The author tries to describe : Why despite the abundance of resources, still a scarcity; is the investment in the industry still alluring; if yes then who may invest; this raises the importance more then ever the role of National Oil Company; how to survive and is there any hopes. The case has been presented in various forum in Paris, in Jakarta and in Yogyakarta to private institution, Governmental Agency and Student of Nuclear Engineering Department in UGM.

1. A 36,000ft Oil & Gas Global View
Toronata Tambun
Boston, 10 December 2017

2. 2
We will discuss ….
1
2
Any hopes ?
3
What are the strategy to survive ?4
Who still want to invest ?
5
Are the investment still alluring ?
Ironic : Abundance but scarce …

3. 3
It is ironic that the hydrocarbons are still abundance but some
don’t meet the needs and price are low ..
1 Ironic : Abundance but scarce …

4. Up to February 2017, in Oil and Gas Services indusrty, 196,000 people
were laid off globally (44% of the total laid off in O&G)
Butler, A. (2017, June 08). Reasons To Be Cheerful : Opportunities and Challenges from the changing availability of capital, assets and people through the
E&P cycle in SE Asia. Drillinginfo's Global Insights Event. Singapore: Unpublished

5. While, it is very true that we have such abundance of oil
resources …
Ellinas, C. (2017). Presentation: The challenges of monetizing and exporting East Mediterranean hydrocarbons to the global markets. 2nd Mediterranean Oil & Gas 2017
Summit. Rome: Unpublished.

6. New Giant Fields in Mediterranean
Karbuz, S. (2017). The Importance of the Mediterranean Region for European Gas Supply Security. 2nd Mediterranean Oil & Gas 2017 Summit. Rome: Unpublished.

7. Or the prolific production from shales in USA
Even though this can’t provide future production growth forever
Moyes, I. (2017). Current E&P Climate. Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED.
7

8. IDEALLY THE PRICE SHOULD GO UP .. BUT
Moyes, I. (2017). Current E&P Climate. Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED.

9. .. this may due to imbalance supply : some area needs gas more
then other area for example Eastern Australia
Source: Aust. Energy Market Operator - Gas Statement of Opportunities for Eastern and South-Eastern Australia 2017*
9
* Based on information as at 31 December 2016.
Only 8 years!! Tipping point
Australian Energy Market Operator Ltd. (2017, March). Gas Statement of Opportunities For Eastern and South-Eastern Australia. Retrieved December 04, 2017, from Australian Energy Market Operator:
Aust. Energy Market Operator - Gas Statement of Opportunities for Eastern and South-Eastern Australia 2017

10. Why supply is disrupted ?
because the imbalance distribution of oil and its inventory …
74.3
19.8
29.9
5.4
10.8
26.6
33.2
133.2
10.5
1.8
9.4
13.1
3.8
7.6
27.9
14.1
22.2
14.9
19.8
29.6 25.7
36.2
7.2
8.3
11.4
7.0
16.9
31.1
13.1 7.2
6.4
10.5
2.7
2.4
6.4
8.7
9.4
Pipeline gas
LNG
US
Canada
Mexico
S. & Cent. America
Europe & Eurasia
Middle East
Africa
AsiaPacific
Major trade movements 2015
Trade flows worldwide (billion cubic metres)
Source: Includes data from FGE MENAgas service, GIIGNL, IHS Waterborne, PIRA Energy Group, Wood Mackenzie.
The Editor, BP Statistical Review of World Energy. (2016). BP Statistical Review of World Energy 2016. London: BP Statistical Review of World Energy

11. … and imbalance distribution of oil gas and its inventory...
87.0
247.4
75.0
1.8
73.9
51.
38.
43.6
129.7
254.3 61.
46.223.7
88.0
52.4 29.2
33.5
46.6
54.
185 8
63.3
32.6
57.5
69.1
46.2 32.9
37.6
23.3
28.7
44.
36.0
US
Canada
Mexico
S. & Cent. America
Europe & Eurasia
Middle East
Africa
Asia Pacific
Major trade movements 2015
Trade flows worldwide (million tonnes)
The Editor, BP Statistical Review of World Energy. (2016). BP Statistical Review of World Energy 2016. London: BP Statistical Review of World Energy

12. 12
Is Oil and Gas still worth to invest ?
1
2 Are the investment still alluring ?
Ironic : Abundance but scarce …

13. Hmmm, the historical ROI in Oil and Gas is erratic, cyclical and in
the end it is perceived to be low …..
2002
1
3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
1300%
1200%
1100%
1000%
900%
800%
700%
600%
500%
400%
300%
Tullow
Murphy
ExxonMobil
StockPricePerformance
Very timing sensitive (cyclical) .. And
only 100% ROI in 15years for XOM
Butler, A. (2017, June 08). Reasons To Be Cheerful : Opportunities and Challenges from the changing availability of capital, assets and people through the
E&P cycle in SE Asia. Drillinginfo's Global Insights Event. Singapore: Unpublished

14. The picture will look worse (-40%) if using the index composed of
companies operating large in a single area being used
Moyes, I. (2017). Current E&P Climate. Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED. 14
AssumeInitialInvestmentof$1,000
Source: Moyes & Co, public data

15. And only 2 areas whose cost are below Oil Price ….
WoodMackenzie. (2016, July 13). When will pre-FID oil projects be commercial again ? Retrieved December 02, 2017, from Wood Mackenzie News Editorial : https://www.woodmac.com/news/editorial/pre-fid-oil-projects-commercial/

16. 20-70 Years Investment Horizon for Explorer
Moyes, I. (2017). Current E&P Climate. p.6. Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED.

17. .. plus other sky rocketting costs due to further delay ...
Strippoli, D. (2017). MED focus on a sustainable transition to the new energy mix. 2nd Mediterranean Oil & Gas 2017 Summit (p. 21). Rome: ERM Worldwide Limited

18. Canada,
USA,
Norway,
UK,
Australia
NOT TO MENTION THE COUNTRY RISK PROFILE
Moyes, I. (2017). Current E&P Climate. p.5, Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED.

19. .. Not enough : the hurdle rate is 15.9%
0%
5%
10%
15%
20%
25%
30%
35%
Acquisitions Conventional LNG Unconventional Exploration Deepwater
%ofrespondents
8% 10% 12% 15% 20% >20%Weighted
average
13.3
%
15.8
%
13.3
%
14.0
%
15.9
%
13.5
%
What hurdle rate is the industry using for investments in different growthoptions?
Source: Wood Mackenzie Trusted commercial intelligence www.woodmac.com
Kelly, M. (2017, May). 1st State of the Upstream Industry Survey. London, Asia Pacific: Wood MacKenzie.

20. 20
With all the borderline : 15.9% hurdle rate, 70 years horizon,
prolong projects, selling price is much less than BEP for most,
erratic ROI …..
1
2
3 Who still want to invest ?
Are the investment still alluring ?
Ironic : Abundance but scarce …

21. QUESTIONS TO ANSWER by Individual
Application in Our Country
A. Facts :
1. The global reserve : increasing / decreasing
2. The global consumption : increasing / decreasing
3. Our country’s reserve : increasing / decreasing : numbers
4. Our country’s consumption : increasing / decreasing
B. Hypothesis :
1. What is the purpose of doing business ?
2. Who is our country’s competitor ?
3. What they writer proposes as remedy ?
C. What are the attractions ?
D. Is vision to reach 1.4MBPD in 7 years feasible ?
1. How if yes ? And Why if not ?
2. Will increasing number of blocks a panacea for the problem ? Why ?
E. What are the 3 bureaucracy reform acts being proposed ?
1. Is TAX mentioned in the reform being proposed by the writer ?
2. What are the underlying principle to do the reform ? (paragraph 15)
Arclauss Rytt, Indonesian Oil and gas : Bureaucracy reform ?, The Jakarta ost, Page 6. 19 June 2014

22. DON’T FORGET WE STILL
NEED HYDROCARBONS
Hartmann, B., & Saji, S. (2016, March 28). What Low Oil Prices Really Mean. Retrieved October 18, 2016, from Harvard Business Review: www.hbr.org

23. AND those sovereign countries MUST rely on their NOCs
NOC = the largest reserve holder
Thurber, M. (2012). National Oil Companies : Fueling Anxieties. University of Texas Energy Symposium. Houston:
UNPUBLISHED.

24. • NOC : proudly largest oil producer
Thurber, M. (2012). National Oil Companies : Fueling Anxieties. University of Texas Energy Symposium. Houston:
UNPUBLISHED.

25. The question why it is perceived that NOCs do not perform as
good as IOCs ?
Thurber, M. (2012). National Oil Companies : Fueling Anxieties. University of Texas Energy Symposium. Houston:
UNPUBLISHED.

26. What may be the main causes of the skewed performance ?
OR
Shall we say it differently that the list actually protrude the power of
NOCs ?
IOC objectives :
1. Maximize and grow profits
2. Maximize and grow profits
3. Maximize and grow profits
4. Maximize and grow profits
5. Maximize and grow profits
6. Maximize and grow profits
7. Maximize and grow profits
8. Maximize and grow profits
NOC objectives
• Maximize and grow profits
• Provide major % of
government budget
• Subsidize domestic fuel
• Provide social programs /
employments (political)
• Serve as government
implementation agent
• Provide energy security for the
country
• Purse foreign policy aims of
government
• Extend life time of resource
Thurber, M. (2012). National Oil Companies : Fueling Anxieties. University of Texas Energy Symposium. Houston:
UNPUBLISHED.

27. IOC tend to be more effective …. in
managing risks
Thurber, M. (2012). National Oil Companies : Fueling Anxieties. University of Texas Energy Symposium. Houston:
UNPUBLISHED.

28. NOC will always be there …... Side by side with IOCs hence they
are the paying customer
Thurber, M. (2012). National Oil Companies : Fueling Anxieties. University of Texas Energy Symposium. Houston:

29. … fair enough with NOCs, but many independent
companies are still searching for helps
0
0.5
1
1.5
2
2.5
3
3.5
Tambun, T. (2017). Asia Pacific & MENA Market Overview. Internal SeaBird Exploration Management Meeting . Paris: UNPUBLISHED.

30. These private companies rely on investment from financial
institutions : PE / Bank / Families
200
150
100
50
0
250
300
350
10
Numberofblocks
• 755 opportunities
• ~40% inAustralia
Moyes, I. (2017). Current E&P Climate. Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED.

31. 11▪ PE is indeed deploying capital now,
but not very much in Asia-Pacific
Butler, A. (2017, June 08). Reasons To Be Cheerful : Opportunities and Challenges from the changing availability of capital, assets and people through the
E&P cycle in SE Asia. Drillinginfo's Global Insights Event. Singapore: Unpublished

32. W
32
▪ PE is opportunistically seeking asset bargains at
a time when other capital sources have dried up
▪ …but the valuation gap between buyers and
sellers — the “bid-ask spread” — has persisted
Butler, A. (2017, June 08). Reasons To Be Cheerful : Opportunities and Challenges from the changing availability of capital, assets and people through the
E&P cycle in SE Asia. Drillinginfo's Global Insights Event. Singapore: Unpublished

33. In reality, despite all the above concerns We still see companies
being established
 AAG Energy
 Bangchak Petroleum
 Dialog Energy
 HyOil
 Jadestone Energy
 SEA Dragon Resources
 Semeru Energy
 Sonoro Energy
 Sundagas
 Tamarind Management
 Timor Resources
11Moyes, I. (2017). Current E&P Climate. Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED.

34. 13
… some are backed up by major PE companies
Neptune acquiring ENGIE assets,
mostly NW Europe and North Africa
but includes Indonesia
More to come?
▪ KKR closes Asia III fund
▪ Many other funds still looking
(BWE, EIG, GNRI, Warburgetc.)
▪ Other family office, HNWIs and
private institutions also active
and important sources of capital
Butler, A. (2017, June 08). Reasons To Be Cheerful : Opportunities and Challenges from the changing availability of capital, assets and
people through the E&P cycle in SE Asia. Drillinginfo's Global Insights Event. Singapore: Unpublished

35. None of them are in the Exploration !
CumulativeValue
Frontier /
High Risk Exploration
Proven Play /
Low Risk Exploration
Appraisal/
pre-Development
Development/
Early production
Mid-Life
Production
Late-Life
Production
Farmouts
PublicEquity
Private EquityFunds
Other PrivateFunds
Debt
▪ Capital more focussed,
more risk-averse
EmergingCompanies
3
5
Butler, A. (2017, June 08). Reasons To Be Cheerful : Opportunities and Challenges from the changing availability of capital, assets and
people through the E&P cycle in SE Asia. Drillinginfo's Global Insights Event. Singapore: Unpublished

36. 36
What should the E&P Companies do ? And what should the
O&G Services Companies Do ?
1
2
3
What are the strategy to survive ?4
Who still want to invest ?
Are the investment still alluring ?
Ironic : Abundance but scarce …

37. Oil and Gas company will focus on protecting the dividend, and only
in exploration near field for the future
23%
16%
1%
28%
32%
What is the industry’s priority for 2017?
Development capex
New growth (M&A / Exploration)
Other
Paying down debt
Protecting the dividend
20%
14%
21%
12%
33%
Which growth option will provide the bestlong-
term returns?
Asset M&A
Corporate M&A
Discovered Resource Opportunities (e.g. Iran, Iraq, Mexico)
Exploration frontier
Exploration near-field
Source: Wood Mackenzie Trusted commercial intelligence www.woodmac.com
Kelly, M. (2017, May). 1st State of the Upstream Industry Survey. London, Asia Pacific: Wood MacKenzie.

38. O&G Services however wish to start NOW to sell their services
to the E&P Companies
Annual Oil Production Deferral
(MMb/d) OPEC Spare Capacity (MMb/d)
Kibsgaard, P. (2016, March 21). Retrieved March 23, 2016, from Kibsgaard Speaks at Scotia Howard Well 2016 Energy Conference New Orleans: http://www.slb.com/-
/media/Files/news/presentations/2016/Kibsgaard_ScotiaHowardWeil_slides_only.pdf?la=en&hash=7236A926AF5029377ED2A33C1D45055F7A822068

39. .. because if the activity level start picking up, the investment from lower service
pricing should largely be reversed !!
Kibsgaard, P. (2015, September 9). Kibsgaard Speaks at Barclays CEO Energy-Power Conference New York. Retrieved January 3, 2016, from Schlumberger Executive Presentation:
http://www.slb.com/-/media/Files/news/presentations/2015/Kibsgaard_Barclays_script_slides_09092015_v2.pdf?la=en&hash=C96CB1B25A12147B6A36C561AEA7C62419B5CAB7

40. If these what they are supposed to do, then is there any good
prognosis?
• …. solid cash flow and balance sheet mean they can operate longer
than most
• …. must try to use the downturn to strengthen their position when
the activity resumes and the temporary international pricing cuts be
restored. … must prime for growth.
• Offshore still focused on shallow water and on going deep-water
commitments.
• Another year of subdued, unsustainable exploration activity
Kibsgaard, P., in 2016 Energy Conference, New Orleans, 210316 and CEO Energy-Power Conference, New York, 090916

41. WHAT ARE THE PRACTICAL POINT FROM
THE READING THAT MAY HELP THE
COMPANIES TO REACH TO SURVIVE ?
Ati, N., Brinkman, M., Peacock, R., & Wood, C. (2016, December). McKinsey&Company Oil & Gas. Retrieved Decembe 04, 2017, from Oil-field services sector gears up for a recovery … but is
not there yet: https://www.mckinsey.com/industries/oil-and-gas/our-insights/oil-field-services-sector-gears-up-for-a-recovery-but-is-not-there-yet

42. 42
RECOMMENDATION
1
2
Any hopes ?
3
What are the strategy to survive ?4
Who still want to invest ?
5
Are the investment still alluring ?
Ironic : Abundance but scarce …

43. Any ALTERNATIVE hopes for them at all ?
Barba, J. (2016, 08 29). 10 Emerging Technology That Will Drive The Next Economy. Retrieved 12 04, 2017, from Game Changer:
http://www.game-changer.net/2016/08/29/10-emerging-technologies-that-will-drive-the-next-economy/#.WiU-M7aB203

44. QUESTIONS TO ANSWER by GROUP
“Low Oil Prices”
1. Do you see sustained low oil prices as a risk ? How so and how
large ?
2. Do you think lower oil prices could slow the transition away from
fossil fuels, the demand for electric vehicles, the shift towind and
solar, and other renewable sources of energy ?
3. How is “Fourth industrial Revolution” connected to what’s going on
with oil ?
4. How should we view the fact that America is now the biggest energy
producer in the world ? How does this change the U.S. perspective
or behavior ?
5. How are the obvious losers ? Who are the winners ? Any hidden
winners or losers ? HINTS : producers, PE/the banks, consumers,
overall economy.
6. What strategic points do businesses need to think about or
understanding when it comes to implications of low oil prices ?
Kehoe, J. (2016, February 15). What's At Stake in An Economy With Low Oil Prices. Retrieved October 18, 2016, from Harvard Business
Review: www.hbr.org

45. Bibliography
• Ati, N., Brinkman, M., Peacock, R., & Wood, C. (2016, December). McKinsey&Company Oil & Gas. Retrieved December 04, 2017, from Oil-field
services sector gears up for a recovery … but is not there yet: https://www.mckinsey.com/industries/oil-and-gas/our-insights/oil-field-services-sector-
gears-up-for-a-recovery-but-is-not-there-yet
• Australian Energy Market Operator Ltd. (2017, March). Gas Statement of Opportunities For Eastern and South-Eastern Australia. Retrieved December
04, 2017, from Australian Energy Market Operator: Aust. Energy Market Operator - Gas Statement of Opportunities for Eastern and South-Eastern
Australia 2017
• Butler, A. (2017, June 08). Reasons To Be Cheerful : Opportunities and Challenges from the changing availability of capital, assets and people through
the E&P cycle in SE Asia. Drillinginfo's Global Insights Event. Singapore: Unpublished.
• Ellinas, C. (2017). Presentation: The challenges of monetizing and exporting East Mediterranean hydrocarbons to the global markets. 2nd
Mediterranean Oil & Gas 2017 Summit. Rome: Unpublished.
• Hartmann, B., & Saji, S. (2016, March 28). What Low Oil Prices Really Mean. Retrieved October 18, 2016, from Harvard Business Review: www.hbr.org
• Karbuz, S. (2017). The Importance of the Mediterranean Region for European Gas Supply Security. 2nd Mediterranean Oil & Gas 2017 Summit. Rome:
Unpublished.
• Kehoe, J. (2016, February 15). What's At Stake in An Economy With Low Oil Prices. Retrieved October 18, 2016, from Harvard Business Review:
www.hbr.org
• Kelly, M. (2017, May). 1st State of the Upstream Industry Survey. London, Asia Pacific: Wood MacKenzie.
• Kibsgaard, P. (2015, September 9). Kibsgaard Speaks at Barclays CEO Energy-Power Conference New York. Retrieved January 3, 2016, from
Schlumberger Executive Presentation: http://www.slb.com/-
/media/Files/news/presentations/2015/Kibsgaard_Barclays_script_slides_09092015_v2.pdf?la=en&hash=C96CB1B25A12147B6A36C561AEA7C62419
B5CAB7
• Kibsgaard, P. (2016, March 21). Retrieved March 23, 2016, from Kibsgaard Speaks at Scotia Howard Well 2016 Energy Conference New Orleans:
http://www.slb.com/-
/media/Files/news/presentations/2016/Kibsgaard_ScotiaHowardWeil_slides_only.pdf?la=en&hash=7236A926AF5029377ED2A33C1D45055F7A822068
• Moyes, I. (2017). Current E&P Climate. Drillinginfo's Global Insights Event. Singapore: UNPUBLISHED.
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https://www.mckinsey.com/industries/oil-and-gas/our-insights/renewable-energy-evolution-not-revolution
• Strippoli, D. (2017). MED focus on a sustainable transition to the new energy mix. 2nd Mediterranean Oil & Gas 2017 Summit (p. 21). Rome: ERM
Worldwide Limited.
• Tambun, T. (2017). Asia Pacific & MENA Market Overview. Internal SeaBird Exploration Management Meeting . Paris: UNPUBLISHED.
• The Editor, BP Statistical Review of World Energy. (2016). BP Statistical Review of World Energy 2016. London: BP Statistical Review of World Energy.
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Editorial : https://www.woodmac.com/news/editorial/pre-fid-oil-projects-commercial/