Peluang InvestasiSektor ESDMKEMENTERIAN ENERGI DAN SUMBER DAYA MINERAL2011Investment OpportunitiesEMR SectorMinistry of Energy and Mineral Resources 20112Investment Opportunities EMR SectorInvestment Opportunities EMR SectorThis material is not be reproduced without the permission of Ministry of Energy and Mineral Resources3Investment Opportunities EMR SectorThesectorofEnergyandMineralResourcesistaskedtomanageIndonesias abundance in oil and gas, coal and mineral resources. Therefore, this sector plays the vital role in the countrys development and national economy, namely in securing domestic energy supply, raw material and feedstock for the industry, as well as a source for state revenue.Development of the sector of Energy and Mineral Resources certainly requires not only prudent policy and regulation, but also substantial capital on investment. Subsequently, as the country is endowed with abundance in oil and gas, coal and mineral resources, Indonesia offers plenty opportunities in the sector of energy and mineral resources, making it an attractive investment destination for prospective investors. Nonetheless,prospectiveinvestorswouldrequiremoreinformationonthecountrysresource potential and relevant law and regulation, before making the decision to invest in the sector of Energy and Mineral Resources in Indonesia. To that end, I trust that this Book on Investment Opportunity in the Sector of Energy and Mineral Resources is very important as a preliminary reference for the prospective investors. This book presents comprehensive information on investment opportunities in the sector of energy and mineral resources, including important relevant data, presented in attractive tables and fgures, for the convenience of prospective investors I do hope that this Book on Investment Opportunity in the Sector of Energy and Mineral Resources would beneft prospective investors with clear and complete information, and serve as the frst step in accelerating the development of Energy and Mineral Resources in Indonesia.Jakarta,April 2011Minister of Energy and Mineral ResourcesDarwin Zahedy SalehSAMBUTAN MENTERI ENERGI DAN SUMBER DAYA MINERALAddress by Minister of Energy and Mineral Resources4Investment Opportunities EMR Sector5Investment Opportunities EMR SectorPages1. INTRODUCTION .......................................................................................................................1.1Background.................................................................................................1.2Scope of Commodities.......................................................................................................1.3LegalSupport...................................................................................................1.4Upstream Business Activity ..............................................................................................1.5Downstream Business Activity .........................................................................................1.6Oil and Gas Supporting Business (Non-Core Business) ..................................................2.OVERVIEWOFCONDITIONOILANDGASNATIONAL...................................................2.1Potential of Sediment Basins .............................................................................................2.2Location and Status of Sediment Basins in Indonesia ....................................................2.3Coal Bed Methane (CBM) Resouches ...............................................................................2.4Oil and Gas Reserves in Indonesia .................................................................................2.5ExplorationActivity........................................................................................2.6OilandGasProduction.............................................................................................2.7FuelMarketCondition................................................................................................2.8FuelSupplySystem.......................................................................................2.9Gas Market Conditions .....................................................................................................2.10Oil and Gas Infrastructure .................................................................................................2.11RefneryInfrastructure.................................................................................................2.12Natural Gas Infrastructure .................................................................................................2.13Storage,TransportationandTrade..............................................................................3.INVESTMENTOPPORTUNITYINOILANDGAS............................................................3.1Block Exploration ..............................................................................................................3.2ProductionFieldsDevelopment..................................................................................3.3CBMBusiness.............................................................................................................3.4The Need for Refned Oil Fuel and Construction Plans of New Refneries ..................3.5Transportation, Storage, and Trading ...............................................................................3.6Investment Opportunities in Oil and Gas Supporting Business .....................................3.7Master Plan of Transmission/Distribution Pipes .............................................................4.PROCEDURESANDARRANGEMENTININVESTMENT...............................................4.1 Investment in Oil and Gas Upstream Business Activities ................................................4.2 Investment in Oil and Gas Upstream Business Activities................................................ Address .................................................................................................................................. Contents .................................................................................................................................35INVESTMENT OPPORTUNITY IN OIL AND GAS SECTOR1111121314151718192021222425262728293031323334353738404142434445TerletakdiAsiabagiantenggara,Indonesia dikaruniaisumberdayaalammelimpah.Sumber daya minyak dan gas yang diperkirakan mencapai 71,5milliarbareldan334,5TSCFtersebardi Indonesia.MenjadikanIndonesiatujuan Investasiyangmenarikpadasektorminyakdan gas bumi. DinamikaIndustriMinyakdanGasBumiyang sudahberlangsungsejaklama,menjadikanIndo -nesialebihmatangdalammengembangkankon -trakdankebijakanyangadauntukmendukung investasi.Dukunganperaturan,insentifdan penghormatan terhadap kontrak yang ada adalah usahapemerintahIndonesiauntukmenjamin keberlangsungan Investasi di Indonesia 9CONTENTS6Investment Opportunities EMR SectorPages1. INTRODUCTION .......................................................................................................................1.1Background....................................................................................................................1.2LegalBasis...........................................................................................................1.3Policy Support ................................................................................................................2.OVERVIEWONCONDITIONOFNATIONALPOWER.....................................................2.1Availability of Energy Resources .....................................................................................2.2CurrentConditionofElectricityInfrastructure................................................................2.3ElectrifcationRatio........................................................................................................3.INVESTMENTOPPORTUNITYINELECTRICITY..............................................................3.1Condition of Demand and Supply of Electric Power.........................................................3.2ElectricityInfrastructureDevelopmentPrioritiesAhead..................................3.3PotentialProjectsintheElectricitySector..............................................4.PROCEDUREANDMETHODOFINVESTMENT..............................................................4.1Investment Scheme And Mechanism Of Procurement ...................................................4.2AuthorityandElectricityBusinessLicense...................................................................4.3LicenseMechanisms............................................................................................-Attachment:RecapitulationofInfrastructureandInvestmentNeeds...........................INVESTMENT OPPORTUNITYIN ELECTRICITY SECTOR4848495255566165666667687272798083TerletakdiAsiabagiantenggara,Indonesia dikaruniaisumberdayaalammelimpah.Sumber daya minyak dan gas yang diperkirakan mencapai 71,5milliarbareldan334,5TSCFtersebardi Indonesia.MenjadikanIndonesiatujuan Investasiyangmenarikpadasektorminyakdan gas bumi. DinamikaIndustriMinyakdanGasBumiyang sudahberlangsungsejaklama,menjadikanIndo -nesialebihmatangdalammengembangkankon -trakdankebijakanyangadauntukmendukung investasi.Dukunganperaturan,insentifdan penghormatan terhadap kontrak yang ada adalah usahapemerintahIndonesiauntukmenjamin keberlangsungan Investasi di Indonesia 1. INTRODUCTION .......................................................................................................................1.1BackgroundInformation................................................................................................1.2LegalBasis.................................................................................................................2.OVERVIEWCONDITIONOFMINERALANDCOAL..................................................2.1PotentialofMineralResourcesandCoal...................................................2.2Condition of Mineral Industriy ...........................................................................................2.3Condition of Coal Industry ..............................................................................................2.4Condition of Coal Shipment ............................................................................................3.OPPORTUNITY AND CHALLENGE INVESTMENT IN MINERAL AND COAL ..................3.1Condition of Production and Sale Mineral and Coal...................................................3.2Priority Development of Infrastructure for Minerals and Coal in the Future ......................3.3OpportunityandChallengeInvestmentinMineralsandCoal...............................4.PROCEDURESANDMETHODOFINVESTMENT.........................................................4.1 Procedures and Method for Licencing Business in Minerals and Coal Mining ...............4.2 Authorization and Provision of Business Licence in Mineral and Coal Mining .................INVESTMENT OPPORTUNITYIN MINERALS AND COAL MINING10210210310510511011411711811812613213313313647101CONTENTS7Investment Opportunities EMR SectorPages1. INTRODUCTION.............................................................................................1.1Background information ..................................................................................................1.2LegalBasis.............................................................................................................2.OVERVIEWOFNEWANDRENEWABLEENERGYANDCONSERVATION..................2.1PotentialandUseofNewandRenewableEnergyandConservation.......................2.2Structure of New and Renewable Energy Industries and Effcient Use ..........................3.THECLEANENERGYINITIATIVE:REDUCINGEMISSIONFROMFOSSILFUEL BURNING(REFF-BURN)........................................................................................... 4.OPPORTUNITYANDCHALLENGEINNEWANDRENEWABLEENERGY, ANDCONSERVATION.....................................................................................4.1InvestmentinNewandRenewableEnergy,andConservation..................................4.2Investment Challenge in New and Renewable Energy and Conservation ......................4.3Development Program of New and Renewable Energy and Conservation .....................5.PROCEDURESANDARRANGEMENTININVESTMENT...............................................5.1Procedures and Arrangement of Business Licencing in Geothermal .............................5.2Procedures and Arrangement of Business Licencing in Biofuels ....................................5.3ProceduresandArrangementofBusinessLicencinginVariousRenewableEnergy forElectricGeneration..................................................................................................INVESTMENT OPPORTUNITY IN NEW AND RENEWABLE ENERGY, AND CONSERVATION141141148151151166168170170178184210210213216TerletakdiAsiabagiantenggara,Indonesia dikaruniaisumberdayaalammelimpah.Sumber daya minyak dan gas yang diperkirakan mencapai 71,5milliarbareldan334,5TSCFtersebardi Indonesia.MenjadikanIndonesiatujuan Investasiyangmenarikpadasektorminyakdan gas bumi. DinamikaIndustriMinyakdanGasBumiyang sudahberlangsungsejaklama,menjadikanIndo -nesialebihmatangdalammengembangkankon -trakdankebijakanyangadauntukmendukung investasi.Dukunganperaturan,insentifdan penghormatan terhadap kontrak yang ada adalah usahapemerintahIndonesiauntukmenjamin keberlangsungan Investasi di Indonesia 223231 CurrentIssuesandSolutions................................................................................. EnclosureofInvestmentIssuesinEsdmSectorof2011..............................139CONTENTS8Investment Opportunities EMR Sector9Investment Opportunity inOil and Gas SectorEL NA ER RE GN I I DM AA NYS AU DM R BEMINISTRY OF ENERGY AND MINERAL RESOURCESREPUBLIC OF INDONESIAINVESTMENT OPPORTUNITY IN OIL AND GAS SECTORMINISTRY OF ENERGY AND MINERAL RESOURCESJakarta, February 201110Investment Opportunity inOil and Gas SectorLocated in South East Asia, Indonesia is endowed with abundant natural resources.It is estimated to contain up to 87.22 billion barrels of oil and gas and there are 594.42 TSCFthroughout Indonesia. This makes Indonesias oil and gas sector an inter-esting investment destination. The long standing dynamism of Indonesias oil and gas industry enhancesitsreputationindevelopingcontracts and policies to support investment. Existing support in the form of regulations, incen-tivesandcontractcomplianceareallpartofthe Indonesian Government's efforts to guaranteethe sustainability of investment in this country.11Investment Opportunity inOil and Gas SectorOilandgasarestillthemoststrategic naturalresourcesinIndonesia,notonlyasa supplyforenergyconsumptionandraw material for domestic industries but also as the main sources of income and foreign exchange for the country.Theincreaseinenergyandrawmaterial demands for industry requires the right scenario toeffectivelyfulfilthedemandsaswellasto establish domestic security of supply.BasedonPresidentialDecreeNo.05 (2006),oilandgasrepresent51.66%and 28.57% of the total national energy mix, respec-tively, in 2006. In 2005, the composition of oil is expectedtobelessthen20%andgaswill increasemorethan30%,therefore,alternative energy resources can be developed.Inlightofthissituation,itispredictedthat there will be significant opportunities for invest-mentinthedevelopmentoftheoilandgas sectorinIndonesia,bothinupstreamand downstream sectors. According to the geology ofthecountry,thereremainsaverylarge amount of hydrocarbon reserves in the country. Thegovernmentsplantomaintainoilproduc-tion at the level of 1 million barrels per day will provide investment opportunity in the upstream sector.Inthedownstreamsector,inordertomeet the domestic needs for energy, investments are requiredtobuildanddevelopoilandgas refineries as well as to develop other infrastruc-ture such as storage tanks, transmission pipes, oilandgasdistributionandothermodesof transportation. All the investment potential in the upstream anddownstreamsectorsprovide excellent opportunitiesforoilandgassupportactivities, both the industry and other services. IntroductionBackgroundFigure 1.1 Energy Mix Target112Investment Opportunity inOil and Gas SectorTheCommoditiesforproductionand business investment in the oil and gas industry consists of:OilOilistheresultofanaturalhydrocarbon processwhichoccursunderpressureand atmospherictemperatureconditionsand resultsinaliquidorsolidincludingasphalt, mineral wax or ozocerite and bitumen which are theresultoftheminingprocessbutexcluding coal or other solid hydrocarbon deposits which are not related to oil and gas.Natural GasNatural gas is produced by a natural hydrocar-bon process which occurs under pressure and atmospherictemperatureconditionsand appears in the form of gas which is the result of oil and gas mining.Coal Bed MethaneCoalbedmethaneisanaturalgas (hydrocarbon) in which the methane gas is the maincomponentthatoccursnaturallyduring the process of coal formation and is trapped or absorbedinthecoalandwithinthelayersof coal.Petroleum Fuel Petroleumfuelisfuelwhichisburnedmaterial originated and/or processed from liquid petro-leum.Gas FuelGas fuel is fuel which is used in transportation activitiesoriginatingfromnaturalgasand/or processed from liquid petroleum.Other Fuels Other fuels are fuels which occur in the form of aliquidorgasoriginatingfromotherthanoil and gas and refined products.LPGLPGishydrocarbongasprocessedwith liquefactionandpressureandconsistsof propaneandbutane.Itisproducedforeasy storage,transportation,andhandling purposes.LNGLNG is natural gas consisting of methane which iscooledandcompressedataverylow temperature (-160< Celsius) into liquid for easy transportation and storage purposes.The Other Refined ProductsOther refined products are products other than oilandgasfuels,occurringastheresultofoil and gas refining activities and as final products or by products, except lube oil and petrochemi-cal products.Scope of Commodities 13Investment Opportunity inOil and Gas SectorOil andGas LawOilandGasLawNo.22(2001)contains basicchangesinthenationaloilandgas industry.Upstreambusinessactivities (exploration and exploitation) are executed and controlledbyanExecutingBodythroughthe cooperationcontracts.Whiletheoilandgas operations(downstreamactivities)are executed by the granting of business licenses which are opened for business operators. According to the new oil and gas bill, the oil andgasbusinesswillbeopenedtobusiness operators such as BUMN (government-owned enterprises), BUMD (local government compa-nies),cooperatives,small-scalebusinesses, andprivatebusinessentitiesandpermanent establishment(multinational/foreigncompa-nies) have the opportunity to participate in the oilandgasbusiness.Thecriteriarequiredto perform the business are as follows :1. the business permanent establishment (fixedbusinessoperators)canonlyperform upstream business activities2. the business entities or permanent establishment that conduct upstream business activi-ties are not allowed to carry out downstream business activities3. business operators that perform downstream business activities are not allowed to conduct upstream business activitiesGovernment RegulationUpstream RegulationGovernmentregulationsonupstreamoil and gas activities (No. 55/2009 on the Second AmendmenttoGovernmentRegulationNo. 35/2004onOilandGasUpstreamBusiness Activities) are derivative of the Oil and Gas Bill withspecialemphasisonexecutingand controllingoilandgasupstreambusiness activity.Thisupstreamgovernmentregulation regulatestheexecutionandmonitoringofthe cooperation contract business in producing oil andgasbetweencontractorsandBPMigas. Thepurposeofthisupstreamregulationisto ensurethattheextractionofoilandgaspro-videsthemaximumpossiblebenefitforthe people of Indonesia as well as for state income. Downstream regulationGovernmentregulationsupstreamactivity (No.30/2009onAmendmenttoGovernment Regulation No. 36/2004 on Oil and Gas Down-stream Business Activities) are the derivative of Oil and Gas Bill concerning the implementation andcontrolofdownstreamoilandgas businessactivitieswhichareexpectedto createtheprincipleofbusinesscompetition thatisreasonable,fair,andtransparent.The implementationandcontrolofdownstream business activities is also contained within the frameworkofthesupplyanddistributionof fuelswhicharecontinuousandaffordablefor thepublic.Consideringthedownstream business activities which consist of processing, transportation,storage,andtrading,each businessoperatormusthaveabusiness license for each segment being implemented.Legal SupportGambar 1.2. Changes in Policies and Contract(1966 1976)1st Generation(1976 1988)2nd Generation(1988 2001)3rd GenerationConcession & Contract 5A (before 1960)Contractof Work(1960 1966)Cooperation Contract(PSC and others)(2001-now)(1966 2001)4th GenerationLaw No. 44, 1960 Law No. 8, 1971 Law No. 22, 2001 Indische Mijn Wet 1899 Government regulations on upstream oil and gas activities (No. 35/2004 )Government regulations on Downstream oil and gas activites (No. 36/2004 )14Investment Opportunity inOil and Gas SectorUpstream Business ActivityTheoilandgasbusinessin Indonesiaisclassifiedintotwotypes, namelythecorebusinessandthe non-core business. The core business consists of upstream and downstream business,whereasnon-corebusiness includesservicesandsupporting industries.Preliminaryactivitiessuch as field surveys are done to determine the working areas for oil and gas explo-ration. The scope of the activities in the nationaloilandgasindustrycanbe seen in Figure 1.3A. Core Business1. Upstream Business ActivityTheUpstreambusinessactivitiesconsistof exploration and exploitation. The purpose of explo-rationactivitiesistogetinformationaboutthe geologicalconditionsinordertodiscover estimated.oilandgasreserves.Theexploitation activitiesconsistofdrillingandfinalizingthewell, developmentoftransportationfacilities,storage, refiningofoilandgasonthespotandother supporting activities.Figure 1.3 Taxonomy of Oil and Gas IndustriesFigure 1.4 Upstream Business Activities SchemeUpstream Business Activities- Preliminary Surveys- Data Collection- Data Access- Resources- Joint Study- Set-up Of Joint Contract- Set-up Of Work Areas - Offer Of Work Areas- Approval Of- Joint Contract- Geol. + Geoph. Study- Exclusive Survey- Prospect And Lead- Well Drilling- Discoveries- Reserve Evaluation- Evaluation- Economic Assessment - Reserve Certification- POD- Implementation Of PODTechnological Development- Development Of Well Drilling- Maintenance Of Production Facilities- Monitoring Of Production Exploration ExploitationGovernmentOpen AreaInvestorsOIL AND GAS INDUSTRYSupporting ServicesConstruction ServicesNon-construction Services- Planning- Implementating- ControllingSupporting Industry- Material Industry- Equipment Industry- Oil & Gas Appliance Core Business UPSTREAM DOWNSTREAM-ExplorationExploitation-- Processing- Transportation- StorageNon Core Business- Trading- Surveys- Geology & Geophysics- Drilling- Well Drilling Operations- Construction And Engineering- Underwater Activities- Management Of Explosives, Radioactive - Materials And Dangerous Materials- Licensing Process And Technology- Transportation And Logistics- Storage- Energy Efficiency- Due Diligence- Appraisal- Security- Technical Inspection- R & D- Training- Occupational Health, Safety,And Environmental Management- Data & Information Management- Supply Of Goods And Manpower- Agency- Others15Investment Opportunity inOil and Gas SectorDownstream Business ActivityFigure 1.5 Downstream Business Activities SchemePIPELINEOIL BARGE GAS STATIONINDUSTRYSTORAGE TRADINGDEPOT/TRANSIT TERMINALTRANSPORTATION PROCESSINGREFINERYCRUDE IMPORTFIELDPIPELINEDEPOT/TRANSIT TERMINALResiduumGasNaphtaGasolineKerosene Kerosene, AvturDieselLubricantIndustrial FuelLPGChemicalsGasolineOil, Paraffin dllSolar & DieselFuelAsphalt, RoofPicture 1.6 Products Resulted from Oil Refining2. Downstream Business ActivityTheDownstreamsectorofoilandgas businessconsistsofrefineries,transportation, storage and or the sale of oil and gas. a.ProcessingProcessingisanactivitytopurify,obtain parts, increase quality and improve the added value of crude oil and/or natural gas, excluding field processing.Crude oil processing is conducted in an oil refinery, a system of plant that processes crudeoilintorefinedproductsandresultsin variousrefinedoilfuelandnon-fuelproducts. Asanillustration,picture1.6showsvarious products resulted from oil refining.16Investment Opportunity inOil and Gas Sectorb.TransportationOilandgastransportationreferstoactivi-ties to transport crude oil, gas, and/or its refined productsfromaWorkSiteorstorageand processing area, including the transportation of gasthroughtransmissionanddistribution pipes. c. StorageOilandgasstoragereferstothereceipt, collection,storage,anddeliveringofcrudeoil and/orgas,refinedoilfuel,gasfuel,and/or refinedproductsabove/belowthegroundfor commercialpurposes.Anexampleisadepot and floating storage.d. TradeTradeactivitiesconsistofthepurchase, sale, export, and import of crude oil, refined oil fuel,gasfuel,and/oritsrefinedproducts, including gas through pipes.TradeBusinessActivitiesaredividedinto two types, namely:1.General Business Trade (Wholesale)i.e.largescalepurchase,sale,exportand import of Refined Oil Fuel, Gas Fuel, Other Fuel andRefinedProductswithbusinessfacilities and infrastructure at its disposal and the right to distributethemtoanyendusersbyapplying particular brands.2. Limited Business Trade (Trading)i.e.thetradingofcommercialoilandgas products, namely crude oil, refined oil fuel, gas fuel and other fuel and refined products without business facilities and the limited trade of LNG.Downstream Business ActivityTRUCKTANKERRAIL TANK WAGONPIPELPG storage tanker loading, karawang offshore17Investment Opportunity inOil and Gas SectorOil and Gas Supporting Business (Non-Core Business)5 Major Products, Supporting BusinessTubingCasingWellheadChemicalsPlatform ConstructionB.OilandGasSupportingBusiness(Non-Core Business)This refers to business activities which support oil and gas business activities such as: Supporting Services Thisreferstoserviceactivitieswithinboththeupstream anddownstreamoilandgasbusinessactivities.Supporting activitiesincludesOilandGasConstructionServicesand Non-ConstructionServices.ConstructionServicesconsistof planning (design engineering), implementation (EPC, installa-tionandcommissioning)andConstructionSupervision services. Non-Construction Services refer to supporting activi-ties such as seismic & non-seismic survey, drilling, inspection and others. Supporting IndustryThisreferstotheindustryresultingingoods,material and/orequipmentusedtodirectlysupportoilandgas businessactivities.SupportingIndustryincludestheMaterial Industry, Oil and Gas Equipment and Oil and Gas User Indus-try.WithreferencetoLawNo.22/2001onOilandGas,in order to nurture and develop national capability to compete at national,regionalandinternationallevel,Enterprisesand Permanent Establishment must prioritize the utilization of local labor,goodsandservices,aswellasdomesticengineering anddesignbuildcapabilityinatransparentandcompetitive manner. With the purpose of encouraging the use of domestic products, the Directorate General of Oil and Gas as an advisor todomesticmanufacturershaspublishedabookentitled Domestic Product Appreciation to be used as a reference in controlling the import of operational goods and the provision of goods and/or services within oil and gas business activities.18Investment Opportunity inOil and Gas SectorTheupstreambusinessactivityofnationaloilandgasis related to the regulations governing ownership of oil and gas resourcesbythestate.Basedontheregulations,thereare threestagesinoilandgasupstreambusiness.Thefirstis pre-productionsharingcontract(pre-PSC),production sharing contract (PSC), and post-production sharing contract (post-PSC).Theactivitiesinpre-PSCincludegeneralsurvey activities to obtain technical data through geological studies in ordertofindnewworkingareas.Theproductionsharing contract stage is related to exploration activities to discover oil andgasdepositsandtheexploitationactivitieswhichare conductedbycontractors.Inthefinalstage,thepost-productionsharingcontractisoverandtheoilandgas reserves are not exploited for economic reasons. The working areas are then returned to the government and they are then offered as new working areas. Overview Of Condition Oil And Gas National PRE-PSC PSC POST-PSCDITJEN MIGASSURVEY COMPANYG&G SERVICE COMPANYUNIVERSITY (BY MOU)BUSINESS ENTITY (NON CONTRACTOR)DITJEN MIGASBUSINESS ENTITY (CONTRACTOR)BP MIGASDITJEN MIGASSignature Oil And Gas Working Areas, 20102Gambar 2.1 Stages in Upstream SectorBusiness19Investment Opportunity inOil and Gas SectorBasedonnationalsurveys,thepotentialofoil and gas resources are accumulated in approxi-mately60sedimentbasinswhicharespread over the islands of the country.Ofthe60basins,38havebeenexploredand thoseremainingareawaitingdevelopmentby investors.Ofthe38exploredbasins,16have producedhydrocarbon,9basinsarenotin productionbuthaveshownhydrocarbon potential,whiletheremaining15havenot indicated any sign of hydrocarbon. The above explanationshowsthattheopportunitiesfor explorationactivitiesinIndonesiaremainwide open,especiallythe22unexploredbasinsof whichmostareindeepseawaterinthez eastern part of Indonesia. The spread of oil and gas basins can be seen in Figure 2.2 and Table 2.1North Sumatera BasinCentral Sumatera BasinSouth Sumatera BasinSunda BasinNorth West Java BasinWest Natuna BasinNortheast Java Sea BasinNortheast Java BasinBarito BasinKutei BasinMATURE1.2.3.4.5.6.7.8.9.10.Tarakan BasinBanggai BasinSalawati BasinBintuni Basin11.12.13.14.SEMI MATURESibolga BasinEast Natuna BasinPati BasinAsem-Asem BasinTimor BasinBone BasinLariang BasinSula BasinBiak Basin1.2.3.4.5.6.7.8.9.FRONTIERBengkulu BasinJava Fore Arc BasinBiliton and Pembuang BasinsKetungau BasinSouth Makassar & Spermonde BasinsFlores and Tukang Besi BasinsSalabangka, Manui & Buton BasinsBuru, West Buru & South Sula BasinsNorth Halmahera, East, South & North Obi Basins1.2.3.4.5.6.7.8.9.Minahasa BasinGorontalo BasinBali - Lombok & Savu BasinsMisool, Seram, South Seram,W. Weber, Weber & Tanimbar BasinsWaiponga BasinAkimegah BasinSahul Basin10.11.12.13.14.15.16.Potential of Sediment BasinsFigure 2.2The Spread of Sediment Basins in Indonesia20Investment Opportunity inOil and Gas SectorLocation and Status of Sediment Basins in Indonesia Operation Operation North SumateraCentral SumateraSouth SumateraSundaNorthen West JavaNorthen East JavaNorthen Sea East JavaWest NatunaTarakanKutaiBaritoNorth SumateraCentral SumateraSouth SumateraSundaNorthen West JavaNorthen East JavaNorthen Sea East JavaWest NatunaTarakanKutaiBaritoSeramSalawatiBintuniBoneSeramSalawatiBintuniBoneBanggaiSulaBlakTimorBanggaiSulaBlakTimorAkimegahButonManuiSouth MakasarMissolAru RiverbedAkimegahButonManuiSouth MakasarMissolAru RiverbedLombok BaliFloresGorontaloSalabangkaWest WeberSouth HalmaheraWeberWaropenTiukang BesiTanimbarLombok BaliFloresGorontaloSalabangkaWest WeberSouth HalmaheraWeberWaropenTiukang BesiTanimbarSouth SulaBuruWest BuruNorth HalmaheraEast HalmaheraSouth HalmaheraNorth ObiSouth ObiSouth SeramJayapuraSouth SulaBuruWest BuruNorth HalmaheraEast HalmaheraSouth HalmaheraNorth ObiSouth ObiSouth SeramJayapuraSahulSawuSpermondeWaipogaLairingSahulSawuSpermondeWaipogaLairingSibolgaEast NatunaBengkuluPatiSibolgaEast NatunaBengkuluPatiBilitonSouth JawaMelawaiAsem-asemBilitonSouth JawaMelawaiAsem-asemPambuangKetungauPambuangKetungauDrilling but Production Drilling but ProductionDrilling but not found Drilling but not foundEksploration not yet Eksploration not yetSedimentary/Basin Sedimentary/BasinSub Total Sub Total 11 11 44Sub Total Sub TotalSub Total Sub Total44 4444 11 11Sub Total Sub Total 22 20 20TOTAL TOTAL 21 21 39 39West Indonesia West Indonesia East Indonesia East IndonesiaTable 2.1 Location and Status of Sediment Basins in Indonesia21Investment Opportunity inOil and Gas SectorInadditiontooilandgaspotential,Indonesiaalsohas CoalBedMethane(CBM)reserves.CoalBedMethaneis trapped gas in the pores of coal. CBM can be found in coal miningareasorinoilminingareaswherecoalsediment occurs.CBMcanbedevelopedasanalternativeenergy source in the future andsuch resources have been identified in11sedimentbasinsspreadoverSumatra,Java,Kaliman-tan, and Sulawesi (figure 2.3) Coal Bed Methane (CBM) Resources 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025PP:CBM-1Rambutan(GOI Sponsor)Start of CBM era1st CBM PSC ContractCBM Estimated Production~500 MMSCFDCBM Estimated Production~1000 MMSCFDCBM Estimated Production~1500 MMSCFDCBM for ElectricityPilot ProjectLegend:Government ParticipationIncreasing number of CBM ContractAverage Production = 250 MSCFD/WellMinister DecreeNo. 033/2006& Model KontrakProject EvaluationStart of Commercial Period (ExplorationEstimated CBM Production)Pilot ProjectProduction Sharing ContractPPPSCFigure 2.3 CBM ResourcesFigure 2.4 Road Map of CBM Development22Investment Opportunity inOil and Gas SectorOil and Gas Reserves in Indonesia Oil and Gas Reserves in IndonesiaFossil Energy ResourcesReserveProductionRatio C/POil 87.22 billion barrels 7.76 billion barrels 344.8 million barrels 22Gas 594.43 TSCF157.14 TSCF 3.408 TSCF 46CBM 453 TSCFOpen, to see the map* Data Source by Ditjen Migas 2010Table 2.2 Oil and Gas Resources & Reserves 23Investment Opportunity inOil and Gas SectorThe total oil reserves in 2010 amounted to 7.764 billion barrels, consisting of proven reserves amounting to 4.230 billion barrels and potential reserves of 3.534 billion barrels. Most of these oil reserves are located in the west of Indonesia, especially in Sumatra (70%), Java (12%) and the remaining reserves are in eastern Indonesia namely East Kalimantan, Sulawesi, Maluku, and Papua.The total gas reserves in Indonesia in 2010 amounted to 157.14 TCF, or 3% of the worlds total gas reserves. This figure consists of proven reserves of 108.4 TCF and potential reserves of 48.29 TCF.Oil Reserves (MMSTB)Oil Reserves (MMSTB)Gas Reserves (TSCF)Gas Reserves (TSCF)OIL RESERVES (MMSTB)PROVEN= 4,230 MMSTBPOTENTIALPROVENPOTENTIAL= 3,534 MMSTBTOTAL = 7.764 MMSTBGAS RESERVES (TSCF)= 108.4 TSCF= 48.74 TSCFTOTAL = 157.14 TSCFPROVINCEMMSTBTSCFNAD127.215.74NORTH SUMATERA111.891.28CENTRAL SUMATERA3.7908.56SOUTH SUMATERA909.8017.90WEST JAVA556.623.70EAST JAVA1,022,356.40NATUNA383.3551.46KALIMANTAN670.0018.33SULAWESI49.784.23MALUKU48.0715.22PAPUA94.9324.32Figure 2.5 Indonesia Oil and Gas Reserve, 2010 24Investment Opportunity inOil and Gas SectorInanefforttolocateoilandgasreserves,exploration activitieshaveincludedseismicsurveysandexploration drilling conducted in working areas that have been produc-tive as well as in those which have not been productive.Seismic SurveySeismicsurveyactivityconsistsof2Dseismicsurveys implementedbyeithergovernmentorproductionsharing contractorsinexistingfieldsand3Dseismicsurveys conductedbyproductionsharingcontractors.2Dseismic surveys conducted by the government (general surveys) are intended to obtain data on oil and gas resource potential to supportblockofferingactivities,while2Dseismicsurveys conducted by production sharing contractors are intended tofurtheranalyzethepotentialreservesofoilandgas relatedtoexplorationactivities.3Dseismicsurveysare conducted by contractors to obtain more detailed descrip-tion of the reservoirs in order to minimize the risks of uncer-tainty associated with field development.In 2010, 2D seismic surveys were completed on 27,242 kmoftheplanned28,760km,withmostoftheareas surveyedwereoffshore.Meanwhile,3Dseismicsurveys wereperformedon7,865km2oftheplanned9,642km2,with most of the areas surveyed were offshore. Drilling ExplorationIn2010,drillingexplorationactivities wereconductedon90wellsofthe planned 126 wells. Of 90 wells drilled, 27 were identified as containing oil and gas, with a success ratio of 30%. Exploration Activity Exploration Activity2005 2010010,00020,00030,00040,00050,000PlanRealization17,77612,20915,78610,39222,3939,38930,789 28,76027,242 23,36442,64631,6562006 2007 2008 20092005 2010010,00020,000PlanRealization5,0104,5325,3902,37416,4464,83517,78915,1368,714 9,6426,977 7,8652006 2007 2008 20092005 2010020406080100120140160PlanRealization795411782111731457084 12675 9027302006 2007 2008 2009Discovery 22 40 39 34 35 Success Ratio (%) 41 49 53 49 47Figure 2.62D Seismic Surveys (in KM2)Figure 2.73D Seismic Surveys (in KM3)Figure 2.8 Drilling Exploration Well25Investment Opportunity inOil and Gas SectorConsideringtheabovepotentialofthereserves, the government strives continuously to increase its oil andgasproduction.Inits2011StateBudget,the governmenthastargeted965,000barrelsofoiltobe producedonadailybasiswhilegasproductionis targeted at 7,769 thousand mmbtu/day.Inordertoachievethesetargets,thegovernment has formulated several policies as well as taken strate-gicmeasuressuchasofferingnewworkingareas; utilizingpotentialfieldsthatarenotyetinproduction; acceleratingprocessessuchasworkprogramand budget (WP&B) approval, authorization for expenditure (AFE),andplanofdevelopment(PoD)approval;and reactivating old wells.Oil ProductionOilandcondensateproductionin2010reached 344.83 billion barrels,with a daily production of 944.90 bpd,whichexperiencedadecreaseof3.90bpd comparedtooilandcondensateproductionin2009 which was 948.80 bpd. This decrease was caused by, amongstotherthings,delaysintheearlyproduction scheduleatseveralpre-sharingcontractors,naturally occurringproductiondecline,andtechnicalopera-tional issues. Gas ProductionIn 2010, gas production reached 9,336 MMSCFD, with ani ncr easeof 1, 034MMSCFDf r omt he 8,302MMSCFDproducedin2009.Thisincrease resultedfrommaximizingproductionandoperating several new gas fields.Oil and Gas Production Oil and Gas Production050010001500MBOPD2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20101,413.90 TotalOilCond1,340.60 1,249.40 1,146.81,094.41,062.11,005.6 954.4 976.8 948.8944.91,272.50 1,208.70 1,117.60 1,013.0965.8934.8883.0 836.0 853.8 826.5 823.7141.4 131.9 131.8 133.8128.6127.3 122.6 118.4 123.0 122.3121.2600030009000MMSCFDTotalUtilitationLosses7,9277,690 8,318 8,644 8,278 8,179 8,0937,6867,8838,3029,3367,4717,188 7,890 8,237 7,909 7,885 7,7857,4187,5737,8168,829456 502 428 407 369 294 308268310486507970.000 bpd7.769 thousand mmbtu/dayIn 2011 State Budget, Thegovernment has targeted to beproduced on a daily basis while gas production is targeted at Figure 2.9 Oil ProductionFigure 2.10 Gas Production02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201026Investment Opportunity inOil and Gas Sector050403020102004 2005 2006 2007 2008 20092010Million KLAvgas + AvturIDO + FOSolarKeroseneGasoline06050403020102002 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Million KLHouseholdTransportationIndustryElectricityFuel Market Condition Fuel Market ConditionOver the last 10 years, domestic fuel consump-tion has been increasing at an average of 4.8% per year.Consideringtheincreaseinpopulationand theimprovingdomesticeconomy,itispredicted that oil fuel consumption will continue to increase. Thetransportationsectorcontinuestoconsume the greatest share of fuel at over 50%, followed by industrial, electrical and household consumption.The demand distribution of domestic oil fuel is determinedbythespreadofpopulationandits economicactivities.JavaandBalistilldominate consumptionwith62%ofthetotal,Sumatra20%, and the remainder is consumed by the eastern and centralpartsofIndonesia.Mostoftheoilfuel supplyfordomesticconsumption,around67%, comes from domestic refineries, while the remain-der 33% comes from import markets. The capacity ofdomesticrefineriesiscurrently1.157million barrelsperday,withoilfuelproductionof40.42 millionKLoranincreaseof1.07%from39.99 million KL in previous years.Figure2.11 Domestic Fuel Consumption by Sector Figure 2.12 Fuel Production by Domestic Refinery Chemical Plant, Merak27Investment Opportunity inOil and Gas SectorFuel Supply System Fuel Supply SystemLPG IMPORTEKSPLOITATION PROCESSING TRANSPORTATION STORAGE TRADING END USERGAS THROUGH PIPELINEBBGCBBLC>10%-