1)ENERGY SUPPY FOR SURROUNDING AREAS (2)SOCIO-ECONOMIC ENLIGHTMENT & EMPOWERMENT

GREEN :(1)ENVIRONMENT PROTECTION RESTORATION(2)SOCIO-ECONOMIC BENEFIT

LICENSE to

OPERATE

BPMIGAS POLICY on CSR: from Charity to Operational Support

1. COMMUNITY DEVELOPMENT1) ECONOMY2) EDUCATION & CULTURE3) HEALTH4) SOCIAL INFRASTRUCTURE5) ENVIRONMENT

2. SOCIAL PROGRAM FOR OPERATIONAL SUPPORT1) INFRASTRUCTURE2) COMPENSATION3) LICENSE4) REGULATION

Synergy with local authorities to prevent duplication, public consensus, continuos benefit to the society, in-kind, no ideology or politic agenda

0

100

200

300

400

2005 2006 2007 2008 2009 2010

133.

1 231.

9

216.

5

261.

3

298.

4 349.

7

86.2

186.

7

169.

7

97.5

231.

1 311.

2

AnggaranRealisasi

Budget

Actual

COMMUNITY DEVELOPMENT EXPENDITURES

Mio IDR

Community Development Activities 2010

Education

Education

Economy

Health

Social Infrastructre

Environment

Social Program for Operational Support2010

Infrastructure

License

Compensatioin

Regulation

©2010 BPMIGAS. All rights reserved. The information consist in this document is exclusively designed and prepared for BPMIGAS’ purposes only. No part of this publication can be reproduced, stored in an information access system, used in a spreadsheet, or distributed in any format or media – electronic, mechanical, photocopy, recording, or any other form – without the written permission from BPMIGAS

21

Rupi

ah

Total: IDR 265.053.617.700 eq USD 29,450.402

32.4%

67,7%

CONCLUSION

1. BPMIGAS WILL ENCOURAGE THE PARTICIPATION OF ALL PRODUCTION SHARING CONTRACTORS OPERATING IN SURROUNDING OPERATION AREAS TO SUPPORT ANY PROJECT IN LINE WITH THE BRIGHT AND GREEN POLICY

2. BPMIGAS IS WILLING TO GET INVOLVED IN MULTI STAKEHOLDERS DIALOG OR WORKING GROUP TO SEARCH FOR SUSTAINABLE FINANCING SOURCES TO SUPPORT RELEVANT PROJECTS WITHIN THE UP-STREAM OIL AND GAS ACTIVITIES

THANK YOU