20032003INDONESIAN INDONESIAN

LICENCING AND CONTRACT LICENCING AND CONTRACT SYSTEMSYSTEM

• Regulator

• Player

Player

Regulator

Supervisor

Previous New

1970 - 2001 2001 - recent

Oil and Gas New Policy

BackgroundBackground

• To help to people’s welfare by reforming in every aspect of state and national life

• Strategic resources control the livelihood of people and play an important role in the national company

• an important role in giving an actual added value to increased and sustainable national economic growth

• The previous oil and gas law is no longer suitable for development oil and gas business activities

SECTOR REFORMSECTOR REFORM

• Enactment of a new oil and gas law

• Ending Pertamina’s monopoly position and the opening up all aspects of the petroleum sector to greater competition while having Pertamina remain an important company.

• greater price transparency

• Establishment of new institution for upstream and downstream petroleum regulation

• Introduction of efficiency improvements in hydrocarbon exploration and production

GOVERNMENT DECREE

Oil and Gas Industries

Upstream

HSE Downstream

Regulatory Body

Implementing Body

State-owned Limited Liability Co

ELEMENTS OF PRODUCTION HANDLING

Production (Revenues)

Cost

Equity To Be Split

Split Sharing (Gross Income)

Tax

Domestic Market Obligation

Net Income (Pertamina/contractor)

Oil : 85/15; 88/12; 80/20; 65/35

Gas : 70/30; 65/35; 60/40

THE PRINCIPLES OF THE PSCTHE PRINCIPLES OF THE PSCBPMIGAS is Responsible For TheBPMIGAS is Responsible For The ManagemetManagemet Of The OperationsOf The OperationsContractor/operator IsContractor/operator Is RespobsibleRespobsible To BPMIGAS For The Execution Of The Operations To BPMIGAS For The Execution Of The Operations In Accordance With Agreed Work ProgramsIn Accordance With Agreed Work ProgramsContractor Provides All Financial And Technical Assistance RequiContractor Provides All Financial And Technical Assistance Required To Conduct red To Conduct Petroleum OperationsPetroleum OperationsContractor Carries The Risk Of The Operating CostContractor Carries The Risk Of The Operating CostContractor Shall Recover All Operating Cost After Commercial ProContractor Shall Recover All Operating Cost After Commercial ProductionductionThe Remaining Production After Deductions Of Operating Costs RecThe Remaining Production After Deductions Of Operating Costs Recovery Is Shared overy Is Shared Between BPMIGAS And ContractorBetween BPMIGAS And ContractorThe Contractor Allows 6 To 10 Years For Exploration And 30 YearsThe Contractor Allows 6 To 10 Years For Exploration And 30 Years Total Term If Total Term If Commercial Production Is EstablishedCommercial Production Is EstablishedContractor Prepares Annually A Work Program And Budget Of OperatContractor Prepares Annually A Work Program And Budget Of Operating Costs To Be ing Costs To Be Agreed ByAgreed By PertaminaPertaminaAll Equipments Purchased By Contractor And For Imported EquipmenAll Equipments Purchased By Contractor And For Imported Equipments When Landed ts When Landed In Indonesia Become The Property Of Government of IndonesiaIn Indonesia Become The Property Of Government of IndonesiaBPMIGAS has Title To All DataBPMIGAS has Title To All Data AbtainedAbtained From The OperationsFrom The OperationsContractor Is Subject To Pay Indonesian Income Taxes And BPMIGASContractor Is Subject To Pay Indonesian Income Taxes And BPMIGAS Will Reimburse Will Reimburse Contractor For The Other Taxes Paid In Conducting The OperationsContractor For The Other Taxes Paid In Conducting The OperationsContractor Is Obligated To Supply Indonesia’s Domestic RequiremeContractor Is Obligated To Supply Indonesia’s Domestic Requirement For Crude Oil, nt For Crude Oil, Natural Gas Called Domestic Market Obligation.Natural Gas Called Domestic Market Obligation.

PRODUCTION SHARING CONTRACTPSC STANDARD - CRUDE OIL

PRODUCTION SHARING CONTRACTPRODUCTION SHARING CONTRACTPSC STANDARD PSC STANDARD -- CRUDE OILCRUDE OIL

PRODUCTIONP

C O S TC

E T S( P - C )

CONTRACTOR26.79% (P - C)

CONTRACTOR TAKE15% (P - C)

INDONESIA73.21% (P - C)

INDONESIA TAKE85% (P - C)

TAX 44%11.79% (P - C)

+

NOTE(1) P = GROSS PRODUCTION

C = COSTETS = EQUITY TO BE SPLIT

(2) PERTAMINA RETENTION(BEFORE TAX) = 5% OF ETS

PRODUCTION SHARING CONTRACTPSC STANDARD - NATURAL GAS

PRODUCTION SHARING CONTRACTPRODUCTION SHARING CONTRACTPSC STANDARD PSC STANDARD -- NATURAL GASNATURAL GAS

PRODUCTIONP

C O S TC

E T S( P - C )

CONTRACTOR53.58 % (P - C)

CONTRACTOR TAKE30 % (P - C)

INDONESIA46.42 % (P - C)

INDONESIA TAKE70 % (P - C)

TAX 44%23.57 % (P - C)

+

NOTE(1) P = GROSS PRODUCTION

C = COSTETS = EQUITY TO BE SPLIT

(2) PERTAMINA RETENTION(BEFORE TAX) = 2 % OF ETS

NOTE(1) P = GROSS PRODUCTION

C = COSTETS = EQUITY TO BE SPLIT

(2) PERTAMINA RETENTION(BEFORE TAX) = 2 % OF ETS

PRODUCTION SHARING CONTRACTPRODUCTION SHARING CONTRACTFIRST TRANCHE PETROLEUMFIRST TRANCHE PETROLEUM--CRUDE OILCRUDE OIL

PRODUCTIONPRODUCTION(P)(P)

INDONESIAINDONESIA73.21% (80% P73.21% (80% P--C)C)

CONTRACTORCONTRACTOR26.79 % (80% P)26.79 % (80% P)

CONTRACTORCONTRACTOR15% (80% P15% (80% P--C)C)

FTP = 20 %FTP = 20 %(20 % P)(20 % P)

P P -- FTP = 20 %FTP = 20 %(80 % P)(80 % P)

INDONESIAINDONESIA73.21 % (20 %P)73.21 % (20 %P)

INDONESIAINDONESIA14.6% P14.6% P

INDONESIA INCOMEINDONESIA INCOME17.0% P + 85% (80% P17.0% P + 85% (80% P--C) = 85% (PC) = 85% (P--C)C)

CONTRACTORCONTRACTOR26.79 % (20% P)26.79 % (20% P)

CONTRACTORCONTRACTOR5.36% P5.36% P

TAX 48 %TAX 48 %2.3% P2.3% P

COSTCOST(c)(c)

E T SE T S80% P80% P--CC

TAX 44 %TAX 44 %11.79% (80% P11.79% (80% P--C)C)

CONTRACTOR INCOMECONTRACTOR INCOME3.0% P + 15% (80% p3.0% P + 15% (80% p--C) = 15 (PC) = 15 (P--C)C)

++++

++

CONTRACTORCONTRACTOR3.0 %3.0 %

PRODUCTION SHARING CONTRACT (PSC) 1st GENERATION : 1964 - 1977

Pertamina Holds The Management Of The OperationsNon-interest Bearing Fund Provided By The ContractorCost Recovery Cap : 40%Of The 60% Balance Shall Be Shared :

- Pertamina : 65%- Contractor : 35%

Pertamina Shall Pay The Contractor’s Indonesia Income Tax To The Government

25% Of The25% Of The Contracttor’sContracttor’s Share Is For Domestic Market Obligation (DMO) Valued At Us$ 0.2Share Is For Domestic Market Obligation (DMO) Valued At Us$ 0.20/bbl0/bbl

All Physical Assets Purchased By The Contractor BecomeAll Physical Assets Purchased By The Contractor Become Pertamina’sPertamina’s PropertyProperty

10% Of Participating Interest Eligible For An Indonesian Company10% Of Participating Interest Eligible For An Indonesian Company In The Early Commercial Field DevelopmentIn The Early Commercial Field Development

From 1974 Up To 1977, Contractor Shall Be Obliged To Pay An AddiFrom 1974 Up To 1977, Contractor Shall Be Obliged To Pay An Additional Cash Payment To The Governmenttional Cash Payment To The Government

PRODUCTION SHARING CONTRACT(PSC)

2nd GENERATION : 1978-1987

Changes As Compared To The 1st Generation PSC

No Cost Recovery Cap

Split Sharing After Cost Recovery Is :Oil : 65.91% / 34.09% (Pertamina/contractor)Gas : 31.80% / 68.20% (Pertamina/contractor)

Contractor Pays 56% Tax To The Government

Net Income (After Tax) :

• Oil : Indonesia/contractor = 85/15

• Gas : Indonesia/contractor = 70/30

Contractor Gets Incentives :

• Full Export Price For Dmo Over The Initial 5 Years Of Production

• Investment Credit Of 20% Of Capital Expenditures For Production Facilities

PRODUCTION SHARING CONTRACT (PSC)3rd GENERATION 1988 - CURRENT

PRODUCTION SHARING CONTRACT (PSC)PRODUCTION SHARING CONTRACT (PSC)33rdrd GENERATION 1988 GENERATION 1988 -- CURRENTCURRENT

InvestmentInvestmentCreditCredit

CommercialityCommerciality

DMO PriceDMO Price

First Trances Petroleum (FTP)First Trances Petroleum (FTP)

Condition That The Government Has To Obtain In Condition That The Government Has To Obtain In Minimum Of 49 % Of The Gross Revenue Not Valid Minimum Of 49 % Of The Gross Revenue Not Valid Anymore.Anymore.

25 % Minimum Guarantee Of The Gross Revenue For 25 % Minimum Guarantee Of The Gross Revenue For The Government Is Not Required.The Government Is Not Required.

10 % Of The Export Price After The First Five Year’s 10 % Of The Export Price After The First Five Year’s Production.Production.

20 % Of Production To Be Shared First Between 20 % Of Production To Be Shared First Between PertaminaPertamina And Contractor.And Contractor.

A. INCENTIVES PACKAGE SEPTEMBER 23, 1988A.A. INCENTIVES PACKAGE SEPTEMBER 23, 1988INCENTIVES PACKAGE SEPTEMBER 23, 1988

B. INCENTIVES PACKAGE FEBRUARY 23, 1989B.B. INCENTIVES PACKAGE FEBRUARY 23, 1989INCENTIVES PACKAGE FEBRUARY 23, 1989

Split For Marginal Field And For TertiarySplit For Marginal Field And For TertiaryEorEorSplit For PreSplit For Pre--tertiary And Deep Sea tertiary And Deep Sea ProductionProductionInvestment Credit Deep SeaInvestment Credit Deep SeaExtension To The Six (6) Years Extension To The Six (6) Years Exploration PeriodExploration PeriodGas PricingGas PricingAccess To DataAccess To DataField Data AcquisitionField Data Acquisition

Conventional Area : 80/20Conventional Area : 80/20Frontier Area : 75/25Frontier Area : 75/25Incremental Split For Frontier Production (See A)Incremental Split For Frontier Production (See A)110 % (Oil) And 55 % (Gas)110 % (Oil) And 55 % (Gas)1 X 4 Years1 X 4 YearsOriented To Wards Field Development EconomicsOriented To Wards Field Development EconomicsNot Restricted To Areas Opened For BiddingNot Restricted To Areas Opened For BiddingWill Be Conducted ByWill Be Conducted By PertaminaPertamina And Will Be Available To And Will Be Available To Contractors. Contractors.

InvestmentInvestmentCreditCredit

DMO PriceDMO Price

SplitSplit

Development Area:Development Area:•• Pre Pre –– Tertiary Reservoir Rocks = 110% for oil and gasTertiary Reservoir Rocks = 110% for oil and gas•• Water deep of 200 Water deep of 200 –– 1500 m = 110% for Oil and Gas1500 m = 110% for Oil and Gas•• Water deep > 1500 m = 125% for Oil and GasWater deep > 1500 m = 125% for Oil and Gas

15 % of The Export Price After The First Five Year’s 15 % of The Export Price After The First Five Year’s ProductionProduction

For Oil:For Oil:•• Field developed in the frontier areas = 80% : 20%Field developed in the frontier areas = 80% : 20%•• Field developed in water depth > 1500 m = 75% : 25% Field developed in water depth > 1500 m = 75% : 25% For Gas:For Gas:•• Field developed in conventional areas = 65% : 35%Field developed in conventional areas = 65% : 35%•• Field developed in the frontier areas = 60% : 40%Field developed in the frontier areas = 60% : 40%•• Field developed in water depth > 1500 m = 55% : 45% Field developed in water depth > 1500 m = 55% : 45%

C. INCENTIVES PACKAGE AUGUST, 1992C.C. INCENTIVES PACKAGE AUGUST, 1992INCENTIVES PACKAGE AUGUST, 1992

D. INCENTIVES PACKAGE DECEMBER, 1993D.D. INCENTIVES PACKAGE DECEMBER, 1993INCENTIVES PACKAGE DECEMBER, 1993DMO PriceDMO Price

First First Tranche Tranche Petroleum (FTP)Petroleum (FTP)

SplitSplit

25 % of The Export Price After The First Five Year’s25 % of The Export Price After The First Five Year’s

15% of Production taken before deduction of cost recovery 15% of Production taken before deduction of cost recovery and will be split between government and contractorand will be split between government and contractor

For Oil : 65% : 35%For Oil : 65% : 35%For Gas : 60% : 40%For Gas : 60% : 40%*) For eastern Indonesia areas and part of western Indonesia *) For eastern Indonesia areas and part of western Indonesia areas having similar geological and geophysical condition.areas having similar geological and geophysical condition.

Average Ranking For Attractive Feature of Average Ranking For Attractive Feature of Investing In Indonesia’s Oil and Gas SectorInvesting In Indonesia’s Oil and Gas Sector

0 1 2 3 4 5

Geological prospectivity

The existing PSC framework

Trained workforce

Foreign Ownership Regulatory

Contract and project approval process

Infrastructure

Regulatory framework

(1=Most attractive, 5= Least attractive)

Modified from Price Water House Coopers 2002

EXPLORATORY WELLS STATISTIC1997 - 2002

'97 '98 '99 '20 '01 '02

YEAR

020406080

100120140160

WEL

LS

0

10

20

30

40

50

60

SUC

CES

S R

ATI

O

Discovery Dry Total Wells Success Ratio (%)

Discovery 46 75 50 54 56 37Dry 54 70 39 38 39 38

Total Wells 100 145 89 92 87 75Success Ratio (%) 46 52 56 54 52 46

Tertiary Sedimentary Basins in IndonesiaTertiary Sedimentary Basins in Indonesia

-10

100 105 110 115 120 125 130 135 140

5

0

-5

Drilled basin, no discovery yetProducing Basin

Drilled and proven discovery, but not producing yet

Frontier Basin

Sedimentary Basins in Indonesia (60)

No Producing Yet (8)Producing (15)

Un-drilled (22) Drilled (38)

Discovery (23) No Discovery Yet (15)

INDONESIA PETROLEUM WORKING AREA MAP

Total working area = 151 blocks

Indonesia's Contract Sign Indonesia's Contract Sign 1961 1961 -- 20022002

0

5

10

15

20

25

30

35

Tota

l Con

trac

t

PSC-std PSC-ext JOB\JOA TAC EOR

EOR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 1 3 1 0 0 0 0 0

TAC 3 3 2 1 2 1 1 5 3 10 6 7 3 4 1

JOB\JOA 1 1 7 6 3 0 0 0 4 4

PSC-ext 3 3 3 3 0 1 2 1 0 2 2 1

PSC-s td 1 1 1 2 5 17 8 10 3 2 4 1 5 2 1 9 9 8 13 3 2 3 2 7 3 6 9 18 4 6 1 9 7 17 15 4 1 9 1

'61 '62 '63 '64 '65 '66 '67 '6 8 '69 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '20 '01 '02

ACREAGE OFFERED IN Q1-Q2 2003

MERANGIN II

MERANGIN I

REMBANG

BULU

N.E. MADURA II

E. KANGEAN

N.E. MADURA I

NORTH BALI II

NORTH BALI I

S. MADURA

Seismic Line SW NE

Basement

Ngimbang

Kujung

PROSPECT OF MERANGIN II

Seismic Line

PROSPECT OF NORTH EAST MADURA IIW E

Basement

Ngimbang

Kujung

Seismic Line

PROSPECT OF NORTH BALI I BLOCK

Kujung

Ngimbang

Basement

S N

TARAKAN

FLOW OF REVENUE OF INDONESIA PSC (NEW)

GROSS PRODUCTION

Investment Credit

Max. Cost Recovery : 100%

EQUITY TO BE SPLIT

FTP Max. 10%

INDONESIA SHARE

CONTRACTOR SHARE

DMO Fee

DMO Max.25%

Tax 44%

INDONESIA TAKE CONTRACTOR TAKE

Taxable Income

(+) (-)

(+)(-)

(-)(+)

(+)

(+)

(-)

(-)(+)

(-)

GROSS PRODUCTION

Investment Credit

Max. Cost Recovery : 100%

EQUITY TO BE SPLIT

FTP Max. 20%

INDONESIA SHARE

CONTRACTOR SHARE

DMO Fee

DMO Max.25%

Tax 44%

INDONESIA TAKE CONTRACTOR TAKE

Taxable Income

(+) (-)

(+)(-)

(-)(+)

(+)

(+)

(-)

(-)(+)

(-)

FLOW OF REVENUE OF INDONESIA PSC (OLD)

FLOW OF REVENUE OF INDONESIA PSC (NEW)

GROSS PRODUCTION

Investment Credit

Max. Cost Recovery : 100%

EQUITY TO BE SPLIT

FTP Max. 10%

INDONESIA SHARE

CONTRACTOR SHARE

DMO Fee

DMO Max.25%

Tax 44%

INDONESIA TAKE CONTRACTOR TAKE

Taxable Income

(+) (-)

(+)(-)

(-)(+)

(+)

(+)

(-)

(-)

(+)

(-)

DEPARTMENT OF ENERGY AND MINERAL RESOURCESDIRECTORATE GENERAL OF OIL AND GAS

NEW FISCAL TERM APPLIED TO THE 11 OPEN ACREAGE OFFERED

25

25

25

25

25

20

20

20

25

25

25

OIL

AFTER TAX

CONTRACTOR TAKE (%)

40

45

45

40

40

35

35

35

40

40

40

GAS

0

0

0

0

0

0

0

55

55

55

55

INVESTMENT CREDIT(Only For Gas Field

Developments)

AFTER TAX FIRST TRANCHE

PETROLEUMGASOIL

75

75

75

75

75

80

80

80

75

75

75

GOVERNMENT TAKE (%)

60

55

55

60

60

65

65

65

60

60

60

638

3,869

3,954,38

5,448

4,617

3,434

1,586

3,494

4,220

2,847

3,247

SIZE(Sq Km)

10

10

10

10

10

10

10

10

10

10

10

TARAKAN – OFFSHORE EAST KALIMANTAN

11

NORTH BALI II – OFFSHORE EAST JAVA

10

NORTH BALI I – OFFSHORE EAST JAVA

9

EAST KANGEAN –OFFSHORE EAST JAVA

8

NORTH EAST MADURA II –OFFSHORE EAST JAVA

7

NORTH EAST MADURA I –OFFSHORE EAST JAVA

6

SOUTH MADURA –OFFSHORE EAST JAVA

5

BULU – OFFSHORE NORTH CENTRAL JAVA

4

REMBANG – OFFSHORE NORTH CENTRAL JAVA

3

MERANGIN II – ONSHORE CENTRAL SUMATERA

2

MERANGIN I – ONSHORE CENTRAL SUMATERA

1

BLOCKNO

FLOW OF TENDER PROCEDUREFLOW OF TENDER PROCEDURE

Bid Evaluation

Determination ofthe Successful Bidder

Announcement Clarification ForumBid Information

• Announcement of Blocks Release, February 01, 2003

Bid Participation(submission)

• Access to Bid Information, February 17-July 21, 2003

• Pre-Tender Open Question and Answer Session (clarification forum), February 24 –July 22, 2003

• Bid Document Submission, July 31, 2003

• Contract Signing, August, 2003 Contract Signing(BPMIGAS & Contractor)

Provisional New Acreage To Be Offered 2003Provisional New Acreage To Be Offered 2003Provisional New Acreage To Be Offered 2003

THANK YOUFor further information, please contact :

Directorate General of Oil and Gas Directorate Exploration and Exploitation

Attn. Secretariat of New Working Acreage of Oil and Gas ManagementPlaza Centris, 1st and 7th Floor

Jalan HR. Rasuna Said Kav. B-5, Jakarta 12929, IndonesiaPhone : 62-21-5268963, 62-21-5268910 ext. 136, 135, 132

Facsimile : 62-21-5269129E-mail : geomigas@indosat.net.id

Htpp : www.geomigas.com