SKK Migas Annual Report 2013

ANNUAL REPORT

2012

ANNUAL REPORT 2012SKK MIGAS

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SKK Migas Vision and Mission 2Core Values 3SKK Migas Chairman Foreword 4The History of SKK Migas 6BPMIGAS / SKMIGAS / SKK Migas Management 82012 Annual Report Summary 14

SKK MIGAS PERFORMANCEA. Upstream Oil and Gas Contract Area 22B. Exploration Activities 26C. Well Development & Maintenance Activities 31D. Oil & Gas Production Activities 33E. Oil & Gas Lifting 38F. State Revenues 42G. Production PSC Contractors Actual Investment 44H. Exploration PCS Contractors Actual Investment 45

EFFORTS TO INCREASE PRODUCTIONA. New Projects 49B. Improved Oil Recovery 50C. Reactivation of Suspended Wells 52D. PSC Contractors Forum for Exploration Contract Area (FOKWE) 53E. Cooperation with Other Institutions 56F. Knowledge Sharing 57

ISSUES AND RESOLUTIONSA. Land Acquisition and Permits 62B. Securing National Vital Objects 65C. Regulations 68D. Oil Theft in South Sumatra 70

DEVELOPMENT AND MAJOR PROJECTSA. Banyu Urip Field 75B. Indonesian Deepwater Development (IDD) 76C. Abadi Field 78D. Jangkrik & Jangkrik North East (JNE) Field 79E. Bukit Tua Field 80F. Ande Ande Lumut Field 81G. North Duri Development Area-13 (NDD Area-13) 82H. Corridor Block Development Project 83I. Ruby Field Development Project 84J. Kepodang Field 85K. Senoro Gas Field Integrated Development and Matindok Area 86L. Train 3 Tangguh Expansion Project 88

NATIONAL CAPACITY EMPOWERMENTA. Utilization Of Domestic Goods and Services 92B. Optimizing Asset Management in 2012 94C. Procurement Transactions Through State-Owned / Regional-Owned Banks 95D. National Capacity Building (NCB) Management 96E. Continuous Development 98

INTERNAL SKK MIGASA. SKK Migas Strategic Plan (Renstra) for 2011-2015 102B. Configuring BPMIGAS (Now SKK Migas) Organization Structure 103C. ISO 9001:2008 Certification 104D. Internal Human Resources Management and Development 106E. Management and Development Of PSC Contractors Human Resources 110F. SKK Migas Budget Realization And Expenditure 112G. State Official Employee Report By SKK Migas 113H. Information and Communication Technologies (ICT) 114

2012 Oil, Gas and CBM Contract Area Map 117

INTRODUCTION

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II

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VI

APPENDIX

TABLE OF CONTENTS

2SKK MIGAS VISION AND MISSION

SKK MIGAS VISION AND MISSION

Be a proactive and trustworthy partner in optimizing the benefits of the upstream oil and gas industry for all stakeholders while becoming one of the Nations engines in mobilizing different economic and industrial activities.

Supervise and control the Production Sharing Contracts implementation through partnerships in order to ensure the effectiveness and efficiency of upstream oil and gas business activities for the greatest welfare of the Nation.

INTRODUCTION

VISION

MISSION


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PROFESSIONAL:Act as a professional with strong commitment.

RESPONSIVE:Promptly responding to enquiries and resolving issues.

UNITY IN DIVERSITY:Synergizing the differences for greater achievements.

DECISIVE:Taking calculated risk within the authority.

ETHICS:Conducting business by following the highest ethical standards consistently.

NATION FOCUSED:Maximizing national capacity and capability.

TRUSTWORTHY:Maintaining credibility to earn the trust of stakeholders.

CORE VALUES

4SKK MIGAS CHAIRMAN FOREWORD

The transition from BPMIGAS to SKK Migas was carried out

rapidly and efficiently, so as to not disrupt daily operations.

Therefore, I would like to thank the Government for its prompt

response towards the changes, and also to all parties involved for

their unwavering support in this process.

INTRODUCTION


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Assalamualaikum Wr. Wb

I would like to thank God Almighty for allowing the upstream oil and gas industry to run smoothly, despite facing a barrage of problems. The transition from BPMIGAS to SKK Migas was carried out rapidly and efficiently, so as to not disrupt daily operations. Therefore, I would like to thank the Government for its prompt response towards the changes, and also to all parties involved for their unwavering support in this process.

Thanks to these efforts at the end of 2012, the upstream oil and gas sector was still able to contribute to state revenues and even exceeded the target. BPMIGAS (now SKK Migas) hand in hand with PSC Contractors managed to keep actual production and lifting closer to the set target. To boost national economic growth, we successfully maintained a high usage of local content, both goods and services. In this respect, we also gave opportunities for state-owned companies to be involved in the upstream oil and gas industry. We also continue to develop the role of the national banking industry through the utilization of national banks in the upstream oil and gas industry. No less important is our efforts to increase gas allocation to meet domestic consumption thus producing a chain reaction towards the economy.

Nevertheless, we still have plenty of work to do which require extra efforts, especially if we are to increase production in the short-term, mid-term, and long-term. SKK Migas performance in 2012 and previous years showed that we couldnt succeed without the aid of the Nation.

This annual report is our way to show responsibility for all the support and trust given. We hope that in future years, our stakeholders will give us even more support in realizing the oil and gas industry, so as to generate maximum benefits for the Nation.

Wassalamualaikum Wr. Wb

Rudi Rubiandini R.S.

SKK MIGAS CHAIRMAN FOREWORD

6On November 13th, 2012, the Constitutional Court rendered Decision Number 36/PUU-X/2012 which declared that phrases related to Badan Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi (BPMIGAS) stated in Law Number 22 of 2001 on Oil and Gas to be in contradiction with the 1945 Constitution and does not have any binding power. The implication of this decision is the transfer of BPMIGAS role to the Government cq. related Ministry.

BPMIGAS as a government agency that has supervised and controlled the upstream oil and gas business activities for the past decade was the first to comply and obey with the Constitutional Court Decision. As soon as the decision was announced, BPMIGAS management instructed its employees to immediately stop all works related to the duties and functions of said agency. As a form of compliance, BPMIGAS also disabled its employees external email and website, which was used to communicate with the public.

At the same time, the Government acted swiftly to ensure upstream petroleum operations was not disturbed by the Constitutional Court Decision. President Susilo Bambang Yudhoyono issued Presidential Regulation Number 95 of 2012 on The Transfer of Duties and Functions of the Upstream Oil and Gas Activity Agency. Inline with the Constitutional Court Decision to transfer the functions and duties of BPMIGAS to the related Minister, the Presidential Regulation reiterated that the duties, function and organization of BPMIGAS are transferred to the Minister of Energy and Mineral Resources (EMR). The Presidential Regulation also states that the Minister of EMR shall continue all processes conducted by BPMIGAS.

BPMIGAS duties, such as approval of work program and budget (WP&B), plan of development (POD), authorization for expenditure (AFE), and permits, supervision and any ongoing implementation shall be continued based on the Presidential Regulation.

As a consequence of Presidential Regulation Number 95 of 2012, the Minister of EMR also issued Decree Number 3135K/08/MEM/2012 and Number 3136K/73/MEM/2012 on November 13th, 2012. With the issuance of Minister of EMR Decree Number 3135K/08/MEM/2012 BPMIGAS duties, functions, and organizational structure were transferred to Satuan Kerja Sementara Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi (SKMIGAS), a unit under and supervised by the Minister of EMR.

THE HISTORY OF SKK MIGAS

THE HISTORY OF SKK MIGAS

BPMIGAS was the first to comply and obey the Constitutional Court Decision Number 36/PUU-X/2012.

INTRODUCTION


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Whereas, Minister of EMR Decree Number 3136K/73/MEM/2012 transferred BPMIGAS management and employee to SKMIGAS and instructed that all management and employee to carry out their duties. With the intent to give legal certainty to investors, on January 14th, 2013, through Presidential Regulation Number 9 of 2013 on Management of Upstream Oil and Gas Activities, Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi (SKK Migas) was established to manage the upstream oil and gas activities until a new law on oil and gas is passed. With this, SKMIGAS duties and responsibilities are transferred to SKK Migas.

To control, supervise, and evaluate SKK Migas management of upstream oil and gas business activities, Presidential Regulation Number 9 of 2013 also created an Oversight Committee. This committee consists of a Chairman (Minister of EMR), Vice Chairman (Deputy Minister of Finance) and 2 members (Indonesia Investment Coordinating Board Chairman and Vice Minister of EMR).

Based on this history, SKK Migas performance in this annual report also compromises the performance of BPMIGAS and SKMIGAS in managing the upstream oil and gas industry on behalf of the Government.

The performance of the upstream oil and gas industry in 2012 is based on the contribution of all stakeholders to uphold its responsibility to the Nation and the State. This achievement is the result of stakeholders maximum effort in the face of various challenges in the upstream oil and gas industry, both technical and non-technical.

Despite facing a number of challenges in 2012, the upstream oil and gas industry was able to fully contribute to the State through several accomplishments such as maximizing Government Take and exceeding the target set in 2012 APBN-P; increasing allocation of domestic gas and thus creating a chain reaction towards the national economy; increasing national capacity; and also maintaining the national energy security.

Despite facing a number of challenges in 2012, the upstream oil and gas industry was able to fully contribute to the State.

8SKK MIGAS CHAIRMAN Rudi Rubiandini R.S. was inaugurated as SKK Migas Chairman on January 16th, 2013 having previously held the office of Vice Minister of EMR since June 14th, 2012. The name Rudi Rubiandini is well known within the upstream oil and gas industry. Earning his Doktor Ingenieurs (Dr.-Ing) degree specializing in petroleum engineering from the Technische Universitaet Clausthal, Germany, Rudi formerly served as BPMIGAS Deputy for Operation Management as well as Corporate Secretary for the same agency. Before joining BPMIGAS, Rudi was a known consultant for various oil and gas field development projects, a trainer of different technical courses in the oil and gas industry, and as a source for a variety of seminars. He has also developed numerous upstream petroleum engineering softwares and is an author of several books. This Petroleum Engineering Faculty of the Bandung Institute of Technology (ITB) alumnus is also actively involved in assisting the Government, among others as the Deputy Chairman for the Supervisory Team of Oil and Gas Production Enhancement (TP3M), Ministry of EMR and as the Deputy Chairman for Investigation Team of Oil and Gas Accidents. Born in Tasikmalaya on February 9th, 1962, Rudi also has extensive field experiences among others in handling blowout incidents in several oil and gas fields in Indonesia.

SKK MIGAS VICE CHAIRMAN Johanes Widjonarko was inaugurated as SKK Migas Vice Chairman on February 8th, 2013. He initially served as BPMIGAS Vice Chairman (2012) and Deputy for General Affairs in the same agency (2011). Born in September 28th, 1962, Widjonarko graduated from the geological engineering department, National Development University (UPN), Yogyakarta, in 1988. He then obtained a Masters Degree in Business Policy Administration Science from the University of Indonesia (UI). Widjonarko began his career by working as a government official at the Directorate General of Oil and Gas, Ministry of EMR, since 1991. During his work at the Directorate General of Oil and Gas, Widjonarko was actively involved as a member in teams formulating and preparing various regulation concepts, including Law Number 22 of 2001 on Oil and Gas, Government Regulation Number 35 of 2004 on Upstream Oil and Gas Activities, and Law Number 79 of 2010 on Recoverable Operational Costs and Income Tax in the Upstream Oil and Gas Industries. He was also involved for more than seven years in drafting concepts for cooperation contracts and the offering of new oil and gas working areas. In addition, Widjonarko was responsible for the formulation of government policies in the oil and gas sub sector. Included in these policies were: The Energy and Mineral Resources Ministers Regulation Number 03 of 2010 on Natural Gas Allocation; Master plan for the National Gas Distribution and Transmission Network; oil and gas infrastructure policy; strategic reserves concept; and the National Gas Blueprint Concept. In 2011, Widjonarko was also appointed as Head of the EMR Technical Team to formulate the Master Plan for Acceleration and Expansion of Indonesian Economic Development (MP3EI) in 2011-2025.

SKK MIGAS MANAGEMENT (JANUARY 14th, 2013-PRESENT)

BPMIGAS / SKMIGAS / SKK MIGAS MANAGEMENTINTRODUCTION

PIMPINAN SKK MIGAS PERIODE 14 JANUARI 2013 - SEKARANG


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SKK MIGAS SECRETARY Gde Pradnyana was inaugurated as SKK Migas Corporate Secretary on February 8th, 2013 following the office of BPMIGAS Deputy for Operations Management. In November 19th, 2002, Gde resigned from being a lecturer in ITB and joined BPMIGAS as Head of the Operation Facilities and Construction Division and before joining the ranks of management, Gde was Head of Public Relations, Security and Formalities Division at the same agency. Born in Klungkung, Bali, on April 28th, 1960, Gde earned a degree in Civil Engineering from ITB in 1984. He received his master degree in Ocean Engineering from University College London and subsequently his Doctor of Philosophy in the same field from the University of Oxford, UK in 1992. Gde is an alumnus of the National Resilience Institute (LEMHANNAS). He has more than 25 years of experience in upstream oil and gas industry and during that period he was involved in various major projects, including the West Seno TLP; the Tangguh LNG Plant; as well as the Kerisi Hiu and the North Belut Platforms.

SKK MIGAS CHIEF EXECUTIVE AUDIT Priyo Widodo was inaugurated as SKK Migas Chief Executive Audit on February 8th, 2013. Born in Yogyakarta on March 19th, 1960, Priyo received his undergraduate degree in Accounting from Gajah Mada University (UGM) in 1985 and his postgraduate degree in Management from the UI in 1994, and for more than 25 years he has dedicated his services to the financial controls aspect of the upstream oil and gas industry. Early in his carrier, Priyo worked for Pertamina with his last position as Government Take Audit Manager in the Directorate of Production Sharing Management (Dit. MPS). Priyo then continued his carrier in BPMIGAS from 2003 up to 2012. In this institution, Priyo occupied several offices, among others, as the Head of Financial Management Division; Head of Work Program and Budget Management Division; and Vice President Management Representative of Pertamina EP for Eastern Area.

SKK MIGAS DEPUTY FOR PLANNING MANAGEMENT Aussie B. Gautama was inaugurated as SKK Migas Deputy for Planning Management on February 8th, 2013 following the office of BPMIGAS expert staff for exploration and reserves concept. Born in Canberra on August 22nd, 1955, Aussie graduated from ITBs Geological Engineering Study Program and has more than thirty years experience as a geologist. Since 1982 to September 2012, Aussie worked for Total E&P Indonesie with his last position as Vice President Geosciences & Reservoir. While working for Total E&P Indonesie, Aussie was involved in several national and international field development projects, among others, as a geologist for the Elmworth Project in Canada; as a senior geologist for the Tunu Field in East Kalimantan; and as head 3G studies for the Egina Project in Preowei, Nigeria.

PIMPINAN SKK MIGAS PERIODE 14 JANUARI 2013 - SEKARANG

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SKK MIGAS DEPUTY FOR OPERATIONS MANAGEMENT Muliawan was inaugurated as SKK Migas Deputy for Operations Management on February 8th, 2013. Born in Jakarta on February 20th, 1962, Muliawan received his undergraduate degree in exploration mining engineering from ITB and his postgraduate degree from UGM. Muliawan has extensive experience in upstream oil and gas operation activities, either during his term of office in Pertamina or during his service in BPMIGAS. Several positions were occupied by Muliawan in BPMIGAS, among others are Head of Production Operations Division and Head of BPMIGAS Representative Office. Muliawan has also attended numerous technical trainings related to the operations of upstream oil and gas industry conducted either in the country or abroad.

SKK MIGAS DEPUTY FOR FINANCIAL MANAGEMENT Akhmad Syakhroza was inaugurated as SKK Migas Deputy for Financial Management on February 8th, 2013. Born in Bengkulu on November 30th, 1963, Syakhroza graduated as an accounting major from the Faculty of Economy, UI in 1987. He pursued a Masters Degree in Accounting, Finance, and Information System at Cleveland State University, Ohio, United States, and graduated in 1991. He obtained a doctoral degree in Organization Behavior and Management Accounting from the Faculty of Business and Public Management, Edith Cowan University, Perth, Australia, in 2001. Apart from being a lecturer at the Faculty of Economy, University of Indonesia, Syakhroza was also active as an auditor, consultant, and audit committee member at several private companies.

SKK MIGAS DEPUTY FOR COMMERCIAL MANAGEMENT Widhyawan Prawiraatmadja was inaugurated as SKK Migas Deputy for Commercial Management on February 8th, 2013. Born in Bandung on August 4th, 1960, Widhyawan earned his bachelor degree in Industrial Engineering from ITB in 1987. He continued his study and earned a Ph.D. in economics from the University of Hawaii in 2002. Working for the energy sector for more than 25 years, Widhyawan has held various executive positions both in national and multinational companies, among others, as Country Executive for GE Energy Indonesia.

SKK MIGAS DEPUTY FOR BUSINESS SUPPORT MANAGEMENT Gerhard M. Rumeser was inaugurated as SKK Migas Deputy for Business Support Management in February 8th, 2013. Born on March 22, 1956, in Magelang, Gerhard earned his bachelor degree in Mechanical Engineering from ITB in 1984. He pursued a Masters degree in Human Resource Management at Rutgers State University, USA, and earned his degree in 1999. Working in the upstream oil and gas industry for more than 20 years, Gerhard has wide experiences in human resource management, among others, as Country HR Manager at BP Indonesia, and has held numerous positions in BPMIGAS, among others, as Head of Procurement and Assets Division, Head of Human Resources and General Affairs Division, and as Deputy for General Affairs.



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SKMIGAS MANAGEMENT (NOVEMBER 13th, 2012 - JANUARY 14th, 2013)

MINISTER OF ERM AS SKMIGAS CHAIRMAN Ir. Jero Wacik, S.E. was inaugurated as Minister of Energy and Mineral Resources on October 18th, 2011 having previously held the office of Minister of Culture and Tourism since October 21st, 2004. With the founding of SKMIGAS through Presidential Regulation Number 95 of 2012, Jero concurrently held the office of Chairman of SKMIGAS up to the establishment of SKK Migas based on Presidential Regulation Number 9 of 2013. Born in Singaraja, Bali on April 24th, 1949, Jero earned his bachelor degree in Mechanical Engineering from ITB in 1974 and his bachelor degree in Economics from UI in 1983.

SKMIGAS VICE CHAIRMAN Johanes Widjonarko

SKMIGAS DEPUTY FOR PLANNING Widhyawan Prawiraatmadja

SKMIGAS DEPUTY FOR FINANCIAL MANAGEMENT Akhmad Syakhroza

SKMIGAS DEPUTY FOR OPERATION MANAGEMENT Gde Pradnyana

SKMIGAS DEPUTY FOR GENERAL AFFAIRS Gerhard M. Rumeser

SKMIGAS DEPUTY FOR EVALUATION AND LEGAL ADVISORYLambok H. Hutauruk held the office of BPMIGAS and later SKMIGAS Deputy for Legal Evaluation and Consideration from October 9th, 2009 until February 7th, 2013. Having previously held the office of Director of Gratification in the Corruption Eradication Commission (KPK). Born in Tebing Tinggi, Sumatera on July 3rd, 1954, Lambok received his Bachelor Degree in Civil Engineering from the Technical University Darmstadt, Germany in 1983. In 1984, he received his Master Degree in Construction Management from the Technical University Braunschweig, Germany.

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BPMIGAS CHAIRMANR. Priyono held the office of BPMIGAS Chairman from April 29th, 2008 until November 13th, 2012. Born in Pati, Central Java on September 12th, 1956, R. Priyono received his Bachelor Degree in Geology from ITB in 1769. R. Priyono started his career at the Directorate General of Oil and Gas, Ministry of EMR. Before becoming BPMIGAS Chairman, he held the office of Director of Oil and Gas Upstream Business Development, Directorate General of Oil and Gas, Ministry of EMR. As Chairman of BPMIGAS, R. Priyonos vision was to increase production by controlling cost recovery and simplifying bureaucracy.

BPMIGAS VICE CHAIRMANJohanes Widjonarko

BPMIGAS DEPUTY FOR PLANNINGWidhyawan Prawiraatmadja

BPMIGAS DEPUTY FOR FINANCIAL MANAGEMENTAkhmad Syakhroza

BPMIGAS DEPUTY FOR OPERATION MANAGEMENTGde Pradnyana

BPMIGAS DEPUTY FOR GENERAL AFFAIRSGerhard M. Rumeser

BPMIGAS DEPUTY FOR EVALUATION AND LEGAL ADVISORYLambok H. Hutauruk

BPMIGAS MANAGEMENT (UNTIL NOVEMBER 13th, 2012)



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A number of upstream oil and gas achievements in 2012 have strategic significance for the nation. The summary is as follows:

MAXIMIZING INDONESIAS INCOME: Successfully contributed US$34.9 billion to state revenues or 104% of the target

stated in the Indonesian Revised Budget (APBN-P) of US$33.48 billion. State revenues derived from the sales of petroleum are 58% of gross revenue.

Increased the average gas price by 28.76% from the 2012 APBN-P target of US$8.23 per million British Thermal Unit (MMBTU) to US$10.59 per MMBTU through renegotiation of domestic gas price and transfer of LNG Tangguh Papua sales. This has become a significant factor under the control of the Government which contributes in exceeding the targeted state revenues, in addition to the Indonesian Crude Price (ICP) which reached US$113 per barrel.

Produced 860 thousand barrel oil per day (MBOPD) of crude oil from the 2012 APBN-P target of 930 MBOPD (92.47%). This is 98% of the 2012 revised work program and budget (WP&B) of 878.5 MBOPD. While gas production reached 8,150 million standard cubic feet per day (MMSCFD).

The realization of investment in the upstream oil and gas sector continually rises from year to year. In 2012, investments reached US$16.1 billion, which is a US$14 billion increase (115%) from last year. In 2012, investments in the upstream oil and gas sector used for exploration activities amounted to US$1.4 billion, while production and development activities reached US$13.7 billion, and administration activities amounted to US$1 billion.

In 2012 the Directorate General of Oil and Gas, Ministry of EMR signed 25 new cooperation contracts in the form of Production Sharing Contracts (PSC). Making the number of contracts under the supervision of SKMIGAS (now SKK Migas) at the end of 2012 a total of 308 cooperation contracts, which consists of 75 production PSCs, 179 exploration PSCs and 54 CBM PSCs.

2012 ANNUAL REPORT SUMMARY

2012 ANNUAL REPORT SUMMARYINTRODUCTION

The realization of investment in the upstream oil and gas sector continually rises from year to year. In 2012, investments reached US$16.1 billion, which is a US$14 billion increase (115%) from last year.


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ENERGY FOR THE NATION: It is the commitment of this agency to maintain domestic energy supply to increase

sustainability resulting in a chain reaction that will affect national industry and economy. The volume of domestic natural gas in 2012 reached 3.4 billion BTU per day, which is a 262% increase from 2002 which was under 1.3 billion BTU per day.

This agency also aims to maximize oil supplies so as to maintain national energy sustainability. 65% of oil production is allocated for the needs of domestic refineries, while the rest of the production is exported. This is due to the fact that part of the production belongs to the PSC Contractors, not to mention the limited capacity of domestic refineries and also as a strategy to determine ICP needed in calculating the LNG price.

To support the Governments program in reducing the consumption of subsidized fuel, we have allocated gas for transportation needs; however this program has not been fully realized due to inadequacy of infrastructure.

It is the commitment of this agency to maintain domestic energy supply to increase sustainability resulting in a chain reaction that will affect national industry and economy.

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EFFICIENCY: To implement the Indonesia Incorporated concept, we continually improve joint

procurement of goods and services by PSC Contractors. In 2012, this activity has generated savings of US$147.96 million, higher than the target of US$125 million, with a total savings of US$355.6 million since this program was launched in 2008.

Utilization of shared assets has increased from 2009 to 2012. In 2012, this activity has generated savings of US$43 million, higher than the target of US$30 million, with a total savings of US$148 million since 2009.

This agency has conducted a bureaucracy reform to accelerate approval processes. One of these reforms can be seen by the acceleration of the POD approval process. By increasing BPMIGAS (now SKK Migas) organizational abilities, we were able to accelerate the POD approval process from 47 days in 2006-2007 to 28 days since 2010 dan approval of WP&B before the start of the new fiscal year since 2010.

Based on Law Number 22 of 2001 on Oil and Gas, this agency is entitled to 1% of the total oil and gas revenues for its operating costs. The average approved budget from year to year is 0.3%, as is for 2012. For the past 10 years this agency has attempted to economize its operation and by 2012 has returned US$1.8 billion of its budget to the state treasury.

By increasing BPMIGAS (now SKK Migas) organizational abilities, we were able to accelerate the POD approval process.



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UPHOLDS NATIONAL INTEREST : This agency continues to uphold national interest by implementing procurement

policies needed to maintain upstream oil and gas activities, such as through Standard Operating Procedure Number 007 REVISI-II/PTK/2011 on PSC Contractors Supply Chain Management. Such guidelines give preferences to domestic providers of goods and services and require PSC Contractors to necessitate a minimum level of local content (Tingkat Komponen Dalam Negeri / TKDN) in their procurement process.

To increase national and regional banking capacities (State-Owned and Regional-Owned Banks), this agency is committed to using State-Owned and Regional-Owned Banks. In 2012, the total transaction for procurement of goods and services using State-Owned and Regional-Owned Banks reached US$9 billion. Based on this, the total transaction for procurement of goods and services using State-Owned and Regional-Owned Banks from April 2009 until 2012 is US$24.28 billion.

Procurement commitments in 2012 reached US$16.61 billion with a 60.04% local content (cost basis).

Local content also involves the participation of state-owned goods and services suppliers. Since 2010 up to 2012, the total amount of procurements was US$2.1 billion with an average local content of 74.26%. SKK Migas hopes that state-owned companys participation can be improved in the future so as to maximize the upstream oil and gas industries multiplier effect.

This agency continues to sustain national interest by upholding procurement policies.

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SOCIAL RESPONSIBILITY: By increasing the budget for social responsibility in the oil and gas industry, we

confirm our commitment to the community. In 2012, the budget realization for activities related to social responsibility reached Rp305 billion, a 171% increase from 2011 realization of Rp178 billion.

Some of the activities were for education aid and community assistance.

As a form of social concern, we also gave rapid aid to the victims of natural disasters, such as the earthquake in Yogyakarta, the earthquake in Nias, the earthquake in Padang, the landslide and flood in Wasior, as well as the flood in Jakarta.

INCREASING OIL AND GAS RESERVES: SKK Migas improved its coordination with central and local Government institutions

to facilitate PSC Contractors exploration permits needed to increase oil and gas reserves. In 2012, we drilled 96 exploration wells, which is an increase from last years accomplishment of 83 exploration wells.

The percentage of successful wildcat exploration wells (with flow test) is 45% or higher than the world average of 40%, with a discovery of 987 million barrels of oil equivalent (MMBOE) in reserves. Exploration activities in 2012 are primarily offshore with higher risks.

Considering the high risk of upstream oil and gas activities, the cooperation contract system is designed to protect the interest of the State. Thus by applying said system the costs of failed exploration activities are not born by the State. The data indicates that from 750 exploration wells drilled in 2002 up to 2012, the amount of dry holes reached 328 wells or almost 50%, and all costs associated with the dry holes are born by the investors.

By increasing the budget for social responsibility in the oil and gas industry from year to year, we confirm our commitment to the community.



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MAIN PROJECTS:To increase national oil and gas production we are developing new oil and gas fields through several major projects, which are:

Banyu Urip Mobil Cepu Ltd; Indonesia Deepwater Development (IDD) Chevron Indonesia Company; Abadi INPEX Masela Ltd.; Jangkrik and Jangkrik North East (JNE) eni Muara Bakau B.V.; Bukit Tua PC Ketapang II Ltd.; Ande-Ande Lumut AWE (Northwest Natuna) Pte. Ltd.; North Duri Development 13 (NDD-13) PT Chevron Pacific Indonesia; Corridor ConocoPhillips Grissik Ltd.; Ruby PearlOil (Sebuku) Ltd.; Kepodang PC Muriah Ltd.; Donggi Senoro JOB Pertamina-Medco Tomori; Tangguh Train 3 BP Berau Ltd.

To increase national oil and gas production we are developing new oil and gas fields.


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SKK MIGAS PERFORMANCEI

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A. UPSTREAM OIL AND GAS CONTRACT AREAI. SKK MIGAS PERFORMANCE

One of the ways that the Government of Indonesia increases reserves and production of oil and gas is by extensification (i.e. increasing the number of new contract areas). Throughout 2012 the Directorate General of Oil and Gas made 3 procurement announcements for new contract areas, which was followed by the signing of Cooperation Contracts in the form of Production Sharing Contracts in April, July and October. From those activities, the Government of Indonesia was able to add 13 oil and gas contract areas and 12 coal bed methane (CBM) contract areas.

At the same time, the Government approved the total relinquishment of 4 contract areas by PSC Contractors, which are Asmat contract area, Bengara-II contract area, Halmahera contract area and Rembang contract area. Furthermore there are 18 contract areas in the process of total relinquishment. Said contract areas are relinquished because until the end of the exploration period the respective PSC Contractors could not fulfill their firm commitment or could not find producible reserves.

From those endeavors, at the end 2012 there were 308 contract areas (CA) as follows:

New Contract Area

Total Contract Area in 2012

One of the ways the Government of Indonesia increases reserves and production of oil and gas is by extensification (i.e. increasing the number of new contract areas).

UPSTREAM OIL AND GAS CONTRACT AREAA.

TOTAL PRODUCTION CBM EXPLORATION TERMINATION

ONSHORE 142 CA 36 CA 52 CA 53 CA 1 CA

OFFSHORE 112 CA 24 CA 0 CA 74 CA 14 CA

ONSHORE/ 54 CA 15 CA 2 CA 34 CA 3 CAOFFSHORE

CBM CA ACTIVE OIL TERMINATION & GAS CA PROCESS

54 CA 161 CA 18 CA

PRODUCTION EXPLORATION CA CA

75 CA 233 CA

TOTAL CONTRACT AREA 308 CA


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Yearly breakdown of CBM, production and exploration contract area.

350

300

250

200

150

100

50

0

2010 2011 2012

245

287

308

155

172

179

23

4254

67 7375

Total CA

Exploration CA

Production CA

CBM CA

Tota

l Con

trac

t Are

a

Through 2012, the Government successfully added 13 oil and gas contract areas and 12 CBM contract areas. The Government also approved the total relinquishment of 4 contract areas from PSC Contractors, so that at the end of 2012 there are a total of 308 contract areas.

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A. UPSTREAM OIL AND GAS CONTRACT AREAI. SKK MIGAS PERFORMANCE

At the end of 2012, there are 233 exploration contract areas consisting of 54 CBM contract areas, 161 oil and gas contract areas, and 18 contract areas in the process of total relinquishment. 119 contract areas has entered the firm commitment evaluation phase, bearing in mind those contracts signed in 2003-2009 has passed the initial 3-year exploration phase.

Out of the 119 exploration contract areas, 42 contract areas were able to fulfill its firm commitment, 59 contract areas were not able to fulfill its firm commitment, and 18 contract areas are nominated for total relinquishment.

Exploration Contract Area

42 (35%)ABLE TO FULFILL THEIR FIRM COMMITMENT

59 (50%)NOT ABLE TO FULFIL THEIR FIRM COMMITMENT

18 (15%)TERMINATION PROCESS

35%

50%

15%


25

Evaluation results shows that fulfillment of firm commitment faces many challenges in the field. The major challenges are external issues (47%), which consist of social issues, permits, and overlapping of land ownership. Other challenges are internal PSC Contractor issues (24%) (operatorship, financial, priority holding, etc.), availability of equipments and operational support services (21%), and subsurface complexity issues (8%).

In 2012, 2 contract areas entered into the production phase by obtaining Plan of Development approval from the Minister of EMR, which are Tonga contract area and Palmerah contract area. With the addition of those contract areas, the total production contract area has reached 75 contract areas, with 60 producing contract areas and 15 contract areas in the development phase.

Based on the first POD, those 2 contract areas will contribute approximately 1,500 BOPD in 2013.

Challenges in Fulfilling Firm Commitment

Production Contract Area

47%EXTERNAL

24%INTERNAL

21%EQUIPMENT

8%SUBSURFACE COMPLEXITY

There are 233 exploration contract areas consisting of 54 CBM contract areas, 161 oil and gas contract areas, and 18 contract areas in the process of total relinquishment.

47%

21%

24%

8%

26

B. EXPLORATION ACTIVITIESI. SKK MIGAS PERFORMANCE

Regarding intensification efforts to increase oil and gas reserves, SKK Migas encourages PSC Contractors to conduct exploration activities, both in exploration contract areas and in production contract areas.

The activities conducted in this phase consists of geological & geophysical studies (G&G), geophysical studies (2D seismic and 3D seismic survey), exploration drilling, coring, and production test. For CBM contract areas, the exploration activities also include CBM drilling (exploration & core hole) and dewatering.

In 2012, 241 PSC Contractors have conducted a total of 460 G&G and technical services from abroad (TSA) studies, consisting of 377 domestic studies, 46 TSA studies and 37 in-house studies.

The total budget for exploration G&G and TSA studies in 2012 is US$91.47 million, with 310 studies using new authorization for expenditure (AFE) and 113 studies carried over from last year.

In 2012, PSC Contractors conducted 27 activities of 2D seismic surveys (13,995 km) and 19 activities of 3D seismic survey (6,615 km2).

G&G and TSA Studies for Exploration Activities

Seismic Survey

2D and 3D Seismic Surveys in 2007-2012

EXPLORATION ACTIVITIESB.

35,000

30,000

25,000

15,000

10,000

5,000

0KM

/KM

2

2007 2008 2009 2010 2011 2012

11,775

4,776

25,427

13,550

31,656

6,997

33,906

8,990

12,549

8,147

13,995

6,165

2D Seismic Survey

3D Seismic Survey


27

Exploration Drilling (Conventional)

Exploration Drilling

Wildcat Discovery in 2012

Exploration Wells Success Ratio (Wildcat, with flow test)

In 2012, there were 96 (conventional) exploration wells drilled, consisting of 55 onshore wells and 41 offshore wells.

From the 96 exploration wells drilled, 60 wells are defined as wildcat wells with 27 discovered hydrocarbons consisting of 9 oil & gas discovery wells, 13 gas discovery wells and 5 oil discovery wells.

The remaining 36 wells are defined as delineation wells. The success ratio for wildcat exploration wells (with flow test) is 45% or higher than the world average of 40%, with a discovery of contigent resources of 987 MMBOE.

100

80

60

40

20

0

42

33

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

30

24

26

38

22

32

43

37

24

50

16

54

11

61

26

54

22

59

41

55

Offshore

1200

1000

800

600

400

200

0

2008 2009 2010 2011 2012*

30

25

20

15

10

5

0MM

BO

E

Wel

ls27

23

19

24

27

154235

508

361

987

Discovery

100

80

60

40

20

0

2008 2009 2010 2011 2012*

60%

50%

40%

30%

20%

10%

0 WEL

LS

Per

cent

age

57% 51%

35%

47% 45%

27

27

4754

4551

60

2319

24 27

Success Ratio

Wildcat

* December 31st, 2012 status awaiting final recapitulation

Discovery

Onshore

Wel

ls

Resources

28

In 2012, 3 PSC Contractors were able to meet their firm commitment, which are Newton Energy Capital Ltd (GMB Kutai contract area operator), Vico CBM Indonesia (GMB Sanga-Sanga contract area operator), and PT Medco CBM Sekayu (GMB Sekayu contract area operator). The activities conducted in CBM contract areas in 2012 consists of 16 corehole drillings, 14 exploration drilling, 22 G&G studies and 10 dewatering-production tests.

Daily production from dewatering / production test wells is +0.98 MMSCFD, derived from 8 wells in 3 CBM contract areas, which are GMB Sekayu contract area, GMB Sanga-Sanga contract area, and GMB Muara Enim contract area.


CBM Drilling

GMB and Pilot Drilling Activities

2010 2011 2012

6

0

13

16

13

910

Dewatering Production test

14

9

G&G Study Activities40

30

20

0

2009 2010 2011 2012

3

912

33

GMB Production Test 2010-2012

2010 2011 2012*

0

0.27

0.98

Exploratory

2 CA2 WELLS

3 CA8 WELLS

Tota

l CB

M in

MM

SFD

SKK Migas encourages PSC Contractors to conduct exploration activities compromising of geological & geophysical studies (G&G), geophysical surveys (2D seismic and 3D seismic survey), exploration drilling, coring, and production test.


Corehole

Wel

lsW

ells

1.2

1

0.8

0.6

0.4

0.2

0


29

Determining the Exploration Status (Penentuan Status Eksplorasi / PSE) is the transition process from exploration to production. In 2012 we achieved 40 PSE to develop exploration findings of 599 MMBOE, which will be further evaluated for POD submission.

Determining the Exploration Status

2010 2011 2012*

50

40

30

20

10

0

PSE

Exploration Discovery

277

52259927 27

40


MM

BO

E

Tota

l PSE

1,000

800

600

400

200

0

30

The estimation of volumetric resources (January 1st, 2012) conservative P50 original oil in-place (OOIP) is 64.6 BSTB (oil case) and P50 original gas in-place (OGIP) is 197.4 TSCF (gas case).

Until January 1st, 2012, there are 2,465 identified structures, consisting of 1,211 structures that have conducted lead surveys, 1,166 prospects that are ready to drill, 38 postdrill prospects with indications of hydrocarbon without production tests, and 50 prospects with hydrocarbon discoveries.

Based on the approved PODs in 2012, generated additional reserves are 162.73 MMSTB oil and 3.78 TSCF gas.

In 2012 oil and gas production reached 314.67 MMTSB for oil and 2.97 TSCF for gas so that the estimated oil and gas reserves per January 1st, 2013 is as follows:

Reserve Replacement Ratio (RRR) for oil in 2012 is 52%, while for gas is 127%. This means for every barrel of oil produced it will be replaced by 0.52 barrels of oil found. While for every TSCF gas produced it will be replaced by 1.27 TSCF gas found. Whereas the withdrawal rate (WR) of oil is 8.41% and gas is 2.87%.


Oil and Gas Resources and Reserves

Reserve Replacement Ratio (RRR) for crude oil in 2012 is 52%, while for natural gas is 127%.

PROVEN POTENTIAL PROVEN + POTENTIAL

OIL & CONDENSATES (MMSTB) 3,590.58 3,671.64 7,262.22

ASSO. + NON. ASSO. GAS (TSCF) 104.37 48.38 152.75


31

In 2012, PSC Contractors have conducted a total of 156 geological, geophysical and reservoirs (GGR) and production TSA studies, consisting of 136 domestic studies, 15 TSA (project) studies and 5 TSA (QC) studies.

The total budget for GGR and TSA studies in 2012 is US$36.4 million, consisting of US$29.1 million for GGR studies, US$6.59 million for TSA (project), and US$731 thousand for TSA (QC).

In 2012, there were 47 plan of developments (POD) consisting of 9 PODs, 3 improved oil recoveries (IOR) POD, 2 first PODs, 15 plan of further developments (POFD), 16 put on production (POP), and 2 POD revisions.

PSC Contractors estimation costs for investment and operation, oil and gas productions, and government income from those 47 PODs are:

WELL DEVELOPMENT & MAINTENANCE ACTIVITIESC.

G&G & TSA Studies for Production Activities

Plan of Development (POD)

OIL (MILLION BBL)

162.73

GAS(BSCF)

3,788.49

LPG(MILLION BBL)

7.45

GOVERNMENT TAKE (MILLION US$)

18,943.8

Cumulative Production

INVESTMENT COST (MILLION US$)

14,319

OPERATING COST (MILLION US$)

6,997.2TOTAL INVESTMENT & )

OPERATING COST(MILLION US$)

21,316.2

Operation & Investment Costs

OPERATING COST (MILLION US$)

6,550.2ASR COST (MILLION US$)

447

32

SKK Migas encourages PSC Contractors to drill additional wells (infill wells) and conduct workovers, in order to withhold the decline in production. In 2012, 840 production wells were drilled out of the 907 wells planned. This was due to several constraints such as land acquisition, permit processes, and rig availability.

740 wells or 85% of the 871 wells planned were maintained through workover. This is due to priority usage of workover rigs and several constraints such as Hinder Ordonnantie (HO) permits, explosives permits, and procurement of workover rigs. Thus affecting the execution of planned activities in 2012.

Of the 13,179 well service activities planned, 11,323 activities or 82.5% have been conducted.

Realization

C. WELL DEVELOPMENT & MAINTENANCE ACTIVITIESI. SKK MIGAS PERFORMANCE

Production Drilling Activities (Development Well) andWorkover Well

Development Drilling in 2004-2012

Left Table:Development Drilling

Right Table:Workover

1,400

1,200

1,000

800

600

400

200

0

442

2004 2005 2006 2007 2008 2009 2010 2011 2012

563614

749

985

1,219

951 953840

Wel

ls

1,000

900

800

700

600

500

400

300

200

100

0

836

2011 2012

953907

840

700

871

704740

Wel

ls

2011 2012

1,000

900

800

700

600

500

400

300

200

100

0Wel

ls

WP&B Revision


33

Production of Oil, Condensate and Gas

Oil and Condensate

Oil and Condensate Production

in 2012

In 2012, the average production of oil and gas reached 2.31 million barrels of oil equivalent per day (MMBOEPD).

Based on the production data, in 2007-2010 oil production increased year to year, however in 2012 a decline occurred, caused by a drop in production from Total E&P Indonesie, ExxonMobil Oil Indonesia Inc., and PT. Chevron Pacific Indonesia.

Oil and condensate production in 2012 reached 860 MBOPD or 92.5% of the APBN-P target of 930 MBOPD.

OIL CONDENSATES GAS

OIL & GAS PRODUCTION ACTIVITIESD.

APBN-P - 930 MBOPD

WP&B Revision = 878.5 MBOPD

950,000

900,000

850,000

800,000

750,000

Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12

June 24th, 2012 -MCL: -24MBOPD Total S/D for TAR -HESS: -6 MBPOD, 18 pipeline pigging of several wells in WHP-A and WHP-B Shutdown -TEPI: Handil compressor

July 15th, 2012 -JOBPPEJ, PEP, MCL: -52 MBPOD. Shutdown SKW wellsbecause of issues in the Hose Off replacement process.Shore pipeline at FSO Cintanatomas and MCL to Mudi rate reductions.

2,750

2,500

2,250

2,000

1,750

1,500

1,250

1.,000

750

500

250

-

2,572.72

142.40

1,272.90

2,464.46

132.65

1,208.78

2,636.46

132,21

1,119.90

2,587.63

133.72

1,012.86

2,521.94

129.16

966.77

2,459.02

127.03

935.09

2,373.85

122.74

883.25

2,254.89

118.39

836.01

2,308.91

124.15

852.63

2,370.57

122.33

826.47

2,526.49

120.45

824.45

2,404.76

107.80

794.30

2,315.18

97.09

762.82

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Gas production = 45% to 64% of oil, condensate and gas productionOil production = 49% to 32% of oil, condensate and gas productionCondensate production = 6% to 4% of oil, condensate and gas production; 12% to 8% of gas production.

MB

OEP

D

BO

PD

1,160.42 1,123.03 1,384.35 1,441.05 1,426.01 1,396.90 1,367.86 1,300.49 1,332.13 1,421.77 1,581.59 1,502.66 1,455.27

34

Based on the production attained in 2012, only 3 out of 50 oil producing PSC Contractors were able to fulfill their APBN-P target.

15 out of 50 oil producing PSC Contractors produced higher than the previous year. The 15 PSC Contractors are Hess (Indonesia-Pangkah) Ltd., PT. Pertamina EP,JOB Pertamina-Talisman Jambi Merang, PT. Pertamina Hulu Energi ONWJ, Mobil Cepu Ltd., PT. Sumatera Persada Energi, Medco E&P Tarakan, BP Berau Ltd., Camar Resources Canada Inc., MontdOr Oil (Tungkal) Ltd., Santos (Sampang) Pty. Ltd., Star Energy (Kakap) Ltd., EMP Malacca Strait, S.A., Lapindo Brantas, Inc., and JOB Pertamina-EMP Gebang.

Based on the 2012 actual production attained in 2012, the 10 PSC Contractors with the largest oil production disparity from the set target with a total of 50.9 MBOPD, are Kangean Energy Indonesia, Ltd. (-69.8%), ExxonMobil Oil Indonesia Inc. (-22.1%), ConocoPhillips Indonesia Inc. Ltd. (-18.2%), Total E&P Indonesie (-17.9%), PT. Pertamina Hulu Energi West Madura Offshore (-16.1%), PetroChina International Bermuda, Ltd. (-15.2%), CNOOC SES, Ltd. (-8.1%), PetroChina International Jabung, Ltd. (-4.8%), PT. Chevron Pacific Indonesia (-4.5%), and Chevron Indonesia Company (-3.8%).

15 PSC Contractors with Higher Oil Production than 2011

10 PSC Contractors with the Largest Oil Production Disparity in 2011-2012

D. OIL & GAS PRODUCTION ACTIVITIESI. SKK MIGAS PERFORMANCE

HESS

140,000

120,000

100,000

80,000

60,000

40,000

20,000

-

7,000

6,000

5,000

4,000

3,000

2,000

1,000

-

4,951

2,891

1,067

948321 311 296 261 169 126 91 24 16

3,203

Perta

mina

JOBP

T-JM

PHE

ONW

JM

CL SPE

Med

co Ta

raka

n

BP B

erau

Cam

ar

Mon

tdO

r

Sant

os S

ampa

ng

Star

Ene

rgy

EMP

Mala

cca

Lapin

do

EMP

Geba

ng

-

Total increase in production from 15 PSC Contractors against 2011 is 14,7 MBOPD

2011

2012

Difference

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50.000

-

(17,500)

(15,000)

(12,500)

(10,000)

(7,500)

(5,000)

(2,500)

-

2,500

Total decrease in production from 10 PSC Contractors against 2011 is 50.9 MBOPD

2011

2012

Difference

CPI

(15,995)

(2,196) (1,874)(1,084) (982) (945) (850)

(14,615)

TOTA

L EP

COPI

Blok

B

CNOO

C

PHE

WM

O

Kang

ean

CICO

PC. B

erm

uda

EMOI

PC. J

abun

g

(2,810)

BO

PD

BB

LS

BO

PD

BB

LS

(9,581)


35

The main challenges in attaining the 2012 targeted oil production are:

The contribution of development drilling was only 76.8% of the target, among others caused by procurement issues regarding rig availability, permit process, subsurface and land acquisition.

PetroChina International Jabung, Ltd. could not produce from drilled wells due to land permit issues for pipelines for the past 2 years. At this moment oil production is transported by trucking, which resulted in loss of potential amounting to 3,000 BCPD of unliftable condensate and 30 MMSCFD of flared gas.

Breakdown or damage to production facilities e.g. compressors, electricity supply, instrumental, artificial lift, leaking subsea umbilical riser and flowline (SURF), and surface pipeline.

Oil transportation issues by trucking, inter alia at PT. Sele Raya Merangin Dua and PetroChina International Jabung, Ltd.

Subsurface of loose sand issues at Total E&P Indonesie. The Pagerungan Utara Offshore Field at Kangean Energy Indonesia, Ltd. was

abandoned due to it being uneconomical. Delay of the Turbin moving project in CNOOC SES, Ltd. following the fire at FSO

Lentera Bangsa. Prolonged shutdown at the LNG Tangguh Plant. No significant additional production from PT Pertamina Hulu Energi WMO following

the West Madura Offshore contract area extension.

Main Challenges in Attaining the 2012 Targeted Oil Production

36

Gas

Gas Production

2012 Gas Production and Distribution

Realization of gas production in the past year has shown an incline, however in 2012 production declined to 8,167 MMSCFD, primarily caused by a drop in production from Total E&P Indonesie and BP Berau Ltd.

The 2012 gas production still rests on fields operated by Total E&P Indonesie in East Kalimantan; BP Berau Ltd. in Papua; PT Pertamina EP, PT Pertamina Hulu Energi, ConocoPhillips in Sumatera and Natuna; Vico Indonesia in East Kalimantan; and other fields operated by ExxonMobil Oil Indonesia Inc. in Aceh, Petrochina International Jabung, Ltd. in Jambi; PT Pertamina Hulu Energi West Madura Offshore; and Kangean Energy Indonesia, Ltd.

D. OIL & GAS PRODUCTION ACTIVITIESI. SKK MIGAS PERFORMANCE

9,600

8,800

8,000

7,200

6,400

5,600

4,800

4,000

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12*

APBN Lifting = 7,655 MMSCFD

ProductionWP&B Production = 8,523 MMSCFD

WP&B Lifting = 6,985 MMSCFD

August 2012 -BP Berau: 900 MMSCFD, curtailment prod caused by surging in export line tank-1 since August 14th. -Premier: 72 MMSCFD, Phase 4 of the Anoa Project since August 13th. -KEI (120 MMSCFD), Santos Madura (40 MMSCFD), COPI Grissik (26 MMSCFD), Hess (11 MMSCFD) Low demand on religious holidays.

BP Berau: Preparation and implementation of TAR-3 Train-1 (for 36 days)EMOI: TA NSO (for 24 days)

BP Berau: Shutdown Train #2 caused by fire in the Gas Turbine

BP Berau : Train 1 & 2 Unplanned Shutdown

*Addition production from development wells, WO, WS and POP / new Fields based on 2012 WP&B

10,000

8,000

6,000

4,000

2,000

-

6,498

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Gas

6,289

7,7528,070 7,986 7,823

7,660 7,283 7,460

8,857 8,4158,1677,962


MM

SCFD

MM

SCFD

Production

WP&B Production

Distribution

APBN Lifting

WP&B Lifting


37

10 PSC Contractors with the Largest Gas Production Disparity in 2011-2012

The main challenges in attaining the 2012 gas production target are: The contribution of development drilling was only 84% of the target, among others

caused by delay in drilling schedules subsurface, and readiness production facilities. Breakdown / damage to production facilities for e.g. compressors, electricity supply,

instrumental, artificial lift, and surface pipeline. Subsurface issues at Total E&P Indonesie. Unreadiness Buyers to offtake gas.

Based on the 2012 actual production the 10 PSC Contractors with the largest gas production disparity from the target with a total of 639 MMSCFD, are Chevron Makassar (-31.1%), Santos Madura (-29.8%), Total E&P Indonesie (-19.1%), Star Energy (-18.6%), Medco Lematang (-17.3%), ExxonMobil Oil Indonesia Inc. (-17.0%), PT Pertamina Hulu Energi WMO (-15.6%), PT Pertamina Hulu Eenergi ONWJ (-10.8%), CNOOC SES Ltd. (-4.9%), and PT Pertamina EP (-0.6%).

2,500

2,000

1,500

1,000

500

-

(500)

(450)

(300)

(200)

(100)

-

Total decline in production for 10 PSC Contractors in 2011 is 639 MMSCFD

TOTA

L EP

(442)

(35) (24)(8) (8) (7) (6) (6)

(79)

EMOI

Sant

os M

adur

a

PHEW

MO

PHEO

NWJ

Med

co Le

mata

ng

Star

Ene

rgy

Chev

ron

Mks

sr

CNOO

C

Perta

mina

(25)

2011

2012

Difference

Based on the 2012 actual production, there were 10 PSC Contractors with the largest gas production disparity from the set target with a total of 639 MMSCFD.

MM

SCFD

MSC

F

38

The 2012 actual oil lifting was 860 thousand BOPD or 92.5% of the target set in 2012 APBN-P. In order to fulfill the needs of domestic fuel, SKK Migas prioritizes governments oil lifting portion to be distributed to domestic refineries in accordance to the specification to be processed in those refineries. In 2012, oil lifting for domestic needs reached 66%.

Oil Lifting

Oil and Condensate Production, Lifting & Stock in 2012

Gas Lifting

Gas Utilization

Gas Lifting and Prices in 2012

OIL AND GAS LIFTINGE.1,000,000

900,000

800,000

700,000

600,000

500,000

16,000,000

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

88

4,2

40

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

79

0,4

46

88

4,3

23

88

4,3

69

88

2,2

52

86

2,1

96

86

9,7

44

86

0,8

05

87

9,2

81

84

2,9

12

86

0,1

92

85

2,9

35

85

4,2

41

81

3,5

48

85

3,4

09

87

2,1

39

84

4,6

17

84

8,6

27

83

7,1

67

82

3,9

62

83

2,9

60

90

6,9

87

83

5,0

59

94

8,9

45

85

9,7

43

85

8,7

59

9 0

Production

Lifting

Total Stock

*Total closing stock consists of stock including dead stock and field stock

8,000

7,200

6,400

5,600

4,800

4,000

3,200

2,400

1,600

800

-

8,000

7,200

6,400

5,600

4,800

4,000

3,200

2,400

1,600

800

-

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Export

Domestic

Total

12,000

11,000

10,000

9,000

8,000

7,000

6,000

5,000

18

16

14

12

10

8

6

4

2

-

7,4

64

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Gas Lifting

Domestic Gas Price

Export Gas Price

4,3

97

1,4

80 4

,41

61

,46

6 4,2

02

1,5

13 4

,00

82

,34

1 3,8

20

2,5

27 3

,77

52

,91

3 3,8

61

3,3

23 4

,33

63

,37

9 4,0

78

3,2

67 3

,63

13

,55

0

5,877 5,882 5,715

6,349 6,3476,688

7,184

7,7157,345 7,181

Average

7,1

88

7,8

24

7,4

95

7,1

05

7,4

78

7,1

26

7,5

15

6,5

56

6,7

58

6,7

26

6,9

18

7,1

81

13.75

5.66

13.56

6.43

13.68

8.99

15.90

7.03

13.54

6.21

13.14

6.12

12.30

6.10

13.33

6.46

13.49

6.57

13.04

6.61

12.64

6.65

12.38

8.87

Pro

duct

ion

/ Lift

ing

(BO

PD

)B

BTU

D

BB

TUD

BB

TUD

US$

/ M

MB

TU

E. OIL AND GAS LIFTINGI. SKK MIGAS PERFORMANCE

Stoc

k (B

BLS

)

Average


39

In 2012, there was a significant raise in gas supply for domestic consumer compared to previous years. The total gas lifting in 2012 was 7,180,69 BBTUD. The utilization of gas lifting for domestic consumers was 3,550,07 BBTUD or 49.44% and for international consumers was 3,630.62 BBTUD or 50.56%.

Gas utilization for domestic needs were: Fertilizer and petrochemical 675.06 BBTUD (18.51%), Electricity 948.62 BBTUD (26.72%), Industry 1,186.89 BBTUD (33.43%), City Gas 0.45 BBTUD (0.01%), LPG Conversion program 282.60 BBTUD (7.96%), Domestic LNG 112.90 BBTUD (3.18%), Oil lifting 361.78 BBTUD (10,.19%).

LNG shipment of 112.91 BBTUD to domestic buyers was a major step for SKK Migas in supporting the Governments program to decrease subsidization of primary energy to PLN, by sending LNG from the Mahakam contract area to domestic buyers through Nusantara Regas Floating Storage Regasification Unit (FSRU) located in offshore Tanjung Priok. This LNG contract commitment started on April 25th, 2012 with 1.5 MTPA (or equal to 26 LNG Cargoes per year) for a period of 10 years (up to 2021).

Furthermore, to support domestic gas needs, SKK Migas supervises and encourages early on-stream in Indonesian gas fields. For 2012, the additional gas supply for domestic needs came significantly from Terang Field (Kangean contract area), Wortel Field (Sampang contract area), and South Mahakam Field (Mahakam contract area), as well as from APN E/F Field (ONWJ contract area).

Domestic Gas Utilization in 2012

10.19%OIL LIFTING

3.18%DOMESTIC LNG

7.96%DOMESTIC LPG

0.01%CITY GAS

26.72%ELECTRICITY

33.43%INDUSTRY

18.51%FERTILIZER

In 2012, significant additional domestic gas supplies were from Terang Field (Kangean contract area), Wortel Field (Sampang contract area), and South Mahakam Field (Mahakam contract area), also APN E/F Field (ONWJ contract area).

33.43%

26.72%

18.51%

10.19%

7.96%

40

SKK Migas commitment to supply gas to domestic buyers in 2012 was realized through the signing of 32 contracts (Heads of Agreements, Gas Sales Agreements dan Gas Sales Agreement Amendments). The details of the utilization of gas in the agreements were as follows:

2 contracts for oil lifting with a total supply of 1.01 BCF. 2 contracts for fertilizer and petrochemical with a total supply of 286.35 BCF. 17 contracts for electricity with a total supply of 580.73 BCF. 10 contracts for industry with a total supply of 156.89 BCF.

In addition, 2012 was a monumental year for LNG utilization in Indonesia, especially from Tangguh Field with the signing of a Heads of Agreement with PT PLN (Persero) to fulfill its electricity need by supplying gas for 20 years and LNG supply equal to 23.96 MT.

Gas Sales Agreements Signed in 2012

2 CONTRACTSOIL LIFTING

2 CONTRACTSFERTILIZER AND PETROCHEMICAL

1 CONTRACTDOMESTIC LNG

17 CONTRACTSELECTRICITY

10 CONTRACTSINDUSTRY

E. OIL AND GAS LIFTINGI. SKK MIGAS PERFORMANCE

SKK Migas commitment to supply gas to domestic buyers in 2012 was realized through the signing of 32 contracts.

FertilizerElectricity

Industry

17

10

2

21


41

In supporting the Governments plan to convert gasoline fuel into gas fuel for transportation (Bahan Bakar Gas / BBG), SKK Migas has committed to supply gas for BBG conversion to Jabodetabek (4 BBTUD), Palembang (1 BBTUD), and Surabaya (5 BBTUD). In addition, SKK Migas has encouraged the Local Government (through local-owned enterprises) to procure gas supplies from PSC Contractors so as to participate in the development of gas fuel for transportation with the signing of a Memorandum of Agreement (MOA) for 20 cities in Java, Sumatera, Kalimantan and Sulawesi.

In supporting the Governments plan to develop city gas, SKK Migas has committed to supply gas for city gas to Surabaya, Tarakan, Palembang, Bekasi and Depok. SKK Migas has also commited to support city gas developments in Wajo, Blora, Bontang, and Ogan Ilir.

Accumulated Volume of Domestic Gas Contracts

25

20

15

10

5

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1.10 1.17 1.77 1.94 2.88 3.08 3.33 3.61 3.33 3.61 1.18 2.28 3.17 4.41 6.25 6.94 7.01 7.59 7.01 7.59 0.10 2.70 4.10 4.20 6.15 10.07 10.18 10.34 10.18 10.34

Industry

Electricity

Fertilizer

TCF

FertilizerElectricity

Industry

42

In 2012, SKK Migas successfully contributed US$34.9 billion to state revenues (accounting period January - December 2012) or 104% of the 2012 APBN-P target. This was achieved by optimizing domestic gas prices by an average of more than 11% and oil prices by an average of more than 1%, compared to 2011.

SKK Migas continually manages operating costs to be more effective and efficient, so as to ensure that the upstream oil and gas industry is able to contribute in the utmost to the State.

STATE REVENUESF.

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

-

2007 2008 2009 2010 2011 2012*

22

,20

3

23

,79

3

30

,65

9

35

,30

2

19

,10

4

19

,95

0

26

,06

0

26

,49

7

32

,40

6

35

,79

8

33

,48

5

34

,93

4

107%

115%

104%

102%

110% 104%

APBN / APBN-P Target

Realization

Mill

ion

US$

F. STATE REVENUESI. SKK MIGAS PERFORMANCE



43

From year to year, upstream oil and gas revenues have shown an upward trend. This generated a 58% average total GOI take against gross revenue, while the average net contractor take against gross revenue to be 15%. This shows that the Return of Investment in Indonesia is still attractive.

This increase was influenced by continues developments in the management of cost recovery; and by maintaining a 25-29% ration between cost recovery and gross revenue, while still encouraging new investment projects in the upstream oil and gas industry.

Distribution of Revenues from the Upstream Oil and Gas Industry

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

-

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

Mill

ion

US$

2,400

2.200

2,000

1.800

1,600

1,400

1.200

1.000

800

600

400

200

- MB

OE/

D

2,204 2,255 2,2542,282 2,326

2,219

2,050 2,033

2,1582,067 2,097

16.665 18,529

24,153

32,05136,294

38,707

54,152

35,752

45,869

60,769 61,065

9,63310,845

13,675

19,79722,638

23,793

35,301

19,950

26,497

35,798 34,934

5,0601,972

5,517

2,167

7,401

3,077

7,563

4,691

8,112

5,544

8,710

6,204

9,339

9,512

10,108

5,694

11,762

7,608

15,341

9,657

15,715

10,416

Gross Revenue

Lifting (MBOE/D) Inc DC. Exc

Cost Recovery

Government Share

PSC Contractor Share

From year to year, upstream oil and gas revenues have shown an upward trend. This shows that the Return of Investment in Indonesia is still attractive.


44

Production PSC Contractors Actual Investment

Actual investment of upstream oil and gas industry (expenditures) for production contract areas in the last 4 years shows growth. This shows that the investment climate in this sector is still healthy and conducive, and has great prospects.

In 2012, investment in the upstream oil and gas sector reached US$16.1 billion, this is higher by US$2.1 billion compared to 2011. Those investments were used to fund US$1.4 billion exploration activities, US$3.3 billion development activities, US$10.4 billion production activities and US$1 billion administrative activities. From this, we can conclude that the bulk of investments are for production and development activities reaching US$13.7 billion or 84,8% of the total investment in the upstream oil and gas industry, compared to last years production and development activities portion which reached US$12.3 billion or 88%.

The implications of this increase not only affects the production profile and the oil and gas reserves portfolio, but also affects the supporting domestic oil and gas industrys ability to increase its national capacity.

PRODUCTION PSC CONTRACTORS ACTUAL INVESTMENT G.

25,000

20,000

15,000

10,000

5,000

-

2007 2008 2009 2010 2011 2012*

Exploration

Total Expenditure

Mill

ion

US$

G. PRODUCTION PSC CONTRACTORS ACTUAL INVESTMENT I. SKK MIGAS PERFORMANCE


Development

Administration

Production

9,142

2,088

5,711

869

10,615

532

2,523

6,579

981

10,425

633

2,671

6,391

730

670

2,495

7,033

833

719

3,149

9,196

958

1,439

3,288

1,016

474

Growth of upstream oil and gas industry in the last 4 years shows that the investment climate in this sector is still healthy and conducive.

11,031

14,022

16,113

10,370


45

Exploration investments to find new oil and gas reserves in the exploration contract areas have increased from time to time. Nonetheless in 2012 a decline occurred, mainly caused by: A drop in exploration drilling activities, particularly deep-water drilling. Drilling results conducted in 2011 still needs evaluation and detailed studies to be

able to determine further exploration activities.

Exploration investment activities have a positive impact for future development prospects of upstream oil and gas, and to maintain the availability of energy for future generations. Until the end of 2012, the cumulative exploration investment in exploration contract areas not yet recovered reached US$6.7 billion.

In addition, the values of exploration investments in terminated contract areas are US$1.3 billion. The total investment expended by PSC Contractors in conducting exploration activities is non recoverable considering the contract area was terminated.

Unsuccessful exploration , as one of the risks of upstream oil and gas industry, has become a natural occurrence. For the Government, the investment remains qualitatively useful, in the form of exploration data, which is useful for future potential hydrocarbon studies.

Exploration PSC Contractors

Actual Investment

Non Recoverable Exploration Costs Caused by Termination of Exploration Contract Area

Exploration PSC Contractors Investment

EXPLORATION PSC CONTRACTORS ACTUAL INVESTMENTH.

600

500

400

300

200

100

-

205

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

98

0

5017

40

540

122

4072

143

2,500

2,000

1,500

1,000

500

-

2008 2009 2010 2011 2012*

1,481

917

1,661

2,120

1,356


Amount

* December 31st, 2012 status awaiting final recapitulation M

illio

n U

S$

Total US$1,327 Million

Mill

ion

US$


47

EFFORTS TO INCREASE PRODUCTIONII

48

A. NEW PROJECTSII. EFFORTS TO INCREASE PRODUCTION

For the last decade, we have produced 3.7 billion barrels of oil, while new oil reserves only

contributes an additional 2.8 billion barrels, this has caused a cumulative decrease in oil reserves

of 92.34 million barrels. If no efforts are conducted, then the decrease in reserves can be

greater, thus causing difficulties in fulfilling the Governments target. To increase production, in

2012, several efforts were carried out, such as accelerating the development of producing

oil and gas fields, encouraging the application of secondary recovery, enhanced oil recovery (EOR),

improving coordination with relevant Government institutions, as well as a more intensive

management approach towards exploration PSC Contractors in the form of a forum

(PSC Contractors Forum for Exploration Contract Area FOKWE) and knowledge sharing.


49

During 2012, there were 12 on-stream projects with 1,062 MMSCFD of gas and 23,600 BOPD of oil/condensates installed production capacity. Considering many of the on-stream projects occurred in Q3 and Q4 of 2012, as well as the unpreparedness of the gas buyers, the additional average production in 2012 was approximately only430MMSCFD and 5,600 BPD from the installed production capacity.

NEW PROJECTSA.

New Projects Realization

Wortel

Development

Santos Gas (MMSCFD)

50

January

2012

APN A

Gas Development

PHE

ONWJ

Gas (MMSCFD)

50

January

2012

APN B

Gas Development

PHE

ONWJ

Gas (MMSCFD)

45

April

2012

APN E / F Gas

Development

PHE

ONWJ

Gas (MMSCFD)

50

May

2012

South Sembakung

Gas Plant

Job PertaminaMedco Simenggaris

Pty. Ltd

Gas (MMSCFD)

25

May

2012

Transfer Line 4 x 25 Km

BS-Tampi Pauh

Sele Raya

Merangin Dua

Oil/Condensates (BPD)3,000

May

2012

Terang Sirasun Batur

Phase 1

Kangean Energy

Indonesia

Gas (MMSCFD)

300

June

2012

Peciko 7B

Extension Platform

Total E&P

Indonesie

Gas (MMSCFD)

122

June

2012

South

Mahakam 1&2

Total E&P

Indonesie

Oil/Condensates (BPD)

20,600

October

2012

Bawal

Subsea

ConocoPhillips

Indonesia

Gas (MMSCFD)

120

September

2012

KF Gas Booster

Compression System

Star

Energy

Gas (MMSCFD)

10

November

2012

Tembang

Subsea

ConocoPhillips

Indonesia

Gas (MMSCFD)

40

January

2012

PROJECT PSC CONTRACTORS

INSTALLED PRODUCTION

CAPACITY

ONSTREAM

TOTAL INSTALLED PRODUCTION CAPACITY

OIL / CONDENSATES (BOPD)

23,600

TOTAL INSTALLED PRODUCTION CAPACITY

GAS (MMSCFD)

1,062

During 2012, there were 12 on-stream projects with 1,062 MMSCFD of gas and 23,600 BOPD of oil/condensates installed production capacity.

Gas (MMSCFD)

250

50

B. IMPROVED OIL RECOVERYII. EFFORTS TO INCREASE PRODUCTION

Other efforts to improve short-term production are by applying Improved Oil Recovery, including the use of EOR technology.

Enhance Oil Recovery (EOR) is a technique for further extraction by improving the mobility of oil by steam, chemical, gas or microbial injection to increase the amount of crude oil from mainly mature fields.

Types of EOR used in oil and gas production fields are:

Steam flood is conducted by PT Chevron Pacific Indonesia in the Duri and North Duri Development (NDD) Fields. In 2012, oil production from the Duri Field reached 165,057 BOPD.

The NDD Field consisting of Area-12, Area-13 and Area-14 started production in December 2010. At this time, NDD Area-12 has produced 43,875 BOPD from 532 development wells. While NDD Area-13 will be developed in 2013.

Improved Oil Recovery (including Enhanced Oil Recovery)

Steam Flood

IMPROVED OIL RECOVERYB.


51

Gas flooding was conducted in the Handil Field (Total E&P Indonesie). The technology used was a joint water flood and gas flood project. Since 2007, gas injection was halted to aid the supply shortage to the the Bontang LNG Plant.

In 2012 a study in gas flooding was conducted on several fields:

CO2 gas study in Gemah Field, PetroChina Jabung (currently in the reservoir simulation stage); and

CO2 gas study in Jatibarang Field, PEP (finished the laboratory simulation and field trials will commence in 2013).

Chemical flooding is planned to be conducted in the Minas Field (PT. Chevron Pacific Indonesia), Kaji-Semoga Field (Medco E&P Indonesia), Tanjung Field (PT. Pertamina EP), Handil Field (Total E&P Indonesie), Widuri Field (CNOOC SES Ltd), as well as Zamrud and Pedada Fields (PT. BOB Bumi Siak Pusako), with the following status:

Minas Field: simulation and laboratory studies are finished and field trials will commence in Q1 2013.

Kaji-Semoga Field: simulation and laboratory studies are finished and pilot project will commence in Q1 2013.

Tanjung Field: simulation and laboratory studies are finished and field trials will commence in 2013.

Handil Field: conducting laboratory study. Widuri Field: simulation and laboratory studies are finished and field trials will

commence in Q4 2013. Zamrud and Pedada Fields: field trial is planned for 2013.

Gas Flooding

Chemical Flooding

Other efforts to improve short-term productions are by applying Improved Oil Recovery, including the use of EOR technology.

52

C. REACTIVATION OF SUSPENDED WELLSII. EFFORTS TO INCREASE PRODUCTION

REACTIVATION OF SUSPENDED WELLSC.

To increase production, SKK Migas with PSC Contractors have inventoried potential suspended wells to reactivate. Those wells were suspended for numerous reasons.

Based on the data collected, a majority of the prospective reactivation wells are located in PT Pertamina EPs contract area. Out of the 5,144 wells inventoried and evaluated, only 1,755 wells are able to be technically reactivated. The wells are located in the Sumatra region (454 wells), the Java region (437 wells), and in the Kalimantan region (864 wells). Through 2012, a total of 154 wells have been reactivated, compromising of 118 wells reactivated as production wells and 36 wells reactivated as injection wells. This activity has accomplished a raise in production (initial gain) of 18.6 BOPD/well for oil and 2.7 MMSCFD/well for gas.

In 2013, an additional 130 wells are planned for reactivation, with an estimated production of 953 BOPD.

To increase production, SKK Migas with PSC Contractors have inventoried potential suspended wells to reactivate.


53

PSC CONTRACTORS FORUM FOR EXPLORATION CONTRACT AREA (FOKWE)D.

One of the objectives of exploration is to sustain the continuity of oil and gas production. For the last 10 years, discoveries of new reserves were small, in part caused by the relatively small number of PSC firm commitments fulfilled and several obstacles in the field. Constraint in the implementation of firm commitment are predominantly caused PSC Contractors internal difficulties, overlapping of areas (including permits), G&G technical issues, social community issues (related to land acquisition), non-availability of supporting goods and services, drilling operations, non-availability of data, procurement process and certain other issues, mostly near the border. To find a solution to these constraints, in 2011, BPMIGAS (now SKK Migas) formed a PSC Contractors Forum for Exploration Contract Area (Forum Operator Kontraktor KKS Wilayah Kerja Eksplorasi / FOKWE).

FOKWE has 4 committees:1. Partnership Committee.2. Permit and Social Committee.3. Procurement and Operational Committee.4. G&G Technical Committee.

To find a solution to firm commitment constraints in 2011, BPMIGAS (now SKK Migas) formed a PSC Contractors Forum for Exploration Contract Area (FOKWE).

54

D. PSC CONTRACTORS FORUM FOR EXPLORATION CONTRACT AREA (FOKWE)II. EFFORTS TO INCREASE PRODUCTION

Every constraint faced by exploration PSC Contractors is categorized into individual committees.

PROCUREMENT & OPERATIONAL

COMMITTEE

FUNCTIONS:PROCUREMENT, FIELD OPERATIONSPARTNERSHIP

COMMITTEE

FUNCTIONS:LEGAL, FINANCE, HUMAN

RESOURCES

FUNCTIONS:COMMUNITY RELATIONS, SECURITY, FORMALITIES, REPRESENTATIVE

G&G TECHNICAL COMMITTEE

FUNCTIONS:EXPLORATION, EVALUATION

AND DEVELOPMENT

PERMIT & SOCIAL

COMMITTEE

FUNCTIONS:EXPLORATION & OPERATION, SECRETARIAT OFFICE, FOKWE

INFORMATION SYSTEM, COORDINATION MEETING

FOKWE SECRETARY

OVERLAPPING, PERMITS, SOCIAL COMMUNITY, FIELD OPERATIONS

INTERNAL PSC CONTRACTORS (OPERATORSHIP, FINANCIAL, PRIORITY HOLDING)

NON AVAILIBILITY OF SUPPORTING GOODS AND SERVICES

SUBSURFACE COMPLEXITY NEEDING GGR STUDIES

NON AVAILABILITY OF EXISTING DATA

PROCUREMENT PROCESS

0 10 20 30 40 50 60 CONTRACT AREA

5130 (59%)

3415 (44%)

1313 (100%)

91 (11%)

81 (13%)

74 (59%)

2012 Firm Commitment Constraints

Resolved Constraints

Note:1 contract area can have more than 1 constraint

50%

40%

30%

20%

10%

0

2010 2011 2012

26%

31%

40%

Achievements in Exploration Drilling Firm Commitments


55

Constraints in the implementation of firm commitment in exploration contract areas are the reason FOKWE was established (based on Letter of Decree Number 0161/BPW00000/2011/S1 dated September 5th, 2011).

Throughout 2012, FOKWE have given significant contributions in managing firm commitment constraints, particularly in drilling exploration wells. Some of the constraints resolved were overlapping land ownership (59%); PSC Contractors internal issues (44%); subsurface complexity issues (11%); and procurement issues (57%). Regarding availability of supporting goods / services, considering joint procurement of rigs were initiated in 2012 for a period of 2.5 years, then the percentage of resolution for those issues cannot yet be calculated awaiting rig allocation schedules.

With the continued growth of contract areas, more constraints will be encountered. To encourage the resolution of exploration constraints, the cooperation of all members and stakeholders are needed. The exploration activities is targeted to accelerate Resources to Reserve to Production (R2P) so as to offset the decline rate of natural production with challenging internal and external conditions.

FOKWEs activities are under the coordination of the FOKWE Secretariat and throughout 2012 have given significant contributions in managing firm commitment constraints.

56

E. COOPERATION WITH OTHER INSTITUTIONSII. EFFORTS TO INCREASE PRODUCTION

COOPERATION WITH OTHER INSTITUTIONSE.

In 2012, SKK Migas signed numerous agreements with several institutions to strengthen SKK Migas role of management and control while at the same time fostering national capacity.

One of the parties who we are actively inviting to cooperate are universities. In May 2012, BPMIGAS (now SKK Migas) signed a Memorandum of Understanding with 6 universities (ITB, UI, Trisakti, UGM, UNPAD, and UPN) and the Education and Training Agency, Ministry of EMR (BADIKLAT KESDM) to cooperate in conducting the National Capacity Building (NCB) program in Jakarta.

BPMIGAS (now SKK Migas) has also signed an agreement with Padjadjaran Universitys Law Faculty (UNPAD) to conduct law research and development, legislation reviews, commercial contracts, legal opinions and other legal aid to boost understanding, compliance and legal awareness.

BPMIGAS (now SKK Migas) has also signed agreements with other universities, among others University of North Sumatra (USU) and Sebelas Maret University (UNS) Surakarta. A group discussion is also held at Gadjah Mada University (UGM) and UPN Veteran Yogyakarta.

In 2012, SKK Migas signed numerous agreements with several institutions to strengthen SKK Migas role of management and control while at the same time fostering national capacity.


57

To increase national oil and gas production, SKK Migas in conjunction with PSC Contractors held knowledge sharing forums, which are forums to share successful experiences and build the spirit of partnership to respond to various diverse challenges. With these forums, it is hoped that technical challenges in increasing production can be resolved. The following is some of the forums and workshops held by SKK Migas in 2012:

The 2012 Exploration and Production Forum, Todays Exploration, Tomorrows Reserves and Production, was held in Bandung from May 30th until June 1st, 2012, and attended by 186 participants from exploration PSC Contractors, production PSC Contractors, Government institutions, Universities, and BPMIGAS (now SKK Migas).

The purpose of this forum was to increase oil and gas production in 2013-2017, and to transfer knowledge / experience in exploration and production between PSC Contractors and service companies as one of the efforts to maintain national oil and gas production. With the goal to accelerate the development of exploration wells for production, and to help resolve exploration constraints.

This Forum was a place to share the experience of PT Pertamina EP with PSC Contractors in the Kalimantan area regarding subsurface aspects, IOR / EOR, wells, and production facilities to increase production of Pertaminas Fields and other Fields in the Kalimantan area.

Held in Balikpapan on February 10-11, 2012, and attended by 176 participants from PSC Contractors in the Kalimantan area, PT Pertamina EP, Government institutions and BPMIGAS (now SKK Migas).

A few of the follow-ups recommended by this forum are:

To explore the Eocene Play in the Kalimantan and Makassar Strait area. To aggressively use base grid drilling for the tank system in the deltaic system

supported by well economics. To increase the quality and quantity of national human resources in conjunction with

the fields development. To optimize assets by reactivating suspended wells and conducting GGRF studies. To identify bottle necking in optimizing production.

1.

Documents

SKK Migas Annual Report 2013