Resume IPA Convex 2022

1. Bukti Kehadiran

a. Addressing the dual challenge: Meeting Indonesia’s Energy Needs While Mitigating Risks of
Climate Change.
Speakers :
Widi Santuso – SKK Migas
Hendrayana E. Halim – Petronas Indonesia
Devan Raj – IPA Associate Member
Willem Siahaya – Guspenmigas
Moderator :
Fery Sarjana – IPA SCM Committee

Lean Strategy in Supply Chain Management to Address Double Challenges: Meeting Indonesia’s
Energy Needs and Mitigating Climate Change Risks. In the National Energy Mix plan and
transition agenda, the upstream oil and gas industry will continue to play an important role. In
this regard, supply chain management for the procurement of goods and services has a strategic
role specially, in the efficiency of the upstream oil and gas sector. Collaboration in exploration
and production activities can be the key to minimizing operational costs.
For example, according to the data from SKK Migas in January – October 2020 the efficiency of
procurement of goods and services in oil and gas sector reached US$ 346 million comes from
four upstream oil and gas activities (drilling, shipping, and transportation), EPCI, as well as
maintenance and operation of production facilities.
Lean strategy can be applied on supply chain management which is focused on identifying user
needs and ensuring that all operational processes are run efficiently. Lean strategy focuses on
optimizing activities that add value and reduce inefficiencies. This strategy also can be applied
from upstream manufacturing to services companies, planning, and down streaming related to
the production. This strategy can be used to anticipate the volatility of the commodity prices.
The challenges is to make sure the policies makers prepared the structures and supports to
apply lean strategy.
In its implementation, Lean SCM requires adjustments from stakeholders, both from the
government as the policy maker, as well as from oil and gas companies. Related to this, Widi
stated that there are three important aspects in implementing Lean SCM in Indonesia, namely
regulation, technology, and culture.

Indonesia already ratified the Paris Agreement to reduce carbon emissions and GHG by 29% in
2030. Inline with the effort, the energy sector needs to reduce 11% carbon emissions or 10
million tons of carbon dioxide. In the other hand , the Indonesian government also have the
production target 1 Million BPD.

"Of course, we monitor the situation and relevant regulations day to day. In the context of
facing 2030 (to achieve production targets and net zero), we are trying to propose changes,"
said Widi.

Some of the changes initiated by SKK Migas include increasing engagement with SKK Migas and
other stakeholders in designing the rules of the game, encouraging policy flexibility, setting oil
and gas price formulas, standardizing technical rules, as well as trying to improve the
competitiveness of Indonesian investment in the eyes of investors.

"To attract business actors, we will provide a long-term contract, and it is being regulated," said
Widi.

Adding Widi’s explanation, Vice President of SCM and Business Support of Petronas Indonesia,
Hendrayana Halim, explained that there are three things that become the reference for
Petronas in implementing Lean SCM, namely standardization, digitalization, and sustainability.

Aspects of standardization include determining business requirements to wellhead design

standards such as determining the standard depth of certain wells in exploration. Hendrayana
stated that this has been practiced by Petronas in Mexico, Suriname, and Brazil.

Regarding digitization, since 2015 Petronas has developed PePS (Petronas e-Procurement
System) which is a digital format of the rules for the procurement of goods and services.
Another digitization is the development of an integrated catalog system and the digitization of
invoicing.

Meanwhile, for sustainability, Petronas is guided by the SDGs, which are in line with the
principles of corporate social responsibility (CSR), equal employment opportunities, waste
reduction, and climate risk assessment.

“The benefits we can get are in terms of manpower, cost, and time. Besides that, we also
contribute to the environment,” explained Hendrayana.
 In line with Widi and Hendrayana, Director of Industry of Guspenmigas, Willem Siahaya, stated
that the implementation of Lean SCM needs to prioritize aspects of quality and competition in
order to produce the best quality of goods and services to support the activities of the upstream
oil and gas sector.
“Lean SCM focuses on competitiveness and quality, then productivity and targets. We put other
things behind. Another focus is continuous improvement and the implementation of continuous
efforts,” said Willem.

b. Why Major IOCs Still Invest in Indonesia

Speakers :
Diego Portoghese – Eni Indonesia
Kathy Wu – BP
Gary Selbie – Harbour Energy in Indonesia
Egon van der Hoeven – ExxonMobil Cepu Limited
Moderator :
Triharyo Indrawan Soesilo – Ministry of Energy and Mineral Resources
Indonesia’s upstream oil and gas sectors are still attractive to major international oil and gas
companies. However, the sectors still face several challenges affecting investment, ranging from
post-pandemic recovery to fiscal governance that needs improvement.

Several panelists, at the 46th IPA Convention & Exhibition Special Talk I session on Indonesia’s
Upstream Oil and Gas Investment entitled “Why Major IOCs Still Invest in Indonesia” at the
Jakarta Convention Center on September 21, said that upstream oil and gas investment in
Indonesia is still promising. However, there are still various challenges that require strategic
solutions to overcome them.

Managing Director of ENI Indonesia, Diego Portoghese said that in line with the setting of target
for oil production of one million barrels per day (BOPD) and natural gas of 12 billion cubic feet of
gas per day (BSCFD) in 2030, the company is committed to continuing investment in Indonesia.

Currently, ENI is developing an oil and gas field in East Merakes. This project is a development of
the Kutai Basin basin which has been running since 2021.

”This project requires a fairly hard effort due to the COVID-19 pandemic that has emerged since
the beginning of 2020,” said Diego.

Referring to data from the Special Task Force for Upstream Oil and Gas Business (SKK Migas),
the investment for this project, which is located near the Makassar Strait, is worth US$ 1.3
billion. It is estimated that this project will increase national gas production by 368 million
standard cubic feet per day (MMSCFD). Gas production from the field is produced from five
wells and is channeled through the Jangkrik Floating Production Unit pipeline, which is about 45
kilometers from the Merakes Field.

Meanwhile, Asia Pacific Regional President of BP, Kathy Wu, explained that the government is
very open to investors, including BP. Moreover, according to Kathy, BP has been in the country’s
upstream oil and gas industry for five decades. Shared vision with relevant stakeholders is the
key to good relations between investors and the government.
 ”We are optimistic that the government will maintain good relations with investors. BP sees that
the Indonesian government is willing to provide convenience and is eager to cooperate with
investors,” said Kathy.

In addition, President Director of Harbor Energy Indonesia, Gary Selbie said that the gas sector in
Indonesia is one of the considerable potentials. The prospect of gas in Indonesia currently needs
to be explored further. This is considering the momentum for the energy transition and the
2050 Net Zero Emissions (NZE) target. Exploration and utilization of gas can help achieve these
two things.

Harbor Energy, said Gary, saw the potential for the use of Carbon Capture Storage (CCS) or
Carbon Capture Utility Storage (CCUS). Gary assesses that if the utilization of CCS/CCCUS runs
optimally it will help achieve the target of 24 percent of the gas portion in the energy mix.

”Why we are still investing here is because we see opportunities from CCS/CCUS, and there are
opportunities for good cooperation with the government,” said Gary.

Furthermore, Egon Van Der Hoeven, SVP Business Development of ExxonMobil Cepu Limited,
said that Exxon’s investment in the Cepu Block oil and gas project resulted in a production of
around 500 million barrels. However, Egon explained that the government also needs to make
more flexible policies, especially in the fiscal sector.

Egon added that improving governance in the upstream oil and gas sector will increase investor
confidence. The government’s desire to increase oil and gas investment to meet energy demand
requires collaboration with investors. Moreover, said Egon, capital will flow to the best projects
in the midst of investment competition between countries.

”Solutions to these challenges require the participation of various stakeholders, such as SKK
Migas and the Ministry of Energy and Mineral Resources,” said Egon.

c. The Role and Commercialization of CCS/CCUS in Meeting Indonesia’s Net Zero Target
Speakers :
Prof. Tutuka Ariadji – Ministry of Energy and Mineral Resources
Budiman Parhusip – PT. Pertamina Hulu Energi
Tracy Lothian – Low Carbon Solutions ExxonMobil
Matsuda Akihisa – Japan national Trade Organization
Moderator :
Wahyu Budiarto – IPA Board

Indonesia’s upstream oil and gas industry seeks to reduce Greenhouse Gas (GHG) emissions
from production operations by preparing Carbon Capture Storage (CCS) or Carbon Capture
Utility Storage (CCUS). The application of CCS/CCUS technology will help to achieve Net Zero
Emission (NZE) 2050 and encourage cleaner oil and gas production.

At the 46th IPA Convention & Exhibition Plenary Session II entitled “The Role and
Commercialization of CCS/CCUS in Meeting Indonesia’s Net Zero Target” at the Jakarta
Convention Center (JCC) on 22 September 2022, a number of panelists explained the
importance of CCS-CCUS on the energy transition. This technology can even reduce carbon
emissions by 10 percent globally. However, the implementation of CCS/CCUS needs to be
supported by legal certainty, ease of doing business, and fiscal convenience.

Director General of Oil and Gas, Energy and Mineral Resources Ministry (ESDM), Tutuka Ariadji
said that Indonesia is in the energy transition stage towards New and Renewable Energy (NRE/
Energi Baru Terbarukan). This energy transition process, said Tutuka, will take a long time. Prior
to achieving this, the oil and gas industry still contributes significantly in meeting energy needs.
Moreover, gas plays an important role as a transitional energy source with lower carbon
emissions.

“The government’s target to increase oil and gas production needs to be supported to meet the
increasing national energy demand and reduce energy imports. Such efforts will require new
investment and global capital,” said Tutuka.

Tutuka added that CCS/CCUS is an important technology in the energy transition period. This is
because the technology can support emission reductions in various industrial sectors.

“The current application of CCS technology is similar to the beginning of LNG exports in the early
1970s, when only a few countries applied the technology,” said Tutuka.

Indonesia, said Tutuka, is currently conducting studies related to CCS/CCUS. There are 10
CCS/CCUS study points spread throughout Indonesia, both in the oil and gas field, as well as in
factories with high emissions. Accordingly, CCS/CCUS in Southeast Asia is targeted to reach 35
metric tons (MT) of CO2 by 2030 and more than 200 MT by 2050.

“Indonesia is blessed with geological wealth. Plus, this technology has not been widely applied
in other countries. Indonesia can lead the use of CCS/CCUS technology in the region,” said
Tutuka.

Still in the same discussion, CEO of Pertamina Hulu Energi (PHE) Budiman Parhusip emphasized
that energy should be available, affordable, and clean—or low in emissions. This is because
energy demand is projected to continue to increase in the future in line with economic growth.

In the energy mix scheme listed in the National General Energy Plan (RUEN), the percentage of
oil and gas energy is projected to decrease, but it will increase in volume. Therefore, oil and gas
still play an important role in supporting energy fulfillment in the energy transition era.

In addition, the supply of oil and gas energy needs to take into account the environmental risks
it poses. This is where CCS/CCUS will play an important role as a technology that helps reduce
carbon emissions in the midst of pursuing production targets. From a corporate perspective, the
development of CCS/CCUS technology can also become a new business area for Pertamina.

“The current technical aspect is to prioritize the development of EOR and IOR to increase
hydrocarbon capture and build partnerships for CCS/CCUS builders,” said Budiman.

Budiman said that PHE’s commitment to sustainable development, especially regarding

decarbonization, requires strategic partnerships with related parties. PHE, continued Budiman,
 has committed to protecting the environment, and has formed a committee as well as made
policies related to this matter.

Budiman added that currently PHE has built partnerships with companies that have green
bonds, and continues to encourage improvements in PSC fiscal governance. “To open this
CCS/CCUS, partnerships, value addition, leveraging of existing infrastructure, policy support, and
return of profits are needed,” he added.

According to Budiman, capital can be a good start to support the implementation of CCS/CCUS.
With good capital, new possibilities related to increasing production, capacity, and meeting
domestic needs will be opened. In line with this, PHE intends to increase production.
Furthermore, according to Budiman CCS/CCUS is a potential business.

Meanwhile, ExxonMobil’s Vice President of Marketing, Financial & Commercial Development,

Tracy Lothian said that efforts to achieve NZE require support for large carbon storage. Relevant
stakeholders need to focus on decarbonization efforts in industries that produce high levels of
carbon emissions in order to achieve the NZE target.

Tracy also emphasized that policy support is a crucial thing needed for the development of
CCS/CCUS in the country. “In particular, stakeholders need to issue a CCS/CCUS
commercialization policy,” said Tracy.

The CCS/CCUS project led by ExxonMobil has so far shown positive progress. Tracy explained
that the company is currently opening CCS/CCUS projects in various offshore areas of the United
States, one of which is located in Houston, Texas.

Meanwhile, VP Director of JETRO, Akihisa Matsuda said that the Japanese Government has set a
Net Zero target in 2030, and even has ambitions to reach the Negative Emissions phase by 2050.
Through JETRO, Japan is holding a strategic partnership related to CCS/CCUS with a number of
Asian countries in the ASIA CCUS Network committee.

“This started in 2020 when the Prime Minister of Japan, Yoshihide Suga released the Net Zero
Emissions policy,” said Akihisa.

d. Technical session pada sesi "Business & Commercial" di sesi 7

Comparative study : PSC – Gross Split and PSC – Cost Recovery’s Net Contractor Share. Should
The Government of Indonesia Gives More Incentives?
By : Iswahyudi Sondi Putra, Idea Tiresnofa

The amendments of existing PSC policies were made to adapt with the current situation and
done comprehensively in term of economic, social, political, and security perspectives. These
amendments were expected to increase the attractiveness of the PSC mechanism to Contractors
to attract new investment. The Indonesian government has been using PSC-Cost Recovery since
1971. 4 generations of Modifications to the PSC-Cost Recovery have been made. In 2017 (4th
generation), the government modified the PSC-Cost Recovery to PSC-Gross Split. This
modification is intended to level up the attractiveness of upstream oil and gas investment
climate in Indonesia by increasing the share of PSC-Gross Split contractors compare to PSC-Cost
 Recovery. This study aims to calculate whether the contractor’s share of the PSC-Gross Split is
higher than the PSC-Cost Recovery. The definition of the contractor share in this research is Net
Contractor’s Income for PSC-Gross Split and Net Contractor Take for PSC-Cost Recovery.
Descriptive statistic shows that, during observation period (2015-2020) for 14 working areas, the
average Contractor Net Income for PSC-Gross Split (-1,78%) is lower than average Net
Contractor Take for PSC-Cost Recovery (9,47%). However, by using the Welch test, the result
indicates that there are no statistical differences (α = 10%) between the Net Contractor’s
Income (PSC-Gross Split) and Net Contractor Share (PSC-Cost Recovery). In short, the
modification to PSC-Gross Split has not been able to improve the contractor’s share as
projected. Therefore, the author recommends the Government of Indonesia to escalate
incentive to elevate the share of contractors, at least similar with PSC-Cost Recovery.

2. Soal no. 5.19 hal 298 pada buku Project Economic & Decision Analysis volume 1
Estimated production and cost data for a prospective exploration consession
Production Forecast, Stb/day CAPEX for each Casae, MM$
Year Oil Price
A B C D A B C D
2009 6.00 6.00 6.00 6.00 15.00
2010 6.00 6.00 6.00 6.00 15.45
2011 19.40 20.80 27.60 23.60 15.91
2012 14.50 32.20 43.30 40.40 16.39
2013 3,493 6,986 13,973 20,959 22.60 50.30 79.10 82.30 16.88
2014 6,986 13,973 13,973 20,959 30.90 44.20 17.39
2015 6,986 13,973 27,945 45,000 42.90 17.91
2016 6,986 13,973 27,945 43,000 18.45
2017 6,986 13,973 27,945 41,918 19.00
2018 6,151 12,301 27,945 41,918 19.57
2019 5,411 10,822 27,945 41,918 20.16
2020 4,767 9,543 27,945 41,918 20.76
2021 4,192 8,384 16,986 41,918 21.39
2022 2,822 7,397 14,411 34,608 22.03
2023 6,493 12,192 31,147 22.69
2024 5,724 10,329 21,600 23.37
2025 5,041 9,590 16,240 24.07
2026 4,438 7,425 14,616 24.79
2027 3,973 7,425 13,154 25.54
2028 11,839 26.30
2029 10,655 27.09
2030 9,589 27.90
2031 8,630 28.74
2032 7,767 29.60
2033 6,990 30.49
2034 6,292 31.41
2035 5,662 32.35
2036 5,096 33.32
2037 4,587 34.32

Operating Cost 5% of total development cost

Tarrif 0.45 USD/Barrrel
Signature Bonus 6 million
Production Bonus at 10 million 5 million
Production Bonus at 25 million 4 million
Royalti 5%
Tax 35%
Case D
Tax Loss Taxable Income Tax
Oil Production Oil Price Gross Revenue Royalty (5%) Net Value CAPEX Opex Total Decutions Net Cash Flow
(C/F) Income ( 35%)
Year
Contractor Government
MBO $/bbl M$ M$ M$ M$ M$ M$ M$ M$ M$ (M$) (M$)
2009 0 15 - - - 6,000 300 6,300 (6,300) - (6,300) -
2010 0 15 - - - 6,000 300 6,300 (6,300) (12,600) - (6,300) -
2011 0 16 - - - 23,600 1,180 24,780 (12,600) (37,380) - (24,780) -
2012 0 16 - - - 40,400 2,020 42,420 (37,380) (79,800) - (42,420) -
2013 7650.035 17 129,153 6,458 122,695 82,300 7,558 89,858 (79,800) (46,962) - 32,838 6,458
2014 7650.035 17 133,027 6,651 126,376 44,200 5,653 49,853 (46,962) 29,561 10,346 66,177 16,998
2015 16425 18 294,185 14,709 279,475 42,900 9,536 52,436 29,561 256,600 89,810 137,229 104,519
2016 15738 18 290,336 14,517 275,820 - 7,082 7,082 - 268,737 94,058 174,679 108,575
2017 15300.07 19 290,725 14,536 276,189 - 6,885 6,885 - 269,304 94,256 175,047 108,793
2018 15300.07 20 299,447 14,972 284,474 - 6,885 6,885 - 277,589 97,156 180,433 112,129
2019 15300.07 20 308,430 15,422 293,009 - 6,885 6,885 - 286,124 100,143 185,980 115,565
2020 15341.988 21 318,553 15,928 302,626 - 6,904 6,904 - 295,722 103,503 192,219 119,430
2021 15300.07 21 327,214 16,361 310,853 - 6,885 6,885 - 303,968 106,389 197,579 122,749
2022 12631.92 22 278,256 13,913 264,343 - 5,684 5,684 - 258,659 90,531 168,128 104,443
2023 11368.655 23 257,942 12,897 245,045 - 5,116 5,116 - 239,929 83,975 155,954 96,872
2024 7905.6 23 184,750 9,238 175,513 - 3,558 3,558 - 171,955 60,184 111,771 69,422
2025 5927.6 24 142,681 7,134 135,547 - 2,667 2,667 - 132,879 46,508 86,372 53,642
2026 5334.84 25 132,265 6,613 125,652 - 2,401 2,401 - 123,251 43,138 80,113 49,751
2027 4801.21 26 122,606 6,130 116,476 - 2,161 2,161 - 114,315 40,010 74,305 46,141
2028 4333.074 26 113,971 5,699 108,273 - 1,950 1,950 - 106,323 37,213 69,110 42,911
2029 3889.075 27 105,362 5,268 100,093 - 1,750 1,750 - 98,343 34,420 63,923 39,688
2030 3499.985 28 97,665 4,883 92,782 - 1,575 1,575 - 91,207 31,922 59,284 36,806
2031 3149.95 29 90,534 4,527 86,008 - 1,417 1,417 - 84,590 29,607 54,984 34,133
2032 2842.722 30 84,155 4,208 79,948 - 1,279 1,279 - 78,668 27,534 51,134 31,742
2033 2551.35 30 77,796 3,890 73,906 - 1,148 1,148 - 72,758 25,465 47,292 29,355
2034 2296.58 31 72,128 3,606 68,522 - 1,033 1,033 - 67,488 23,621 43,867 27,227
2035 2066.63 32 66,853 3,343 63,510 - 930 930 - 62,581 21,903 40,677 25,246
2036 1865.136 33 62,145 3,107 59,038 - 839 839 - 58,199 20,369 37,829 23,477
2037 1674.255 34 57,459 2,873 54,586 - 753 753 - 53,832 18,841 34,991 21,714