STRIVING for a COMEBACK PAGE 20 INDONESIA APRIL 2016 Acknowledgements
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BLUEPRINT FOR THE NEW PERTAMINA page 8 MINI-LNG: PLAYGROUND FOR INNOVATION page 42 FORTHCOMING SHALE BOOM? page 38 STRIVING FOR A COMEBACK PAGE 20 INDONESIA APRIL 2016 Acknowledgements Energy Boardroom would like to thank: Dr Subroto, Founder and President of BIMASENA Wianda Pusponegoro, VP Corporate Communications, Pertamina M.I. Zikrullah, Deputy Chairman of SKK Migas Pandri Prabono-Moelyo, Commissioner of Indika Energy Satya Widya Yudha – Vice Chairman of Commission VII Craig Stewart, President of Indonesian Petroleum Association (IPA) Akbar Rivai, Director of Sagatrade Murni Bambang Widarsono, Director of Lemigas As well as all the companies we have met for their steadfast support, assistance and enthusiasm. IINDONESIA OIL & GAS Blueprint for the new pertamina Interview 8 CONTENTS —April 2016 2 ACKNOWLEDGEMENTS 5 PREFACE 6 HYDROCARBONS SNAPSHOT Production, Trade & Revenues / Timeline & Infrastructure 8 BLUEPRINT FOR THE NEW PERTAMINA INTERVIEW Dwi Soetjipto, Pertamina President Director & CEO 10 LEVERAGING FULL E&P POTENTIAL INTERVIEW Dr. Syamsu Alam, Pertamina Upstream Director Striving for a 12 TPP: OPPORTUNITY OR THREAT? FEATURE comeback Fault lines of the debate Cover Story 14 REFINERY DEVELOPMENT MASTERPLAN (RDMP) 20 INTERVIEW Rachmad Hardadi, Pertamina Refining Director 16 TRANSITIONING TO GAS INTERVIEW Dr Wiratmaja Puja, Migas Director General 20 STRIVING FOR A COMEBACK COVER STORY 22 Rediscovering prowess on the world stage 23 A defining moment for Indonesia’s lead energy protagonist 23 Looking beyond the land of superlatives 24 Tearing down walls 26 Voices from the inside Betting big on 26 Reawakening the specter of Resource Nationalism deepwater 27 Re-thinking CBM for an Age of Austerity Interview 28 An Evolving Cast of Actors 36 29 Brand Indonesia’s champions – local manufacturing comes of age 31 Making fit for fifty 33 Eastern flair– how Asian investors cracked the Indonesian market 34 Betting on Gas 35 He who dares, wins 36 MERGERS, ACQUISITIONS AND SHAKE-UP INTERVIEW Craig Stewart, Ophir General Manager The Inside Oil&Gas is produced by Focus Reports Ltd. 38 UNCONVENTIONALS INTERVIEW Kim Morrison, CEO LION ENERGY Project Director: Louis Haynes 40 INFRASTRUCTURE AND CONSTRUCTION FEATURE Report Publishers: Mariuca Georgescu & Louis Haynes BIG-TICKET INVESTMENTS Project Coordinators: Simona Simeonova, Roxane Höck 42 MINI-LNG APPLICATION INTERVIEW Johan de Saeger , Editorial Coordinator: Jannes Peemöller, Nicholas Laane ENGIE chief representative Graphic Design: Carmen Reyes 44 BONDED LOGISTICS PARKS & SUPPLY CHAIN For exclusive interviews and more info, please log onto EFFICIENCY INTERVIEW Asok Kumar, President Director www.energyboardroom.com or write to [email protected]. of PT Schenker Petrolog Utama Copyright: All rights reserved. No part of this publication maybe reproduced in 46 COUNTER-CYCLICAL BUSINESS STRATEGIES any form or by any means, whether electronic, mechanical or otherwise including INTERVIEW photocopying, recording or any information storage or retrieval system without Eric Herman, Puma General Manager prior written consent of Focus Reports. While every attempt is made to ensure the 48 THE ARCHIPELAGO DIMENSION FEATURE accuracy of the information contained in this report, neither Focus Reports nor the authors accept any liabilities forerrors and omissions. Opinions expressed in this Complexity of movements report are not necessarily those of the authors. STAY IN TOUCH: @energyboardroom www.energyboardroom.com JOIN THE CONVERSATION Indonesia Additional full-feature interviews from our Indonesia 2016 Report can be accessed on EnergyBoardroom, the premier website for C-Level executives, consultants and state actors in the pharmaceuticals and life sciences sector, alongside hundreds of exclusive interviews featuring the main movers and shakers of the industry, free country reports and sector insights supplemented by the latest news from global markets. AMPLIFIED CONTENT IN BRIEF BRIAN PYE – VP Global Business @energyboardroom Development, Sales & Marketing, Meeting Dr. Subroto sharing his thoughts on LR Senergy, Indonesia @Indonesia @OilGasIndustry reform @EnergyBoardroom @OGFJ @offshoremgzn Read the interview KARDAYA WARNIKA – Chairman, Commission VII, Indonesia @energyboardroom Ir. Satya @satyawidyayudha puts forward the case for @Indonesia engaging in nuclear power @EnergyBoardroom @OGFJ NATHAN MEEHAN – Senior Advisor to Global Management Board, Baker Read the interview Hughes, Indonesia @energyboardroom Dr. Kuntoro advocates better decision making LUKMAN MAHFOEDZ – CEO, architecture for @Indonesia oil and gas Medco, Indonesia @EnergyBoardroom @OGFJ @energyboardroom Dwi Soetjipto, @PTPERTAMINA CEO explains ARI HERNANTO SOEMARNO – that $100B investment is needed for the #Energy Former CEO, Pertamina, Indonesia infrastructure #Indonesia Read the interview 4 Indonesia Oil & Gas April 2016 www.energyboardroom.com INDONESIAPREFACE Preface Long disregarded by international investors as ‘forgotten giant’ can belatedly awake from its Asia’s “great underachiever”, Indonesia still stru- slumber and whether such a feat can be actually ggles to fulfill its enormous potential despite a realized remains hotly contested. Looking beyond sprawling population of 260 million and consi- the hype and reformist rhetoric, this report seeks derable natural bounty of coal, gas and oil re- to lift the lid on the state of play of the country’s serves. Rent-seeking, bureaucratic inertia, insular hydrocarbons industry. We survey the new cons- patronage-driven politics and protectionist ten- tellation of actors grappling with a commodity dencies abound rendering the country a ‘compli- price flop and turbulent oil environment. We seek cated’ place for doing business for the uninitiated. out the optimism surrounding imminent growth Change may at last be underway, however, with hotspots such including mini-LNG, deep water, a singularly unorthodox, freshly elected and vi- shale reserves and a newly reconsidered CBM en- gorous president promising to trim Indonesia’s vironment. We also cover stakeholders striving to negative investment list and to return the eco- iron out Indonesia’s complex logistical landsca- nomy to heady 7 percent growth rates though pe and gain insights from those expecting to business-friendly policies and a big push on in- reap a windfall from forthcoming infrastructure frastructure renewal. Whether South East Asia’s and refining programs. www.energyboardroom.com Indonesia Oil & Gas April 2016 5 HYDROCARBONS SNAPSHOT Production, Trade & Revenues MACROECONOMIC ASSUMPTIONS FOR 2016 STATE BUDGET 5.3% 4.7% 5.5% 50 (USD/barrel) INFLATION 3 MONTH- GOVERNMENT ECONOMIC GROWTH TREASURY BILLS iCP (thousand barrels/ 830 (thousand barrels/day) 1,155 day equal to oil) 13,900 (RP/USD) OIL LIFTING GAS LIFTING EXCHANGE RATE Source: Indonesian Ministry of Finance. OIL AND GAS TRADE REVENUES Trade balance Production USD mln (USD mln) USB bln (mln BOEPD) 50 10 80 2.50 40 5 60 2.25 30 0 40 2.00 20 -5 20 1.75 10 -10 0 -15 0 1.50 2010 2011 2012 2013 2014 2015* 2009 2010 2011 2012 2013 2014 2015** Total fuel imports Oil and gas exports Net contractor share Indonesia share Cost recovery Sources: SKKMIGAS; Indonesian Ministry of Trade. *BMI Research forecasts. **Wood Mackenzie forecasts. INDONESIA OIL AND GAS PRODUCTION PROFILE 1996 - 2016 2000 PEAK PEAK ERA OF OIL AND GAS LAW 1977 1995 22/2001 Decline 10-12% 1734 1683 1689,1 1631 1624 1612 1624 1589 1587 1586 1575 1574 1557 1539 1519 1535 1537 1522 1506 1491 1500 1501 1499 1498 1468 1496 1500 1445 1462 1450,3 1407 1415 1408 1405 1387 1397 1404 1373 1362 1360 1373 1338 1354 1336 1305 1327 1341 1288 1303 1302 1302 1316 1267 1264 1252 1214 1229 1147 1082 1096 1056 1062 Build-up stage 1047 1049 1006 966 977 1000 954 949 945 953 902 889 904 893 853 847 Decline 2-3% 860 MBOEPD 797 773 742 744 601 569 585 550 544 512 500 466 488 401 266 153 99 109 74 91 52 57 57 51 53 59 0 1971 1981 1991 2011 1974 1975 1972 1973 1977 1978 1987 1976 1979 1982 1967 1983 1997 1985 1992 1988 1993 1995 1989 1986 1968 1998 2012 2013 1970 2015 1969 1984 1996 1999 1966 2016 1994 1980 2014 1990 2001 2010 2007 2002 2003 2005 2008 2006 2009 2004 2000 Oil Gas Source: Indonesian Petroleum Association (IPA). 6 Indonesia Oil & Gas April 2016 www.energyboardroom.com HYDROCARBONS SNAPSHOT Timeline & Infrastructure SIGNIFICANT EVENTS IN THE HISTORY OF INDONESIA’S OIL AND GAS SECTOR 2014 2015 2015 2015 2016 Joko Widodo elected New oil and gas Indonesia reactivates Oil & Gas Governance Ministry announces intent to president on a manifesto law submitted to membership of Oil Reform Commission tender 21conventional and promising massive Parliament producer’s cartel, OPEC established to clean up the unconventional oil & gas investment in energy hydrocarbons sector blocks in an effort to attract infrastructure upstream investment 2014 2013 2011 2010 Indonesia registers oil Constitutional court rules Implementing GR. 79 on cost recovery production of 794,000 bpd, that BPMigas be dismantled. regulation and income tax for well below the government’s SKK established as the new -PMK 256 upstream sector upstream oil lifting target of 818,000 regulator for upstream -PMK 257 & downstream business bpd -PMK 258 activities 2001 2002 2003 2004 2008 Oil and Gas law Upstream and Downstream PT Pertamina Government Regulation Indonesia suspends its No. 22/2001 bodies called BPMIGAS (Persero) No.35 & 36 Regulation for membership of OPEC introduced, and BPH MIGAS were established upstream & downstream reflecting shift from oil revoking