The document outlines a gas development master plan project for Indonesia. The project aims to develop a sustainable gas development strategy to increase domestic gas supply and market growth. Key objectives include gas demand-supply projections, policy recommendations, and identifying optimal infrastructure investments. The consulting team will conduct a benchmarking study, dynamic modeling, and consensus building workshops. Key challenges include low domestic gas prioritization, underdeveloped infrastructure, and an unfavorable business environment. The presentation seeks input on priorities and issues from the steering committee.

1. Gas Development Master Plan
Steering Committee Meeting
21 May 2012
David Aron
Managing Director
Petroleum Development Consultants, UK

2. Contents
• Project
• Project key objectives
• Gas sector key challenges
• Consulting team & consulting staff
• Deliverables
• Work plan
• Diagnostic work
• Consensus building workshop
• Benchmarking study
• Dynamic model
• Key issues
Note: This presentation incorporates comments from the World Bank

3. Project
• The project is to develop a Gas Development Master Plan (GDMP) that would
contribute to the sustainable development of the country’s natural gas resources,
national energy supply security, and protection of the environment
• The GDMP will include options for growing the domestic gas market, and for
increasing domestic gas supply
• The project provides a good opportunity to develop integrated thinking that includes
both upstream and downstream sectors of the oil industry
• Being undertaken as a partnership between Government of Indonesia, AusAID, and
the World Bank
• Contract signed 20 April 2012
• Completion of project by 31 May 2013
• An important element for the finalization of TOR is the flexibility to amend the terms of
reference during the next month based on Steering Committee, World Bank, AusAID
feedback and recommendations on the proposed scope of work
• The project team is seeking to identify and prioritize key deliverables and
interventions under the GDMP as proposed by the main stakeholders in the sector

4. Gas sector key challenges
• Indonesia has potentially plentiful gas reserves but the needs of domestic
consumers are not being met. There are a number of major factors
• Gas producers, to make new projects bankable, prefer to export gas to
highly creditworthy overseas buyers who pay international prices rather
than sell into the lower priced domestic market
• Conventional gas exploration has slowed down and Indonesia’s share
of the global and regional markets has declined in absolute terms
• Gas transportation infrastructure has been slow to develop, with many
projects having been delayed due to regulatory uncertainty
• Together with the Steering Committee, the project team seeks to
understand the underlying causes and propose workable solutions

5. Key objectives - 1
• Primary objective to prepare a medium and long term Gas Development Master Plan
(GDMP)
• GDMP will focus on:
• Gas demand-supply projections
• Optimum gas field development to meet growing demand
• Substitution of export gas with domestic supply
• Optimizing flow patterns from existing fields to demand centres
• Optimizing the expansion of gas supply and transmission infrastructure
• Recommending policy, legal, regulatory and institutional framework
To produce:
A proposed investment timeline through 2025 along with potential projects that
need to be financed - including identification of the least cost and most optimal
gas-based solutions for Indonesia
• Review existing policy (pricing, consumer rules, regulations) and initiate new policies
to expedite private investment
• Build local capacity in policy formulation and gas market planning and development

6. Key objectives - 2
• Improve business environment by establishing sound rules and regulations
for private sector participation in upstream, midstream and downstream gas
development and financing
• Review gas utilization options in the domestic gas market based on netback
values including:
• Replacing oil consumption with gas in transport (directly or electric
vehicles)
• Substitution of diesel and other fuel oils with gas in the power sector,
industry and related areas
• Capacity building
• in the key policy areas that need to be addressed to grow the domestic
gas market, and to improve its investment climate
• in the quantitative tools developed during the course of the assignment
so that these are available on a continuing basis for refining the GDMP
and gas planning and development strategy on an ongoing basis

7. Consulting team
• Petroleum Development Consultants (PDC) – international oil and gas
consulting company based in London covering both upstream and
downstream aspects of oil and gas industry
• Economic Consulting Associates (ECA) – specialist economics company
with particular skills in modelling gas markets
• Ali Budiardjo, Nugroho, Reksodiputro (ABNR) – Jakarta based legal firm
with oil and gas experience

8. Consulting team
• David Aron – Managing Director PDC, chemical engineer and petroleum
engineer
• Ray Tomkins, Managing Director, ECA, economist
• William Derbyshire, Director, ECA, Thailand
• John Bowers, PDC, gas transportation expert
• Rita Jolly, PDC, petroleum economist
• Tatiana May Tumenggung, ECA, economist
• Ferry Madian, ABNR, lawyer
• David Braithwaite, Q Energy, local expert

9. Deliverables
• Identification and Consensus Building Workshop – 21 June 2012
• Inception Report – 27 July 2012
• Interim Report – 30 October 2012
• Draft Final Report – 27 February 2013
• Final Technical Report – 29 March 2013
• Final Policy Notes – 28 April 2013
• Summary Report – 13 May 2013

10. Work plan – diagnostic
• Review existing work
• Gap identification and analysis
• Strengthening scope of work
• Consensus building workshop

11. Task A outline
• A1 - benchmarking study regarding development of domestic gas market
• A2 - review current market condition
• A3 - demand scenarios
• A4 - supply situation
• A5 – LNG export contract requirements
• A6 – gas transmission
• A7 – load management
• A8 – technical and financial feasibility
• A9 – project ranking based on technical, economic, and financial feasibility,
• Dynamic model

12. Task B outline
• B1 – overview of Indonesian gas sector including conventional and potential
unconventional gas both for domestic use and export – (natural gas, CBM,
etc)
• B2 – identify impediments to development of domestic gas industry
including infrastructure issues as well as the legal and regulatory framework
and identifying policy gaps
• B3 – review existing PSCs and identify impediments to increasing domestic
gas delivery – propose pragmatic gas oriented provisions to facilitate
commercialization of gas for domestic uses
• B4 – recommend market based producer and consumer pricing

13. Task C outline
• C1 – consensus building workshop planned for 21 June in Jakarta
• C2 – capacity building workshops including regulators, policy markers and
gas industry
• C3 – on the job training including training in quantitative tools developed
during the project, with counterparts to refine the Gas Development Master
Plan and strategy on an ongoing basis

14. Initial meetings
• PDC along with the World Bank has already had substantive one to one
discussions with organisations including PGN, PLN and IPA and the
following is awaited:
• Collection of latest data on supply and demand
• Feedback on proposed terms of reference
• Prioritization of deliverables
• Identification of main issues (domestic pricing, policy, gas
transportation, domestic LNG, gas production sharing agreements, gas
for power appears to be mainly considered for peak demand only, CBM,
etc)
• PDC is seeking further one to one meetings with key stakeholders
represented in the meeting including BP Migas, BPH Migas, DG Oil & Gas,
key Government Ministries and agencies, UKP-4, Pertamina and others
• PDC will attend the IPA Annual Conference Wednesday 23 May – Friday 25
May and our priority is to engage key stakeholders in discussion on the
proposed scope of work either at the Conference or outside it

15. Benchmarking study
• To be based on relevant and useful factors for Indonesia such as reserve
levels, market potential, gas export levels, domestic gas market penetration,
and share of gas in the energy mix
• Countries will be selected on the same bases and be proposed to the
Steering Committee for approval
• Will compare current market conditions in Indonesia with selection of oil and
gas producing countries in the region and elsewhere
• Will compare Indonesian progress in developing a domestic market with the
approach used by these countries, particularly those with similar climate
• Many of Indonesia’s gas sector challenges have been encountered and
addressed in other countries
• Countries to be considered: Malaysia, Australia, Algeria, Netherlands, India,
Colombia

16. Dynamic model features
• The GDMP model will integrate the analysis conducted under other tasks to
develop the recommended Gas Development Master Plan
• The model will investigate various combinations of feasible projects to meet
demand in each region (varying the timing and sequencing as well as the
selection of individual projects)
• The financial and economic viability of the individual projects concerned and
the overall costs of the combinations will be compared and used for the
purposes of project ranking under a dynamic model

17. Key issues - Indonesia
• Policy notes will be prepared covering various issues which will be selected
as the project progresses. At this early stage of the project some of the key
issues are seen as follows
• The project team will continue to benefit from their extensive work along
with similar gas market assessments undertaken by the World Bank and the
donor community on gas market development in other countries as reflected
in the terms of reference
• Indonesia is an archipelago and that needs to be taken into consideration
when discussing the development of its domestic gas industry
• The team will draw upon lessons learnt elsewhere in world in terms of
developing a domestic gas industry related to the legal and regulatory
structure, incentives for increases of supply and pricing
• Recent but limited changes to domestic pricing are a positive sign that some
reform of the Indonesian gas industry is in progress

18. Key issues – domestic market
• There is significant potential demand for domestic gas that is not currently
being met – the largest of which are in the power and industrial sectors
• While the Government of Indonesia is benefitting from high prices of
exporting gas to Japan, at the same time the country is suffering from
having to import high-priced petroleum products to meet domestic energy
demand
• The infrastructure for the domestic market for both gas pipeline
transportation and distribution is very underdeveloped

19. Key issues - supply
• Exploration for conventional oil and gas in Indonesia has been in decline for
a number of years
• CBM exploration has grown but at this stage this is still an industry in its
infancy
• There are significant issues that concern the oil industry and reduce its
desire to explore and supply the domestic market including the cost
recovery mechanism and PSC renewals
• The greater involvement of local companies has not been entirely
successful as they have difficulties in arranging finance
• The contracting arrangements for the gas from wellhead to end user are
complex and need to be simplified and made more certain and transparent

20. Key issues - integration
• Development of a domestic gas industry requires parallel development of
both upstream and downstream infrastructure
• Regulation in Indonesia is fragmented between upstream and downstream
and experience from other countries may be of use in suggesting how
integration may be achieved
• An integrated gas market planning, and gas allocation program would also
need to be developed
• There appears to be a lack of an integrated vision of how the domestic gas
market should be developed
• The Gas Development Master Plan will allow evaluation of alternatives

21. Key issues - pricing
• There is indication that price revision for gas is underway helped no doubt
by the high oil prices
• Increase in price in nine contracts (see Jakarta Post, 9 May 2012):
• Grissik field (ConocoPhillips) increased from US $1.85/MMBTU to US
$5.60/MMBTU and US $6.5/ MMBTU in 2013
• Pagardewa field (Pertamina) US $2.2/MMBTU > US $5.5/MMBTU > US
$6/MMBTU
• Increase in government revenue from gas sales of US $9.4 billion
• PGN will increase prices for its buyers
• Gas could be considered as a transportation fuel bringing major economic
and environmental advantages to urban areas but subsidies on diesel and
gasoline make this difficult

22. Your views…..
• It is suggested that a small group of representatives from the Steering
Committee are appointed to liaise directly with the consultants so that the
project delivers the product that you need
• We have suggested in this presentation what may be considered the most
important issues that face Indonesia in developing its domestic gas industry.
However you may disagree with these views and please let us know what
you think are the most important issues
• Finally please remember that the international oil industry has competition
for its upstream investment capital and it is really important that we bear this
in mind – the next slide illustrates today’s perception….

23. Fraser Institute: Attractiveness to upstream
oil and gas investment – 2011 report
Country Position in league
Thailand 64
Brunei 71
Malaysia 79
Vietnam 84
Philippines 86
China 90
Pakistan 107
Myanmar 108
Cambodia 110
Indonesia 114

24. Comments and suggestions
Together we can
identify workable
solutions to address
the gas sector
challenges. We
welcome your input
and ideas