ANNUAL REPORT 2015 - s3. · PDF filePREFACE S MIGAS ANNUAL REPORT 2015 03 SKK MIGAS VISION AND MISSION VISION To become a proactive and trustworthy entity, as

ANNUAL REPORT

2015

CONTENT

INTRODUCTION

SKK Migas Vision and Mission

Core Values

SKK Migas Oversight Committee Chairman Foreword

Chairman of SKK Migas Foreword

SKK Migas Management

SKK Migas Organization Structure

Upstream Oil and Gas Condition - Global and National

Annual Report 2015 Summary

CHAPTER I SKK MIGASPERFORMANCE

Oil and Gas Contract Areas

Resource and Reserves

PSC Contractors' Commitment

Investment of Exploitation& Exploration PSC Contractors

Oil and Gas Lifting/Production Activities

Distribution of Oil and Gas Revenues

Efficiency on Cost Recovery

03

04

05

07

09

11

12

13

19

21

23

30

32

36

38

INTRODUCTION

SKK Migas Vision and Mission

Core Values

SKK Migas Oversight Committee Chairman Foreword

Chairman of SKK Migas Foreword

SKK Migas Management

SKK Migas Organization Structure

Upstream Oil and Gas Condition - Global and National

Annual Report 2015 Summary

CHAPTER IIEFFORTS TO INCREASE PRODUCTION AND RESERVES

New Projects

Efforts to Increase Oil and Gas Production and Reserves

Sharing Knowledge Forums

Cooperation with Other Institutions

Challenges in the Achievement of Production Target 2015

CHAPTER IVEMPOWERING NATIONAL CAPACITY

Optimization of Crude Oil Production for Domestic Refineries

Increasing Gas Supply to Meet Domestic Demands

Utilization of Local Goods and Services

Involvement of State/Regional-Owned Banks in the Oil and Gas Business Activities

Management and Development of PSC Contractors' Human Resources

National Employees Development

CHAPTER IIIMAJOR UPSTREAM PROJECTS

Banyu Urip Project - Exxonmobil Cepu Ltd.

Indonesia Deepwater Development Project - Chevron Indonesia Co.

Abadi Project - Inpex Masela Ltd.

Tangguh Train 3 Project - BP Berau Ltd.

Jangkrik Project - Eni Muara Bakau

Senoro Project - JOB Pertamina - Medco Tomori Sulawesi and Donggi Matindok Project - PT. Pertamina EP

Kepodang Project - Petronas Carigali Muriah Ltd.

CHAPTER VINTERNAL SKK MIGAS

Audit Report from the Supreme Audit Board (BPK-RI)

Continuous Improvement in the Governance Aspect of the Organization

Communication and Information Technology System

ATTACHMENTCONTRACT AREAS

43

44

50

59

63

89

92

97

99

101

103

69

71

73

75

77

81

85

107

107

115

PREFACE | SKK MIGAS ANNUAL REPORT 2015

03

SKK MIGASVISION AND MISSION

VISIONTo become a proactive and trustworthy entity, as well as the primary

mobilizer in the development of the upstream oil and gas industry for

the greatest welfare of the nation and state.

MISSION• Supervise and control the implementation of the Production Sharing

Contracts (PSCs) through partnerships to ensure the effectiveness and

efficiency of upstream oil and gas business activities while maintaining

environment sustainability;

• Synergize stakeholders and PSC Contractors to increase oil and gas

production and reserves;

• Work towards a condusive working culture through synergy,

coordination and application of change management, knowledge and

technology systems;

• Support and develop the national capacity to compete in the national,

regional and international levels;

• Increase state revenue to give maximum contribution to the national

economy, and to develop and strengthen Indonesia’s oil and gas

position.



04

CORE VALUES

PROFESSIONAL

RESPONSIVE

UNITY IN DIVERSITY

DECISIVE

ETHICS

NATION FOCUSED

TRUSTWORTHY

Think and act according to the standards of the job;

Provide timely and prompt response with a positive and acceptable conduct in performing the job;

Able to accept, recognize, appreciate, and synergize diversity to achieve agreed goals;

Able to make decisions within the designated level of authority

based on rational and professional judgment and by considering

implication/risks from the decisions taken;

Act in accordance to the norms, regulations, and business ethics in performing the duties, functions, and authorities of the position;

Understand and strive to maximize national capacity in decision

making and implementation of activities;

Can be trusted and reliable in performing the duties, functions, and authorities of the position.

As a form of commitment and seriousness in the development of upstream oil and gas

industry in Indonesia, SKK Migas hold values called "P R U D E N T"

described as follows:



SKK MIGAS OVERSIGHT COMMITTEE CHAIRMAN FOREWORD

Oil and gas resources must be managed correctly

and properly to provide maximum added value for the

nation; on the other hand, oil and gas should be able

to accomodate a fair economic value for the investors

considering the high capital, high risk, and long term

nature of investment in the upstream oil and gas sector.

05


Assalamu’alaikum Wr. Wb.

Giving praise to Allah SWT, I joyously welcome the publication of the 2015 SKK Migas Annual

Report, which provides a general illustration of the various achievements and challenges of the

upstream oil and gas industry in 2015.

As we expirienced, the year 2015 was a challenging year for the upstream oil and gas industry

as a result of the continuous decline in world oil prices since the third quarter of 2014 which

reached around US$30 per barrel at the end of 2015. However, it is observed that despite of

the difficult situation, stakeholders still strive to pull their maximum efforts in order to keep the

Indonesian upstream oil and gas industry running. Therefore, I convey my highest appreciation to

business executives and all stakeholders who gave full support to the sustainability of this industry.

The main task imposed on the upstream oil and gas industry by the Government is to increase

production, increase reserves, and to enhance national capacity. From the government point of

view, especially in terms of policy and regulations, we strive to make the upstream oil and gas

investment climate remain attractive to the investors, by simplifiying permit terms, reassessing

the fiscal system, and also analyzing the various incentives and privileges possible to be applied

in the upstream oil and gas industry.

In the current crisis situation we should remain optimistic. In reference to previous situations,

crises are usually temporary because basically everybody is eager to get out of a crisis.

By establishing a stronger synergy between stakeholders, the expectation is that in the future,

the upstream oil and gas industry will continue to dedicate a better performance.

Wassalamu’alaikum Wr. Wb.

SUDIRMAN SAIDMinister of Energy and Mineral Resources

as SKK Migas Oversight Committee Chairman

06


02

CHAIRMAN OF SKK MIGAS FOREWORD

07

Assalamu’alaikum Wr. Wb.

Let us praise God Almighty for allowing the upstream oil and gas industrial activities in Indonesia to keep

operating. 2015 was not an easy year. It was challenging not only for the upstream oil and gas sector and for

Indonesia, but it also stumbled almost all economic sectors globally. This is primarily induced by the drop of

world oil prices from around US$100 per barrel in the third quarter of 2014 to only around US$30 per barrel

at the end of 2015, which was initially triggered by oversupply in the first quarter of 2014.

Amid of a difficult situation, we continue to cooperate hand in hand with all stakeholders in order to keep the

upstream oil and gas activities in Indonesia moving forward. On behalf of SKK Migas, I would like to thank the

PSC Contractors and other parties who have provided support for the sustainability of upstream oil and gas

activities in Indonesia.


08

Encountering the crisis of oil price drop, SKK Migas through tight cooperation with the PSC Contractors and

other stakeholders carry out various efforts, such as; efficient use of Capex and Opex, maintain the reliability

of production facilities to reduce unplanned shutdown, and the Right to Audit implementation of the PSC

Contractor's goods/services provider to further ensure efficiency in the procurement cost and enhance good

corporate governance. SKK Migas will continue to work more efficiently, improve coordination with correlated

government agencies and the stakeholders, as well as provide assistance to the PSC Contractors.

Having completed the Work Program and Budget (WP&B) meeting held for two months in late 2015, the main

indicator targets of upstream oil and gas sector in 2016 were agreed as follows:

a. Oil Lifting 827.8 Mbopd

b. Gas Lifting 6,256 MMscfd

c. Oil and Gas Lifting 1,945 Mboepd

d. Cost Recovery US$14.93 billion

e. State Revenue US$10.77 billion

f. Expenditure US$17.22 billion, consists of US$15.98 billion for Exploitation CA and US$1.24 billion for the

Exploration CA

To achieve the agreed targets is definitely the utmost mutual expectation. Finally, we would like to thank the

support from all stakeholders and components of the nation. The performance record in the annual report is a

form of our accountability for the support and trust given over the years. We hope we could still gain support

in the upcoming years so the upstream oil and gas industry would be able to devote a better performance in

delivering the maximum added value for the state and nation.

Wassalamu’alaikum Wr. Wb.

AMIEN SUNARYADIChairman of SKK Migas


09

AMIEN SUNARYADI was inaugurated as the Chairman of SKK Migas on

21 November 2014. Before assuming his new role, he served as Deputy Chief of

Corruption Eradication Commission (KPK) (2003-2007), Senior Governance and

Anti-Corruption Officer of World Bank (2007-2012), and partner Fraud Investigation

& Dispute Services at EY Indonesia (2012-2014). Born in 1960, he managed to

earn degrees from Sekolah Tinggi Akuntansi Negara (Indonesia State College of

Accountancy) and College of Business Administration, Georgia State University,

Atlanta. He began his career by working as a civil servant at the Finance and

Development Supervisory Agency (BPKP).

M.I. ZIKRULLAH was inaugurated as the Vice Chairman of SKK Migas, after serving

as SKK Migas Deputy for Business Support Management on 17 July 2014 until

28 April 2015. He also serves as Deputy for Commercial Management and Chief

Executive Audit. Born in Bogor in 1961, he obtained master degree in Law from

Universitas Indonesia (UI). Other positions that he has occupied in BPMIGAS/

SKK Migas are among others as Head of Program and Reporting Department,

Head of Legal Counsel and Formalities Division, Vice President Management

Representatives for Donggi Senoro, Head of Oil and Gas Monetization Division,

Head of Legal Counsel Division, and Head of Procurement and Asset Management

Division.

BUDI AGUSTYONO was inaugurated as the Secretary of SKK Migas on

15 May 2015 after serving as SKK Migas Deputy for Financial Management.

Born in Jakarta in 1958, Budi obtained his undergraduate degree in accounting from

Universitas Indonesia (UI) in 1985 and then earned his master degree in management

program from Universitas Gajah Mada (UGM) in 1999. Several positions that he has

occupied in BPMIGAS/SKK Migas are among others as Head of Operations Cost

Audit Division and Head of BPMIGAS Representative Office for Kalimantan and

Sulawesi Areas.

SKK MIGAS MANAGEMENT

CHAIRMAN OF SKK MIGAS

VICE CHAIRMAN OF SKK MIGAS

SECRETARY OF SKK MIGAS


10

GUNAWAN SUTADIWIRIA was inaugurated as SKK Migas Deputy for Planning

Management on 7 May 2015 after serving as Advisor for Chairman of SKK Migas

since October 2014. Born in Jakarta in 1962, he earned a degree in Petroleum

Engineering from Universitas Trisakti, master degree in Petroleum Engineering from

ITB and earned a Ph.D in Petroleum Engineering from Texas A&M University. Other

positions that he has served in this industry were Head of Exploitation Division,

Head of Plan of Development Commitment Realization Division, The main spesialist

Deputy for Planning, Head of Evaluation And Development Division, and

Vice President Management Representative PT. Chevron Pacific Indonesia.

MULIAWAN was inaugurated as SKK Migas Deputy for Operations Management

on 8 February 2013. Born in Jakarta in 1961, Muliawan received his undergraduate

degree in Exploration Mining Engineering from ITB and his master degree in

Management Program from Universitas Gajah Mada (UGM). Muliawan has extensive

experience in upstream oil and gas operations, either during his term of office in

Pertamina or during his service in BPMIGAS/SKK Migas. Several positions occupied

by Muliawan in BPMIGAS/SKK Migas, were Representative Office for North

Sumatera Areas and Head of Production Operations Division.

PARULIAN SIHOTANG was inaugurated as SKK Migas Deputy for Financial

Management on May 2015. Born in 1963, he earned scholarship from the Government

of Indonesia to study Accountant at Sekolah Tinggi Akuntansi Negara (STAN), earned

scholarship from the World Bank for Master of Accountancy program from Case

Western Reserve University, Cleveland, USA and PhD from Dundee University, UK in

2003. Before joining SKK Migas in 2008, the accountant who was the best graduate

of LEMHANAS in 2014 worked as an Auditor at BPKP. Several positions occupied by

Parulian in BPMIGAS/SKK Migas, were Head of Program and Reporting Department,

Vice President Management Representative, Head of Government Entitlement Audit

Division, and Head of Risk Management And Taxation Division.

RUDIANTO RIMBONO was inaugurated as SKK Migas Deputy for Business

Support Management on 7 May 2015. He received his undergraduate degree in Civil

Engineering ITB (1989, with great honor) and Magister Project Management program

Universitas Indonesia (2009, Cum Laude), he joined BPMIGAS/SKK Migas

since 2004 and has received numerous assignments previously such as Head

of Representative Office for South Sumatera, Head of Project Acceleration of

Indonesian Deepwater Development, Corporate Secretary, Head of Project

Management and Facilities Maintenance Division, and as Head of Public Relations.

DEPUTY FOR PLANNING MANAGEMENT

DEPUTY FOR OPERATIONS MANAGEMENT

DEPUTY FOR FINANCIAL MANAGEMENT

DEPUTY FOR BUSINESS SUPPORT MANAGEMENT


11

CHAIRMAN

VICE CHAIRMAN

SECRETARY INTERNAL AUDIT

INTERNAL SERVICES DIVISION

PROGRAM ANDREPORTING DIVISION

DEPUTY FORPLANNING

MANAGEMENT

EXPLORATION DIVISION

PRODUCTION OPERATIONSDIVISION

ACCOUNTING DIVISION

OPERATIONS SUPPORTDIVISION

SURVEY AND DRILLINGDIVISION

EXPLOITATION DIVISION

EVALUATION ANDDEVELOPMENT DIVISION

PROJECT MANAGEMENT AND FACILITY MAINTENANCE DIVISION

RISK MANAGEMENT AND TAXATION DIVISION

CRUDE AND CONDENSATECOMMERCIALIZATION DIVISION

PSC CONTRACTORS SUPPLY CHAIN MANAGEMENT DIVISION

LEGAL ADVISORY AND FORMALITIES DIVISION

INFORMATION SYSTEMMANAGEMENT DIVISION

HUMAN RESOURCES DIVISION

NATURAL GAS COMMERCIALIZATION DIVISION

PLAN OF DEVELOPMENTCOMMITMENT REALIZATION

MONITORING DIVISION

OPERATIONAL COST AUDITDIVISION

GOVERNMENTENTITLEMENT AUDIT

DIVISION

WORK PROGRAM AND BUDGETMANAGEMENT DIVISION

DEPUTY FOROPERATIONS

MANAGEMENT

DEPUTY FORFINANCIAL

MANAGEMENT

DEPUTY FORCOMMERCIALMANAGEMENT

DEPUTY FORBUSINESS SUPPORT

MANAGEMENT

AUDIT WORKING GROUP

MANAGEMENT REPRESENTATIVES

PUBLIC RELATIONS DIVISION

EXPERT ADVISORS

SKK MIGAS ORGANIZATION STRUCTURE


12

UPSTREAM OIL & GAS CONDITION - GLOBAL AND NATIONAL

Since the beginning of the modern oil and gas industrialization in the mid-19th century, the oil and gas industry has

played a dominant role for economic growth in various parts of the world on both sides, producers and consumers.

Oil and gas industry has also gone through various cycles and changes, including oil and gas price fluctuation that

demands the industry to adapt to it.

2015 was marked by the stunning fall in world oil prices from an average of US$100 per barrel in the third quarter

of 2014 to only an average of US$30 per barrel at the end of 2015. This implies that the stable oil prices at around

US$100 for over 3.5 years since 2011 has ended. The collapse in oil prices was initially triggered by oversupply in the

beginning of 2014. The increase in oil production of non-OPEC countries (especially shale oil in the United States),

the failure of OPEC to reach an agreement of reducing production levels, as well as geopolitics and security issues in

various regions of the world is thought to be factors that lead to a decline in oil prices.

Source:WTI and BRENT : U.S. Energy Information and Administration (EIA)ICP : Ministry of EMR

140

120

100

80

60

40

20

0

ICP

WTI

BRENT

THE WORLD OIL PRICE MOVEMENTS2011-2015

US

$/B

AR

RE

L

stable at 100s for 3.5 years

Decline to the level of the 30s

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep

-11

Nov

-11

Jan-

12

Mar

-12

Jan-

13

May

-14

Mar

-15

May

-12

Mar

-13

Jul-1

4

May

-15

Jul-1

2

Nov

-13

May

-13

Sep

-14

Jul-1

5

Sep

-12

Jan-

14

Jul-1

3

Nov

-14

Sep

-15

Nov

-12

Mar

-14

Sep

-13

Jan-

15

Nov

-15


The drop in oil prices led to a slowdown in oil and gas exploration and production activities. Many of oil and gas

companies, both IOCs and NOCs, had to restructure their cost operating expenses. A number of development projects

had to be postponed because it is no longer economical at the current oil price levels. The number of active drilling rigs

shrunk, investment plans are reevaluated, operational costs are being cut, and new hirings are being postponed.

According to the Wood Mackenzie study, there has been a decrease by 20% in the cost of exploration and production

in 2015 which includes drilling services, seismic, Opex, production facilities, subsea facilities, FPSO, and offshore

facilities compared to 2014. Layoffs have occurred in many parts of the world, especially in supporting companies

(subcontractors) to be the first and foremost to be affected by the decreasing volume of demand for goods and services

of exploration and production activities.

A sharp decline in oil prices is actually not a new phenomenon. According to the World Bank, for the last 30 years there

has occurred five episodes of oil price drop by the decline rate of more than 30%. The up and down of price cycle

is the nature of a market system where since the beginning, petroleum business is already used to dealing with this

cycle. In every crisis usually appears new opportunities. For oil and gas companies who have firm financial support, it is

actually the right time to promote exploration activities, especially when commodity prices of goods/services supporting

the oil and gas is at a low level. In terms of cost and technology, it is now time to improve efficiency and deliver new

technological breakthroughs that are cheaper without sacrificing human capital.

In the midst of a crisis situation in oil prices, SKK Migas through close cooperation with the PSC Contractors and other

stakeholders determine to the following efforts:

(1) Efficient use of Capex and Opex:

•Optimizationofdevelopmentdrillingactivities.Ifthelevelofprobabilityislow,drillingprogramswillbereduced.

•Increasingwokoverandwellmaintenanceactivities.Thisactivityisencouragedbecausetheunitcostsarelower

than drilling and has a higher level of probability to get supplemental production from existing production wells.

•Maintainingthereliabilityofproductionfacilitiesinordertoreduceunplannedshutdown.

•Beginnegotiationswiththeprovisionofgoodsandservicessothatupstreamoilandgasactivitiescanstilltake

place with sufficient economic value.

•Reanalyzedactivitiesanddevelopmentofprojectswhichitseconomicareinfluencedbyoilprices.

•ImplementtheRighttoAuditofthePSCContractorsgoods/services'providertofurtherensurecostefficiencyin

procurement and increasing the good corporate governance.

(2) Maintain exploration activities (studies, surveys, and drilling); the opportunity to increase the volume of exploration

activities while goods/services are currently at a lower price level.

(3) Anticipation of employment: an enormous effort will be made to minimize the impact on the employment, such as

cost efficiency of training and business trips, natural retirements, as well as resettling the hours/days of work.

(4) Minimize negative impact on national companies especially those who support in goods/services in the upstream oil

and gas industry in order to maintain the development of national capacity.

(5) SKK Migas will continue to work more efficiently, improve coordination with related government agencies on the

implementation of regulations and permits, as well as provide assistance to the PSC Contractor, especially those who

have not fully understood the specific character of Indonesian upstream oil and gas, both technical and nontechnical.


In a state of dwindling reserves, considering the characteristics of oil and gas as depleted natural resources and

exploration activities that has not produced adequate results to replace oil and gas reserves that have been

produced, the most important thing is to do a variety of efforts to acceleration (debottlenecking). In terms of

regulatory, governance certainty and the ease of doing business is necessary by refering to the principles of good

governance. Revision of oil and gas law needs to be legalized as soon as possible considering SKK Migas' temporary

status that has been running for over three years since the dissolution of BPMIGAS by the Constitutional Court on

13 November 2012. Terms in the contract are reevaluated in order to remain attractive to the investors. Regulations

that indicate disincentives are likely to be eliminated. When viewing from a macro perspective related to energy policy,

it is time to reformulate the energy policy of Indonesia where oil and gas still plays a very dominant role, both as a

primary energy supply as well as a source of state revenue.

At the level of dwindling reserves, it is natural that development of upstream oil and gas industry is more likely managed

as capital of development and engine of economic growth. Capital of development in the sense of allocating as much as

possible national oil and gas production to be processed and consumed in the country for sustainable development of

Indonesia. While engine of economic growth is associated with increase in national capacity that can be done through

the following strategies:

(1) develop the role and competence of national manpower;

(2) enhance the involvement of stakeholders (especially in the areas of oil and gas producers);

(3) strengthen the role of domestic companies as supporter of upstream oil and gas activities;

(4) increase the local content of goods/services in the country; and

(5) help to develop the economy in the areas of oil and gas producers.

To survive the oil crisis, various breakthrough and creativity is necessary to be taken so the Indonesian upstream oil and

gas activities could continue to strive in this challenging situation.

PRIORITY COST EFFICIENCY Priority areas

to cut costsLevel of cost

reductions expected

Cut spend on existing high cost projects (EOR etc)Push contractors to cut costsDefer E&A costsDelay pre-FID projectsCut discretionary expenditure

30

25

20

15

10

5

0

Dril

ling/

rig

rate

s

Sei

smic

Ope

x

Pro

cess

ing

Sub

sea

FPS

Os

Offs

hore

pla

tform

s

% c

ost r

educ

tion

17%

30%

24%15%

14%

14

Source: Wood Mackenzie


ANNUAL REPORT 2015SUMMARY

The decline of crude oil prices in 2015

has affected the economic of upstream

oil and gas industry significantly so

that the PSC Contractors need to

make adjustments in development

programs and consequently affect the

achievement of key indicators based on

the WP&B that are decline rate, lifting,

cost recovery, and state revenues.

The adjustment program implicated

in the optimization of development

and operating expenses, followed by

a decrease in lifting and revenues,

but still continue to prioritize efforts

to restrain the decline rate of natural

production. Efforts are also implemented

in cost optimization, mainly through

renegotiation on cost of procurement

of goods and services required in the

petroleum operation.

Key Performance Indicators (KPI) are as follows:

OBJECTIVES

To contain the decline rate of production

To increase the oil and gas reserves

To achieve the oil and gas lifting target in line with

target of WP&B Revision 2015

To control the cost recovery in line with


To achieve state revenue target in line with


To improve the governance system

NO

1

2

3

4

5

6

15


TARGETS

The average decline rate of national oil production is <5%

The achievement of Reserve Replacement Ratio in 2015 for oil and gas is 60%

(barrel oil equivalent)

a. Realization of Oil Lifting: 802 Mbopd

b. Realization of Gas Lifting: 6,029 MMscfd

c. Realization of Oil and Gas Lifting: 1,880 Mboepd

Actual cost recovery: US$ 16.1 Billion

Actual state revenue: US$ 13.8 Billion

a. SKK Migas Financial Statements for 2014 period obtained

‘Unqualified Opinion’ predicate

b. Decrease of the Supreme Audit Board repeat findings

c. Monitoring and Evaluation Enterprise Risk Management (ERM)

report per semester

REALIZATION YTD 31 Dec 15*

0,4%

60%

776 Mbopd

6,330 MMscfd

1,906 Mboepd

US$13.4 Billion

US$11.9 Billion

‘Unqualified Opinion’ predicate

-

-

% ACHIEVEMENT

Achieved

Achieved

97.9%

105%

101%

83%

86%

Achieved

Achieved

Achieved

16

* Data operasional per 19 April 2016 (unaudited)

SKK MIGAS PERFORMANCE | SKK MIGAS ANNUAL REPORT 2015


CHAPTER I

SKK MIGASPERFORMANCE

2015


19 OIL AND GAS CONTRACT AREAS

One of the Government’s effort to increase oil and gas reserves and production is by adding new contract areas

(CAs) through the signing of Production Sharing Contracts (PSC). In 2015, SKK Migas together with the PSC

Contractors has signed 12 new PSCs, consist of 8 PSCs of Conventional Oil and Gas Exploration CA and 4 PSCs

of Unconventional Oil and Gas (UOG) Exploration CA.

OIL AND GAS CONTRACT AREAS 2003-2015

350

300

250

200

150

100

50

02003

59

51

2004

76

54

2005

79

57

2006

80

59

2007

110

59

2008

7

132

64

2009

20

141

67

2010

23

155

67

2011

42

172

73

2012

54

179

75

2013

55

187

79

2014

55

183

80

2015

58

170

84

Unconventional Exploration CA

Conventional Exploration CA

Exploitation CA

110

130 136 139

169

203

228245

287

308321 318 312

Total CA


20

THE DISTRIBUTION OF CONTRACT AREAS IN 2015

Based on the distribution of contract areas in 2015, there are 84 Exploitation CAs and 228 Exploration CAs, either

conventional or unconventional. Additionally, the Government approved the termination of 16 PSCs and another

60 PSCs were undergoing termination process, resulting in a total of 312 PSCs at the end of 2015.

Information of change during 2015:

1. 8 conventional Exploration CAs and 4 UOG Exploration CAs were signed PSC on 22 May 2015

2. Lemang and Bontang CA turned into Exploitation CA

3. Offshore Lampung I, Kumawa, Terumbu, West Tungkal, East Kangean, SW Bird’s Head, SE Mahakam, West Aru I, West

Aru II, Sibaru, Malunda, South Mandar, NE Natuna, Warim, West Glagah Kambuna, East Sepanjang, West Belida, Pari,

Citarum, Palangkaraya, Halmahera Kofiau, Sough Sageri, North Makasar Strait, East Bula, Sunda Strait I, Obi, SE Seram,

GMB Bentian Besar, GMB Indragiri Hulu, GMB Barito Banjar I, GMB Barito Banjar II, GMB Tabulako, GMB Barito Tapin,

GMB Pulang Pisau, and GMB Batangasin CA under termination process

4. Sadang, Kuma, Rombebai, Sula I, Mandala, Sageri, Gunting, Bengkulu, Mandar, South CPP, South Madura, Kerapu,

Northern Papua, Merangin I, Karapan, and GMB Tanjung IV CA already approved termination from the Minister of EMR

ONSHORE

TOTAL

160 CAs

115 CAs

38 CAs

5 CAs

- CA

- CA

8 CAs

39 CAs

5 CAs

CBM*

44 CAs

- CA

1 CA

8 CAs

- CA

- CA

EXPLOITATION

44 CAs

28 CAs

12 CAs

EXPLORATION

50 CAs

48 CAs

20 CAsONSHORE / OFFSHORE

OFFSHORE

TERMINATION PROCESSCONVENTIONAL UOG

ACTIVE UOG CA 50 CAs

EXPLOITATION CA84 CAs

PRODUCTION CA 66 CAs

DEVELOPMENT CA18 CAs

CONVENTIONAL EXPLORATION CA + UOG 228 CAs

TOTAL CONTRACT AREA 312 CAs

ACTIVE OIL & GAS CA 118 CAs

TERMINATION PROCESS 60 CAs

SHALEHC

* Coal Bed Methane


21

RESOURCES AND RESERVES(RESERVES REPLACEMENT RATIO)

Within 2003 to 2015, the decline of national oil and gas reserves continued to occur with an average rate of

0.65 billion barrels of oil equivalent per year. SKK Migas along with PSC Contractors seek to contain the decline

rate through the increase of various exploration programs.

The current condition of national oil and gas reserves are generally distributed all around the archipelago from

Sumatra to Papua with the tendency of bigger volume of reserves in the west area than the east area. In total,

the oil reserve (3P) is 7,305.03 MMstb and the gas reserve (3P) is 151 Tscf.

Meanwhile, national hydrocarbon prospective resources are still considerably large, for a total of in place national

hydrocarbon resources of 106 Bstboe, where the three largest resources are located in Java, Papua, and Sumatra

area.

INDONESIA’S OIL AND GAS RESERVES AS OF 1 JANUARY 2015

OIL AND GAS RESOURCES MAP1 JANUARY 2015

RESERVES

PROVEN PROVENPOTENTIAL POTENTIAL

PRODUCED NOT YET PRODUCED

TOTAL

1. Oil (MMstb)

2. Gas (Bscf)

a. Associated

b. Non Associated

INPLACE RESOURCES - 3P (P50)

TOTAL INPLACE RESOURCES - 3P (P50) = 106 Bstboe

3,445.21

33,039.61

3,833.49

29,206.12

3,310.19

16,701.42

1,923.67

14,777.75

157.33

64,946.31

236.70

64,709.61

392.30

36,644.09

575.42

36,068.67

7,305.03

151,331.43

6,569.28

144,762.15

26,4

21,4

18,6

14,8

19,3

2,3

1,9

0,8

BS

TB

OE


22

OIL RRR

GAS RRR

In order to improve the status from Resources to Proven Resources, an acceleration of more intensive exploration

program is required. Ideally, one barrel of oil and gas equivalent produced should be replaced by one barrel of oil

and gas equivalent discovered. The rate of new reserve discovered to the reserve produced is called the Reserves

Replacement Ratio (RRR).

160.00%

140.00%

120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%

350.00%

300.00%

250.00%

200.00%

150.00%

100.00%

50.00%

0.00%

2007 2008 2009 2010 2011 2012 2013 2014 2015

32.20%

34.60%

180.10%

69.20%

309.50%

129.70% 126.90%

90.27%71.15%

17.00%

61.90%

22.60%

62.50%

81.70%

52.20%46.60%

58.27%

139.00%Oil RRR

RRR Target

Gas RRR

RRR Target

2007 2008 2009 2010 2011 2012 2013 2014 2015


23

PSC CONTRACTORS’ COMMITMENT

EXPLORATION COMMITMENT

CONVENTIONAL OIL AND GAS

There are 118 active conventional oil and gas Exploration CAs consisting of 90 CAs that have entered their

3rd contract year or more and are not under termination process, which can be measured to fulfill their

Firm Commitments. Of these 90 CAs, 44 CAs have met all their Firm Commitments and 46 CAs have not met

their Firm Commitments.

EXPLORATION COMMITMENT IN THE EXPLORATION CA THROUGHOUT2015 AND ITS OBSTACLES

CA are less than 3 years

CA have fulfilled their Firm Commitment

CA have not fulfilled their Firm Commitment

CA are under Termination Process

Obstacles in Fulfilling the Firm Commitment 46 CAs – December 2015

Obstacles in Fulfilling the Exploration Commitment of118 Oil and Gas Exploration CA – December 2015

Regulation & Social (23 CAs)

Internal Contractor (23 CAs)

Equipment Availability & Operation (16 CAs)

Subsurface & Data (10 CAs)

PSC Contractor Portfolio (10 CAs)

Regulation & Social (49 CAs)

Internal Contractor (42 CAs)

Subsurface & Data (33 CAs)

PSC Contractor Portfolio (32 CAs)

Equipment Availability & Operation (27 CAs)

170 CAs conventional

oil and gas

Exploration CAs,

90 CAs ≥ 3 years

11 EXPLOITATION CAs(Have not fulfilled their Firm Commitment)

44

28

118 CA52

46

28%

27%

28%

22%

20%

18%

12%

17%

12%

15%

0%

0%

10%

10%

20%

20%

30%

30%

Obstacles in Fulfillingthe Firm Commitment

Obstacles in Execution of Exploration Activities

*note : 1 CA may have more than 1 obstacles


24

SKK Migas assessing PSC Contractors whose Exploration CAs have entered their 3rd contract year and thereafter

(excluding CAs under termination process), in which the assessment is based on the following criteria, including

minimum (basic/mandatory) assessment and exploration proving (advance) assesment.

Based on the results of the assessment, on 27 May 2015 SKK Migas awarded to the following PSC Contractors

who experienced a change of status or performance improvement, as follows:

• Two CAs received the Gold Category

Nunukan CA (PHE Nunukan Company), and South Sesulu CA (PT. Saka Indonesia Sesulu);

• Two CAs received the Green Category

North Ganal CA (Eni North Ganal Ltd.) and SW Bukit Barisan CA (PT. Radiant Bukit Barisan E&P);

• Six CAs received the Blue Category

Babar Selaru CA (Inpex Babar Selaru Ltd), Halmahera CA II (Statoil Indonesia Halmahera II AS), Offshore Timor

Sea I CA (Eni Indonesia Offshore Timor Sea I Ltd.), Lirik II CA (PT. MRI Lirik II), South Bengara II CA (Caelus

Energy South Bengara II Pte. Ltd.), and Wokam II CA (Murphy Wokam Oil Co. Ltd.

Remark:

only performed G&G study or did not perform any Firm Commitment

performed a small part of the Firm Commitment

performed major part of the Firm Commitment

fulfilled all Firm Commitments

Blue Category that has discovered hydrocarbon under technical discovery category

Blue Category that has discovered potential economical reserves

ASSESSMENT ON THE PERFORMANCE OF EXPLORATION COMMITMENT FOR EXPLORATION CA IN 2015

COMPARATIVE ASSESSMENT ON MAY AND DECEMBER 2015

35

30

25

20

15

10

5

0

BLACK RED PINK BLUE GREEN GOLD

13

10

1514

2123

33

30

10 10

4 3

Assessment in May 2015 96 CAs

Assessment in December 2015 90 CAs


25

UNCONVENTIONAL OIL AND GAS

At the end of 2015, there were 58 UOG CAs consisting of 53 CBM CAs and 5 UOG-Shale Hydrocarbon CAs.

Out of 53 CBM CAs, 8 CAs were under termination process, totaling 50 active UOG Exploration CAs.

Out of those 50 CAs, 45 CBM CAs have entered their 3rd contract year or more and are not in the termination

process, hence the fulfillment of their Firm Commitment can be assessed. The fulfillment of Firm Commitment for

the 45 CBM CAs indicates that 8 CBM CAs have managed to fulfill all of their Firm Commitments and 37 CBM

CAs have not yet met their Firm Commitments.

UOG EXPLORATION CA STATUS IN 2015

TOTAL

312 CAs 50 CAs Active Conventional Oil and Gas Exploration CA

45 CAs ≥ 3 years

505

84

8

18%

11845

37 82%

60

Active Conventional Oil and Gas Exploration CA

Exploitation CA

Active UOG CA

Under Termination CA (Conventional & UOG)

Outstanding Firm Commitments in 37 UOG CAs

3rd contract year or more CA (not under termination process)

Below 3rd contract year CA

CA who have fulfilled their Firm Commitment

CA who have not fulfilled their Firm Commitment

G&G

Corehole

Exploratory

Prod. Test

New Prod. Test Well

Dewatering

44 Activities

78 Activities

61 Activities

42 Activities

8 Wells

13 Activities


26

THE ACHIEVEMENT OF FIRM COMMITMENT IN UOG EXPLORATION CA IN 2015

FIRM COMMITMENT OF UOG EXPLORATION CA > 3rd YEAR STATUS IN 2015

SKK Migas also conducted an assessment towards the PSC Contractor of Exploration UOG CAs who have

entered their 3rd year contract or more (not in the termination process CA), in which the assessment is based on

the achievement of Firm Commitments activities throughout 2015. Based on the results of the assessment,

SKK Migas categorized achievement of PSC Contractor's Firm Commitment activities of Exploration UOG CAs

during 2015 as follows:

a. Being in the return process or inactive.

b. There is no realization or realization of Firm Commitment only < 25% or Firm Commitment realization is

just a G&G study and have entered into a 3rd or 4th year contract.

c. (82%-99%): There is no realization or realization of Firm Commitment only < 25% or Firm Commitment

realization is just a G&G study and have entered into a 3rd or 4th year contract.

d. Firm Commitment realization 80% < x > 50% or just performed G&G study or conduct drilling of

exploration wells but have not performed dewatering and have a entered into a 3rd year contract until

6th year contract.

e. Firm Commitment realization > 80% and have conducted drilling of exploration wells (including

dewatering) and have entered into a 3rd year contract until 6th year contract.

f. Firm Commitment realization 100% (and there is a realization of the work commitment), have conducted

dewatering and data required for development.

8

7

6

5

4

3

2

1

0

GOLD GREEN BLUE PINK RED BLACK

GOLD

Firm Commitments Realization 100% (and

there is a realization of the work commitment), have conducted dewatering and data required for

development

GMB OGAN KOMERING

GMB BARITO

GMB TANJUNG II

GMB OGAN KOMERING II

GMB KOTABU

GMB KUTAI

GMB TANJUNG ENIM

GMB RENGAT

GMB SIJUNJUNG

GMB MUARA ENIM I

GMB MUARA ENIM III

- - GMB INDRAGIRI HULU

GMB BENTIAN BESAR

GMB BARITO BANJAR I

GMB BARITO BANJAR II

GMB BARITO TAPIN

GMB TABULAKO

GMB PULANG PISAU

GMB BATANG ASIN

GMB SANGATTA II

GREEN

Firm Commitments realization > 80% and have conducted drilling of exploration wells (including dewatering) and

have entered into a 3rd year contract until 6th year

contract.

BLUE

Firm Commitments realization 80% < x > 50% or just performed

G&G study or conduct drilling of exploration wells but have not

performed dewatering and have a entered into a 3rd year contract

until 6th year contract.

PINK

There is no realization or realization of Firm Commitments

only < 25% or Firm Commitments realization is just a G&G study and have entered into

a 3rd or 4th year contract.

RED

There is no realization or realization of Firm

Commitments only < 25% or Firm Commitments realization is just a G&G study and have entered into a 3rd or 4th year

contract.

BLACK

Being in the return process or

inactive.

6

1

5

0 0

8


27

EXPLOITATION COMMITMENT

Bulu CA is the only Exploration CA that received approval for the first Plan of Development (POD) from the Minister

of Energy and Mineral Resources (EMR) in 2015. With that approval, the number of Exploitation CAs increased to

84 CAs. In addition, SKK Migas also issued approvals for other 57 PODs, consisting of 5 PODs, 47 Plan of Further

Development (POFD), 3 Put on Production (POP), and 2 revised PODs. The estimates of investment and operating

cost incurred by PSC Contractors, oil and gas production, as well as the state revenue from those PODs are as

follows:

During 2003-2015, SKK Migas approved 447 PODs/POFDs/POPs. However, from 447 PODs/POFDs/POPs,

60 PODs/POPs are not active due to have been developed within the scope of an advanced POD (POFD), or

due to becoming uneconomical to be implemented on by the PSC Contractors. so that total only about

387 active PODs/POFDs/POPs with an estimated cumulative production of oil and gas of 4,004.77 MMbo

and 69,768.20 Bscf.

ESTIMATED OPERATING COST, INVESTMENT, AND STATE REVENUE FROM THE POD APPROVAL IN 2015

OIL AND GAS PRODUCTION BASED ON

POD/POFD/POP 2003-2015

POD/POFD/POP 2003-2015

Item

Cummulative Production in 2015

Item

Investment

Operation

ASR

State Revenue

MMUS$

6,749.44

5,562.60

559.97

27,081.60

Oil, MMbo

294.02

Gas, Bscf

527.02

PODs in 2015

Oil, MMbo

Gas, MMboe

POD POD I

POP POFD

24%

35%

32%23%

10%

76%

12588

37

137


28

POD/POFD/POP APPROVAL ANDPROFILE 2003-2015

ADDITIONAL OIL PRODUCTION PROFILE BASED ON POD/POFD/POP APPROVAL 2003-2015

Active POD

Inactive POD

Cumulative POD

55

50

45

40

35

30

25

20

15

10

5

-

1.000

900

800

700

600

500

400

300

200

100

-

550

500

450

400

350

300

250

200

150

100

50

-

2003

2003 2004 2005 2007 2008 2009 2010 2011 2012 2014 201520132006

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

MM

BO

2

3.36

161.27

361.07

878.17

111.50

220,.0

77.45146.28

258.84

168.00

104.45

343.95294.02

19

2427

17

3333 35

41

5745

2628


29

ADDITIONAL GAS PRODUCTION PROFILE BASED ON POD/POFD/POP APPROVAL2003-2015

WORK PHASE UNDER THE POD/POFD/POP APPROVAL 2003-2015

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

-

2003

2003

2004

2004

2005

2005

2007

2007

2008

2008

2009

2009

2010

2010

2011

2011

2012

2012

2014

2014

20152013

2013

2006

2006

BS

CF

Monitoring POD of post completed Technical Commitment

Monitoring POD phase of FEED Execution & Drilling Plan

Monitoring POD phase of EPCI Execution & Drilling

Monitoring POD of Post Onstream phase (unfinished technical commitment PO)

Exploration Exploitation

End of PSCStart of

PODs PODs PODs PODs

227,961.303,71

18,430.73

6,389.64

969.16

5,187.51

2,119.05

4,928.52

3,692.97 3,853.59

1,300.76 1,783.68

527.02


*) Data in 2015 based on IVQ FQR 2015 by 8 March 2016 (unaudited)**) Source of data: Consolidated Financial Statement of PSC Contractors (unaudited)

UPSTREAM OIL AND GAS INVESTMENT – EXPLOITATION CA

30

INVESTMENT OF EXPLOITATION & EXPLORATION PSC CONTRACTORS

INVESTMENT OF EXPLOITATION PSC CONTRACTOR

For Exploration CAs, the actual investment (expenditures) trend in the upstream oil and gas industry was still

increasing until 2014, on the contrary it decreased in 2015. The condition was a change in world oil prices that

weakened significantly, from the level of approximately US$100 per barrel to around US$30 per barrel, lead to a

slowdown in the investment climate of Indonesia's upstream oil and gas sector and efficiency of costs (expenses).

This can turn out to be more positive with the support of world oil price incline in the future.

In 2015, investments in the upstream oil and gas sector reached US$15.1 billion, or 95% from the target of

WP&B Revision 2015, but decreased 22% compared to the realization in 2014. The investment used to finance

exploitation activities amounted US$0.8 billion (6%), well development activities amounted to US$2.1 billion (14%),

production activities amounted to US$10.9 billion (72%), and administration activities amounted to US$1.1 billion

(8%). It is identified that from its composition, the majority of the investment in the upstream oil and gas sector

is allocated for production and development activities reaching US$13 billion or 86% of the total investment for

exploitation.

Continuity of industrial investment in the upstream oil and gas Exploration CAs is required to maintain a production

profile and portfolio of oil and gas reserves, as well as generate positive impact to the process of increasing

national capacity in domestic oil and gas supporting industry. Therefore, it needs commitment from all related

parties to collectively maintain a conducive investment climate.

25,000

20,000

15,000

10,000

5,000

-

2009 2010 2011 2012 2013 2014 2015*

MIL

LIO

N U

S$

Administration

Production

Development

Exploration

Total

6% 7% 7% 6% 6% 6% 8%

65% 66%

66%64% 62%

64% 72%

23% 21%

22%

20%

22%21%

14%

5% 6%

5%

9%

10% 9%

6%

11,535 11,854

13,986

16,541

18,987 19,275

15,115


31

INVESTMENT OF EXPLORATION PSC CONTRACTOR

The Increase of exploration activities is very important, for it will generate positive impact to the development

prospect of upstream oil and gas in the future and maintain the availability of energy for the next generations.

Investment in Exploration CAs to discover new oil and gas reserves has increased since 2000. However, since

2012 until 2015, investments gradually declined compared to the previous period. Especially in 2015, it was

heavily influenced by the extreme decline in world oil prices to the level of US$30s per barrel.

Until the end of 2015, the cumulative investment in Exploration CAs reached US$0.52 billion, or 31% from the

target of WP&B Revision 2015, but decreased 53% compared to the realization in 2014.

The low realization of PSC Contractors’ investment in exploration stage was not only caused by the decline of

world oil prices, but also because of operational constraints both external and internal of the PSC Contractors.

External constraints are for instance, overlapping land with plantations, industrial forest, and protected forest;

bureaucracy in the permits process related to other institutions; public fear of the impact of oil and gas activities

and the community's demand for corporate social responsibility; as well as the availability of drilling rigs which are

very limited.

Meanwhile, internal constraints of the PSC Contractors are financial problems and technical operational issues

occured during the course of surveys and drilling. Support from all related institutions and stakeholders is needed

to solve the above problems.

Other challenges dealt with was the current prospect of oil and gas reserves in Indonesia which are mostly

situated in the eastern part of Indonesia and mainly in the deepwater. This leads to be technically more difficult to

find new oil and gas reserves and requires a considerably bigger cost. Therefore, it is necessary to offer investors

more attractive incentives so they will be interested to invest in exploration activities, especially in the eastern part

of Indonesia and in the area of deepwater. Good infrastructure support is also required to help the acceleration of

activities considering that the exploration locations are situated in remote areas. SKK Migas continues to provide

understanding to stakeholders about the importance of exploration activities because without exploration, new oil

and gas reserves will not be discovered.

UPSTREAM OIL AND GAS INVESTMENT – EXPLORATION CA

*) Data in 2015 based on IVQ FQR 2015 by 8 March 2016 (unaudited)**) Source of data: Consolidated Financial Statement of PSC Contractors (unaudited)

2,500

2,000

1,500

1,000

500

-

2009 2010 2011 2012 2013 2014 2015*

MIL

LIO

N U

S$

Administration

Exploration

Total

11% 12% 13% 11% 11% 17% 15%

89%

88%

87%

89% 89%83%

85%

917

1,661

2,120

1,356 1,391

1,106

515


32NATIONALOIL AND GASPRODUCTION PROFILE

ACTUAL & FORECAST OIL AND GAS PRODUCTION

OIL AND GAS PRODUCTION/LIFTING ACTIVITIES

OIL AND GAS PRODUCTION PROFILE

Currently Indonesia’s oil and gas production is still dominated by gas, and for the last couple of years have

surpassed the national crude oil production. This condition is predicted to continue for years ahead.

The national rate of production for natural gas contributes 60% of the national oil and gas production. Based

on long term production forecasts, it will continue to increase until 2020, which will reach 70% and continue to

increase until 2050, which will reach 86%.

Oil (Mbopd)

Gas (Mboepd)

MB

OE

PD

MB

OE

PD

1,400

1,200

1,000

800

600

400

200

0

OIL

Dominated by Oil Dominated by Gas


OIL AND GAS ACTUAL PRODUCTION

Until 31 December 2015, Indonesia’s oil and gas actual production reached 2.24 million barrels of oil equivalent

per day (MMboepd). This achievement was measured from the average oil and condensate production at

786 thousand barrels per day (Mbopd), while the gas production is at 8,113 million cubic feet per day (MMscfd).

The decline rate of production in 2015 could be reduced to 0.4% which is the lowest decline rate for the

last 4 years. This was triggered by a full-scale onstream Banyu Urip Field by Exxon Mobil Cepu Limited,

Bukit Tua Field by Petronas Carigali Ketapang II Ltd., Pematang Lantih Field by MonD'Or Oil Tungkal, and

GG Field by PHE ONWJ in 2015.

DECLINE RATE OF PRODUCTION 2008-2015

1,200

1,000

800

600

400

200

0

2008 2009 2010 2011 2012 2013 2014 2015*

MB

OP

D

33

9772.9%

1. The outbreak of gas pipeline PT. TGI to CPI, BOB and SPR 29 Sept 20102. Kodeco (PHE WMO), Hit of 40th platform dated 12 August 2010

1. No return of CPI production level as a result of the outbreak of the TGI pipeline (Duri Field)2. The delay in the decision of new operator, Kodeco/ PHE WMO3. Fire of FSO Lentera Bangsa in CNOOC4. Leaks of Hose and SBM in KKS Star Energy, Camar, Kangean and Pertamina EP-TAC PAN

1. No return of CPI production level as a result of the outbreak of the TGI pipeline (Duri Field)2. Effects of delayed decision of new operator, Kodeco/ PHE WMO3. High Decline in Tunu and Peciko Field - TEPI4. Damage to production facilities

Onstream project1. South Mahakam - TEPI2. Expansion of EPF MCL3. POD PHE WMO (38Bth, 39th, 40th PHE)

*) Status until 31 December 2015

Onstream project1. MCL-WPB and Full Scale2. GG Field - PHE ONWJ3. Bukit Tua Field - Petronas Ketapang4. Pematang Lantih Field - Mondor Oil

0.4%

0.4%

4.5%4.7%

4.1%4.3%

949 945902

860824

789 786


OIL AND CONDENSATE PRODUCTIONPERFORMANCE IN 2015

GAS AND CONDENSATE PRODUCTIONPERFORMANCE IN 2015

950,000

900,000

850,000

800,000

750,000

700,000

650,000

600,000

9,500

9,000

8,500

8,000

7,500

7,000

6,500

6,000

5,500

5,000

1 Jan 15

1 Jan 15 1 Feb 15 1 Mar 15 1 Apr 15 1 May 15 1 Jun 15 1 Jul 15 1 Aug 15 1 Sep 15 1 Oct 15 1 Nov 15 1 Dec 15

1 Feb 15 1 Mar 15 1 Apr 15 1 May 15 1 Jun 15 1 Jul 15 1 Aug 15 1 Sep 15 1 Oct 15 1 Nov 15 1 Dec 15

BO

PD

MM

SC

FD

21 Mar,EMCL: First Oil Well Pas B

Feb: TEPI: Maintenance compPeciko; CPI: pipe repair in PKM 30

State Budget Revision 2015 = 825 MbopdWP&B Revision 2015 = 828.5 Mbopd

May: CPI: problem comp. in Minas

August: TEPI: Maintenance Senipah comp, SNB-NPU sdown, BRC stop pumping in Bontang to Santan

Nov: EMCL Shut in Wellpad-B commisioning CPF Train A

CPI Power Outage

31 July: EMCL: leak of discharge pump.1 Aug: worker demonstration; EOE & Wellpad-B shutdown

18 May,Petronas: Bukit Tua field productionState Budget Revision

Production

WP&B

WP&B Revision

State Budget Revision

Production

WP&B Ori

WP&B Gas Supply Revision

Gas Supply

WP&B Revision

34

751,393 750,910740,758

791,795 770,280

847,653

PRODUCTION 2015YTD Production until 31 Dec: 785,797 bopd

Achievement to State Budget Revision : 95.25%Achievement to WP&B Revision : 94.85%

841,589

897,672

913,595 909,677916,468

825,000

804,132

7,972

6,631 6,641 6,598 6,590

6,159

6,665 6,731 6,651 6,915 6,863

7,048 7,119

7,894 7,9507,867 7,424

7,986

8,145

6,989

1 Jan: EMOI: NSO sdownSantos M: SDV replacement

22 Feb: BP Berau: Train 1 MR Gas Turbine trip

3 Mar: BP Berau: Train 1 MR Compressor trip

11 Oct: JOB Tomori: Maintenance in buyer DSLNG

25 Sept: BP Berau: Kalimantan Palm delay for lifting LNG

30 Nov: BP Berau: Power Blackout

7 June: BP Berau: Sdown train 1 due to VCMI & CPU card prblm in MR GT

9 August: TEPI: ESD TestJOB Medco Tomori: Repair activities in plant buyer

23 August: TEPI: SNB-NPU sdown for maintenanceCopi: Duyong shutdown

17 Oct: BP Berau: curtail due to LNG high inventory, shutdown train 1 for filer gas turbin replacement

10 & 14 May: BP Berau: TAR 6 ActivitiesCopi blok B: Belanak FPSO partial shutdown in EGC-A & gas Plant train 1

4 Apr: CPGL: Total shutdown for valse metering installation path to GSPL

31 Jan: BP Berau: Train 2 shutdown, TEPI: maintenance comp, Peciko

31 May: BP Berau: TAR 6 TEPI: ESD 1,1 in active GTS-E & shutdown GTS-G

WP&B Prod. Revision 2015 = 8,056 MMscfdWP&B Gas Supply Revision 2015 = 6,402 MMscfdState Budget Revision 2015 = 6,989 MMscfd

PRODUCTION 2015YTD Production until 31 Dec: 8,113 MMscfd

Achievement to WP&B Revision : 100.7%


OIL AND GAS LIFTING OF JANUARY – DECEMBER 2015

Oil and gas lifting shall mean oil and/or gas production which has been sold/distributed. The actual oil lifting

in average for the period of January to December 2015 was 776 Mbopd or 96.7% of the WP&B Revision 2015

targeted at 802 Mbopd. The actual gas distribution in the same period was 6,963 BBTUd (equivalent to

1.13 million boepd), or 105% of the WP&B Revision 2015 targeted 6,632 BBTUd (equivalent to

1.14 million boepd).

OIL LIFTING AND GAS DISTRIBUTION

2,500

2,000

1,500

1,000

500

-

Jan

723

1,136

Oil Lifting

Gas Lifting

Feb

743

1,162

Mar

727

1,117

Apr

727

1,238

May

806

1,067

Jun

828

1,238

Jul

714

1,226

Aug

766

1,151

Sep

858

1,176

Oct

754

1,314

Nov

913

1,280

Dec

753

1,170

MB

OE

PD

35

1,859 1,9051,844

1,9651,873

2,066

1,940 1,917

2,0342,068

2,193

1,923Total Oil and Gas

Target


Oil Lifting Volume

776 Mbopd

Oil RevenueUS$13.7 Billion

Oil Price(US$48.3/bbl)

GOI ShareUS$5.7 Billion

Cost Rec.US$7.2 Billion

Net Contr. ShareUS$0.8 Billion

GOI ShareUS$6.2 Billion

Cost Rec.US$6.2 Billion

Net Contr. ShareUS$3.3 BillionGas Price

(US$6.2/MMBtu) *)

GasRevenueUS$15.7 Billion

Gas Lifting Volume1,130 Mboepd (6,963 BBtud)

DISTRIBUTION OFOIL AND GAS REVENUESOIL AND GAS REVENUES PER 31 DECEMBER 2015

The State Revenue from upstream oil and gas sector for the period of 1 January to 31 December 2015 was

US$11.9 billion consisting of revenue from oil in the amount of US$5.7 billion and revenue from gas in the amount

of US$6.2 billion, or equal to 86% of the State Revenue targeted in the WP&B Revision 2015 at US$13.8 billion.

The amount of the state revenue is 40% of the total revenue generated by upstream oil and gas industry.

P

S

C

CRUDE OIL

Total GOI ShareUS$11.9 Billion

Total Cost RecoveryUS$13.4 Billion

Total Net Contractor Share

US$4.1 Billion

NATURAL GAS

BI (S) Acc. No. 600,000on behalf of Minister of Finance

36

40%

46%

14%


REVENUE DISTRIBUTION INUPSTREAM OIL AND GAS SECTOR

*) Data in 2015 based on IVQ FQR 2015 by 19 April 2016 (unaudited)

Significant decline of Indonesian Crude Price (ICP) (declined by 50% of 2014's ICP) hit directly on the decline of

State Revenue in 2015, with the average ratio of State Revenue (Total GOI Take) to Gross Revenue was 40%,

while the average ratio of PSC Contractor revenue (Net Contractor Take) to Gross Revenue was 14%. This

indicated that the government still received sufficient profit, but the Return on Investment (ROI) from PSC partners

decreased. Therefore, it needs the support of the government in providing a more modest deregulation, as well as

fiscal incentives selectively to maintain a conducive and profitable investment climate in the upstream oil and gas

industry.

100

90

80

70

60

50

40

30

20

10

-

120,00

80,00

40,00

-

BIL

LIO

N U

S$ U

S$/B

BL

78.87

110.85 112.33105.02

95.57

48.26

Average ICP

37

Cost Recovery

GOI Share

Net Contractor Share

Gross Revenue

2010

11.8

26.5

7.6

45.9

2011

15.2

35.9

10.2

61.3

2012

15.5

35.4

10.3

61.3

2013

15.9

31.2

9.4

56.5

2014

16.3

26.8

8.2

51.2

2015*

13.4

11.9

4.1

29.4


SAVING FROM JOINT PROCUREMENT

EFFICIENCY ON COST RECOVERY

SKK Migas continues to control operating costs in order to reach the most effective and efficient level, thereby

contributing to the optimal production/lifting and State Revenue from the upstream oil and gas sector. In 2015, the

actual investment (exploration and exploitation) disbursed by upstream oil and gas industry was US$15.6 billion.

Meanwhile, the cost recoverable to PSC Contractors in the same period reached US$13.6 billion.

Expenditure budgeted and spent is aimed to maintain the national oil and gas production profile, so it is used to

support production activities, conducting workover and well services, as well as perform maintenance activities of

production facilities. The activities of development drilling, additional production facilities executed more selectively

and efficiently, taking into account the economics of the project, and also some development drilling activities have

been delayed to the next fiscal period.

Throughout 2015 some saving had been carried out to maintain the continuity of operations in the upstream oil

and gas in facing the challenges of low world oil prices. The steps taken for saving are through the strategy of

joint procurement, optimizing joint utilization of assets; which was applied mainly to the PSC Contractors having

adjacent areas, negotiating prices with providers of goods/services, as well as reevaluating the economics of

projects which were affected by the oil price.

JOINT PROCUREMENT

Procurement saving of goods and services by PSC Contractors in 2015 reached US$351.5 million from the target

of US$100 million. The savings can exceed the target due to the implementation of the negotiation of special

conditions related to the drop of world oil prices on major commodity contracts (rig, EPCI, ship, OCTG-pipeline,

and other services).

MIL

LIO

N U

S$

350

300

250

200

150

100

50

0

20

50

80

125

165150

100

33.2

70.999.7

147.96

109.7 89.11

351.5

Target

Actual

38

2009 2010 2011 2012 2013 2014 2015


OPTIMIZATION OF ASSET UTILIZATION

Saving value of optimizing asset utilization in 2015 amounted to US$47.03 million consisting of activity of materials

transfer amounted to US$34.83 million and the saving from the ex-used assets amounted to US$12.2 million.

Throughout 2015, in addition to asset utilization through the transfer of material, there are eleven Facility Sharing

Agreement (FSA) approved by SKK Migas. Ten FSA is a joint utilization agreement among the PSC Contractors,

while there is one utilization agreement of PSC facility between PSC Contractor and a third party beyond the

upstream oil and gas industry, which is the PT. Medco E&P Malaka Rights of Way (ROW) utilization agreement by

PT. Pertamina Gas (Pertagas).

FSA between Medco and Pertagas have been proposed by SKK Migas to the Minister of Finance on November

2015 and is currently under the evaluation process by the Ministry of Finance. The estimate of Non-tax State

Revenue (PNBP) is Rp584 million, plus the rental fee that will be determined based on the approval of the Minister

of Finance. The FSA is proposed to be given approval until February 2018.

OPTIMIZING ASSET UTILIZATION

50

45

40

35

30

25

20

15

10

5

0

Target

Actual

2009 2010 2011 2012 2013 2014 2015

15

28

25 25

30

35 35 35

40

43 43

4947

3739

MIL

LIO

N U

S$


No

1

2

3

4

5

6

7

8

9

10

11

Title of Facility Sharing Agreement

Facility Sharing of Rights of Way (ROW) PT. Medco E&P Malaka (Medco) by PT. Pertamina Gas (Pertagas)

Amendment Concept of Facility Sharing Agreement between JOB PTM Talisman Jambi Merang & Petrochina International Jabung

Request for approval of FSA Amendment Revision between JOB PTM Talisman Jambi Merang & Petrochina International Jabung

Proposed signing of Amendment of Facility Sharing Agreement between JOB PTM Talisman Jambi Merang & Petrochina International Jabung

Facility Sharing Agreement of State-owned facilities between Chevron Indonesia Company & Total E&P Indonesie Facility Sharing Agreement of State-owned facilities between Chevron Indonesia Company & Total E&P Indonesie

Document of State-owned Facility Sharing Agreement in West Kampar Contract Area between PT. Chevron Pacific Indonesia (PT. CPI) and PT. Sumatera Persada Energi (PT.SPE)

Revision of State-owned Facility Sharing Agreement between PT. Chevron Pacific Indonesia (PT. CPI) and PT. Sumatera Persada Energi (PT.SPE)

State-owned Facility Sharing Agreement (FSA) between PT. Chevron Pacific Indonesia (PT. CPI) and BOB Pertamina Bumi Siak Pusako

State-owned Facility Sharing Agreement (FSA) betweenPT. Chevron Pacific Indonesia (PT. CPI) and BOB Pertamina Bumi Siak Pusako

Revision of State-owned Facility Sharing Agreement (FSA) between PT. Chevron Pacific Indonesia (PT. CPI) and BOB Pertamina Bumi Siak Pusako

Amendment No. 1 State-owned Facility Sharing Agreement (FSA) - PT. Chevron Pacific Indonesia (PT. CPI) and PT. PHE Siak (Request for Approval of SKK Migas) – Pipeline

Revision of Amendment No. 1 State-owned Facility Sharing Agreement (FSA) - PT. Chevron Pacific Indonesia (PT. CPI) and PT. PHE Siak

Amendment No. 1 State-owned Facility Sharing Agreement (FSA) - PT. Chevron Pacific Indonesia (PT. CPI) and PT. PHE Siak (Request for Approval of SKK Migas) – Electricity

Revision of Amendment No. 1 State-owned Facility Sharing Agreement (FSA) - PT. Chevron Pacific Indonesia (PT. CPI) and PT. PHE Siak - Electricity

Submission revised state-owned facility sharing agreement of land and facilities for pipeline systems, and Terminal operated by PT. Chevron Pacific Indonesia (PT. CPI) - for approval SKK Migas

Revision of state-owned facility sharing agreement between PT. Chevron Pacific Indonesia (PT. CPI) and PT. EMP Tonga

Application for approval of FSA Gas and Condensate (Gas) between Total E&P Indonesie and Pearl Oil (Sebuku)

Application for approval of FSA Gas and Condensate (Condensate) between Total E&P Indonesie and Pearl Oil (Sebuku)

BetweenPSC

Contractor

√

√

√

√

√

√

√

√

√

√

√

Time Period (FSA)

28 February 2018

5 June 2014 - 9 May 2015

2 January 2013 - 31 December 2017

2 January 2013 - 31 December 2017

Effective Date - 8 August 2016

9 August 2013 - 8 August 2016

1 September 2014 - 27 May 2016

1 September 2014 - 27 May 2016

Effective Date - 8 August 2016

27 October 2013 - 31 December 2017

27 October 2013 - 31 December 2017

PSC & Non PSCContractor

Utilization

40

Categoryof Facilities

Land (ROW)

Pipeline Facilities

Production Facilities (Gas)

Production Facilities (Condensate)

Production Facilities (Pipa)

Pipeline and Production Fasilities

Pipeline and Production Fasilities

Electricity

Land, Pipeline and Production Facilities

Pipeline and Production Facilities(Gas)

Pipeline and Production Facilities

(Condensate)

EFFORTS TO INCREASE PRODUCTION AND RESERVES | SKK MIGAS ANNUAL REPORT 2015

CHAPTER II

EFFORTS TO INCREASE PRODUCTION AND RESERVES



43

REALIZATION OF NEW PROJECTS

There are 71 ongoing upstream oil and gas projects throughout 2015, where 5 of them are scaled mega projects

which are Banyu Urip project, Jangkrik and Jangkrik North East Project, Tangguh Train-3 Project, IDD Project, and

Abadi Project.

In 2015, a total of 12 upstream oil and gas development projects were onstream and can generate additional

installed oil and gas production facility capacity of approximately 212,039 bopd and 765 MMscfd.

ONSTREAM OIL AND GAS DEVELOPMENT PROJECTS 2015

No Project PSC ContractorsOil

(bopd)Gas

(MMscfd)

Installed ProductionCapacity

Onstream

1

2

3

4

5

6

7

8

9

10

11

12

SKG Lembak Project

Pelikan Field Development Project

Bukit Tua Development

Senoro Gas Development

Suban Mid Term Water Disposal

South Mahakam Dev. 3

KL Gas Lift Compressor

Kepodang Gas Development

Bekapai Phase 2B Facilities Modification

Asti-A Platform Development

Mila-A Platform Development

Banyu Urip

PT. Pertamina EP

Premier Oil NS BV

Petronas Carigali Ketapang 2 Ltd.

JOB Pertamina Medco E&P Tomori

ConocoPhillips (Grissik) Ltd.

Total E&P Indonesie

PT. PHE ONWJ

Petronas Carigali Muriah Ltd.

Total E&P Indonesie

CNOOC SES Ltd.

CNOOC SES Ltd.

ExxonMobil Cepu Limited

60

100

70

310

-

120

-

116

29

30

40

-

-

-

20,000

-

-

-

-

-

2,039

-

-

185,000

2015-Q1

2015-Q1

2015-Q2

2015-Q2

2015-Q2

2015-Q3

2015-Q3

2015-Q3

2015-Q3

2015-Q4

2015-Q4

2015-Q4


44

EFFORTS TO INCREASE OIL AND GAS PRODUCTION AND RESERVES

SEISMIC SURVEY ACTIVITIES IN 2015

Efforts to increase production and reserves continue to be carried out by SKK Migas and PSC Contractors. Since

early 2015, the efforts have shown a slower decline rate of production compared to the previous year. The efforts

to increase production and reserves are as follows:

EXPLORATION ACTIVITIES

In relation to the extensification efforts, SKK Migas continues to encourage PSC Contractors to increase oil and

gas production and reserves through exploration activities, both in exploration and exploitation contract areas.

The scope of activities carried out at this stage cover geophysical survey (2D and 3D seismic survey) and

exploration well drilling. Particularly in CBM contract areas, the exploration activities are added with CBM drilling

activities (exploration and corehole) and dewatering.

CONVENTIONAL OIL AND GAS

• SURVEY

In 2015, PSC Contractors carried out 10 2D seismic surveys covering 4,083 km and 5 3D seismic surveys

covering 1,773 km² and 13 non-seismic activities.

4

3

2

1

0

Jan

1

1

Offshore

Onshore

Feb

0

1

Mar

0

1

Apr

0

1

May

2

0

Jun

1

3

Jul

0

0

Aug

0

1

Sep

0

1

Oct

0

0

Nov

0

0

Dec

0

2

TOTAL

4

11

AC

TIV

ITIE

S


45

• EXPLORATION WELL DRILLING

In 2015, 35 exploration wells were drilled. This comprised of 30 new wells and 5 reentry wells. Based on location,

it is comprised of 33 onshore wells and 2 offshore wells.

NON-SEISMIC SURVEY ACTIVITIES IN 2015

EXPLORATION WELL DRILLING IN 2015

5

4

3

2

1

0

Jan

0

0

Jan

1

1

0

2

Feb

2

2

0

4

Mar

4

4

0

8

Apr

5

1

0

6

May

1

3

1

5

Jun

4

4

0

8

Jul

3

2

0

5

Aug

2

4

0

6

Sep

2

4

0

6

Oct

3

2

0

5

Nov

5

2

0

7

Dec

0

4

1

5

Offshore

Onshore

Onshore Unconventional

Onshore Conventional

Offshore Conventional

Total

Feb

0

0

Mar

1

0

Apr

0

0

May

0

1

Jun

0

2

Jul

0

1

Aug

1

4

Sep

0

0

Oct

1

0

Nov

0

1

Dec

1

0

TOTAL

4

9

AC

TIV

ITIE

SA

CT

IVIT

IES

CONSTRAINTS ON REALIZATION

Land Acquisition

Permits Process

Internal PSC Contractors

21

3

7

68%

10%

22%


46

UNCONVENTIONAL OIL AND GAS

In 2015, PSC Contractors drilled 25 new CBM wells and 7 reentry existing wells, bringing the total of 32 activities.

CONSTRAINTS ON THE IMPLEMENTATION OF UNCONVENTIONAL OIL AND GAS CA EXPLORATIONCOMMITMENT PER AREA 2015

Jan

1

Feb

2

Mar

4

Apr

5

May

1

Jun

4

Jul

3

Aug

2

Sep

2

Oct

3

Nov

5

Dec

0Onshore Unconventional


Land Acquisition

Permits Process

Internal PSC Contractors

Site Preparation

Changes in Work Program

Equipment

Land

Permits

Infrastructure

Internal PSC

G&G

Social

Operational

Identified from*

SUMATERA : 22 CAs

KALIMANTAN : 28 CAs

TOTAL : 50 CAs

* 1 CA might have more than one constraint

1 16

4

11

9

3

3

12

11

10

3

1

7

Main constraints in SUMATERA area are equipment,

land acquisition, and permits. Meanwhile, main

constraints in KALIMANTAN area are equipment,

land acquisition, permits, and

infrastructure.

19

8

4

19

36 22%

9%

5%

22%

42%

0


47

EXPLOITATION ACTIVITIES

PRODUCTION WELL DRILLING (EXPLOITATION WELL)

As an effort to reduce the decline rate of production, SKK Migas encourages PSC Contractors to drill development

wells (infill wells) as well as to perform well maintenance (workover/well service). In 2015, 541 exploitation wells

were drilled, which was 86 wells less than the 627 wells planned. This is due to issues in rig schedule, the

economic value of wells associated to the oil price, subsurface evaluation, and internal constraints of

PSC Contractors.

WORKOVER & WELL SERVICE

Well maintenance was performed through the workover of 1,320 activities out of the 1,354 activities planned.

This was due to the scale of priority in the use of rig workover which caused pending of the executions in 2015.

EXPLOITATION DRILLING

According to the WP&B Revision 2015, it was

planned for a total of 627 wells, however by the

end of the year only 541 wells were drilled.

An amount of 86 wells could not be drilled due to

issues related to rig schedule, the economic

value of well associated to the oil price,

subsurface evaluation, and internal constraints

of PSC Contractors.

Jan

14

44

Feb

14

36

Mar

17

42

Apr

17

32

May

11

31

Jun

7

36

Jul

12

40

Aug

11

40

Sep

10

22

Oct

6

26

Nov

12

32

Dec

5

24

Total

136

405

Actual Offshore WP&B 2015

Actual Onshore WP&B 2015

ACTUAL DEVELOPMENT DRILLING JANUARY-DECEMBER 2015 ACTUAL ACHIEVEMENT OF REV WP&B 2015


80

70

60

50

40

30

20

10

0

WE

LLS

WE

LLS

541

627

Actual

Target

Rig schedule

Economic value of well associated to the oil price

Subsurface evaluation

POFD evaluation

Internal constraints of PSC Contractors 56

15

9

2 4


48

ENHANCED OIL RECOVERY

In order to increase oil reserves and production, SKK Migas encourages PSC Contractors to implement EOR

activities, both in the study and the field trial/pilot stages. In 2015, there was 1 proposed EOR pilot activity

(Pertamina EP) and 3 ongoing field trials/pilots, which are:

LIMAU FIELD (ALKALINE SUFACTANT POLYMER METHOD), PERTAMINA EP

The status in 2015, Pertamina EP is preparing to submit a pilot EOR proposal of ASP Flooding method to

SKK Migas.

WIDURI FIELD (POLYMER METHOD), CNOOC

The Polymer Flooding Pilot Project in Widuri Field is ongoing and is planned to complete in 2018. The estimated

incremental recovery until the end of the project amounted to 236 Mbo for unrisked case and 162 Mbo for risked

case. However, due to declining of oil prices, CNOOC decided to dismiss this field trial at the end of 2015, with a

cumulative oil production of 46.1 Mbo.

On the other hand, a total of 31,578 well services were performed out of the 34,060 planned.

WORKOVER

WELL SERVICE

Jan

113

29

84

Jan

2,848

839

2,009

Feb

111

29

82

Feb

2,765

920

1,845

Mar

115

27

88

Mar

3,042

792

2,250

Apr

123

23

100

Apr

2,872

741

2,131

May

97

17

80

May

2,603

729

1,874

Jun

81

11

70

Jun

2,808

656

2,152

Jul

110

16

94

Jul

2,627

850

1,777

Aug

149

31

118

Aug

2,812

661

2,151

Sep

113

29

84

Sep

2,130

687

1,443

Oct

130

15

115

Oct

2,169

669

1,500

Nov

122

38

84

Nov

2,470

746

1,724

Dec

56

7

49

Dec

2,432

698

1,734

Act

ual Y

TDA

ctua

l YTD

Pla

n Y

TDP

lan

YTD

Pro

ject

ed

Ach

ieve

men

tP

roje

cted

A

chie

vem

ent

Rev

ised

W

P&

B 2

015

Rev

ised

W

P&

B 2

015

Total

Offshore

Onshore

Total

Offshore

Onshore

160140120100806040200

3,0002,5002,0001,5001,000

500-

1,350

1,300

1,250

1,200

1,150

1,100

35,000

34,000

33,000

32,000

31,000

30,000

29,000

100%

80%

60%

40%

20%

0%

100%

80%

60%

40%

20%

0%

AC

TIV

ITIE

SA

CT

IVIT

IES

1,320

31,578

1,321

33,751

1,354

34,060

97%

93%

97%

93%

100%

94%

1,354

34,060


WIDC-16 PRODUCTION FORECAST

ELECTRICAL EOR METHOD

OLD RIMAU FIELD (ELECTRICAL EOR METHOD), MEDCO E&P

The Electrical EOR Field Trial in the Old Rimau CA is ongoing and expected to complete in 2015. The field trial was

conducted on a number of wells. It is currently ongoing and the results are being evaluated.

MINAS FIELD (POLYMER FIELD TRIAL), PT. CHEVRON PACIFIC INDONESIA

The Polymer Injection Field Trial in the Minas Field began on 13 April 2015 and ends on 24 November 2015.

The field trial was conducted on a 4.5 acres area that produces a cumulative oil of 14.7 Mbo with a recovery factor

of 4.6%.

1 Apr 12 14 Aug 13 27 Dec 14 10 May 16 22 Sep 17 4 Feb 19

350.0

300.0

250.0

200.0

150.0

100.0

50.0

0.0

OIL

RA

TE

(BO

PD

)

WF Base

Polymer Flooding Risked

Polymer Flooding Unrisked

49

1Electricity is sent fromthe power supply to thesurface anode (+) and thewell-bore cathode (-)

2Electric current is passedthrough the groundtowards the anode (+)

3Cold cracking begins,breaking down the heavyoil’s molecular structure

4Electrokinetics causes fluids inthe reservoir to migrate to thecathode (-) creating a drivemechanism

5Oil around the well-boreis heated, oil becomesless viscous and can bepumped to the surface

CATHODE (-)

ANODE (+)


SHARING KNOWLEDGE FORUMS

In order to increase national oil and gas production, SKK Migas and PSC Contractors held sharing knowledge

events which are forums to share success stories as well as to develop a spirit of partnership to answer more

diversified challenges. Through this forum, it is expected to find a solution in facing the challenge of increasing

production, both in technical and nontechnical.

The followings are forums and workshops conducted by SKK Migas throughout 2015:

Upstream oil and gas industry committed to prioritizing the role of domestic industry in its operations to improve

the multiplier effect towards the national economy.

One form of commitment that is exemplified in the Work Procedure Guidelines (PTK) issued by SKK Migas to

manage the supply chain management of the PSC Contractors in the upstream oil and gas industry. One of the

main objectives of the guidelines is to enhance national capacity, such as the obligation of the local goods/services

procurement and the terms of consortium that must be composed of domestic companies.

Furthermore, it is necessary to enlarge the participation of national business entities in the upstream oil and gas

industry by disclosure of information both from the upstream oil and gas industry (demand) and from supporting

industry (supply). SCM Summit held by SKK Migas together with BP and Petronas is an annual meeting to give

opportunity for all professionals of upstream oil and gas supply chain management to exchange information,

share knowledge, and formulate strategies and breakthrough in supply chain management.

SUPPLY CHAIN

MANAGEMENT

SUMMIT 2015

IN JAKARTA,

14-17 MARCH 2015

50


The workshop began with the awards for PSC Contractor's performance of exploration. This year, the performance

assessment conducted in 96 Exploration CAs with the term of more than three years. The assessment criteria

includes financial liabilities, environmental liabilities, obligations of firm commitment, exploration drilling, and

discovery of hydrocarbons. All PSC Contractors is prior judged by the fulfillment of basic categories, such as

fulfillment of Firm Commitment, Financial Commitment, and the Environment and Baseline Assessment (EBA).

Results of the assessment for the basic category is divided into four zones, namely Black, Red, Pink, and Blue.

PSC Conctractors are stated into Black zone if they have not fulfilled all or parts of their Firm Commitment,

Financial Commitment, or only conducted exploration activities of geological and geophysical studies, or merely

done anything. PSC Contractors are stated in the Red zone when performing only a small part of their Firm

Commitment. Pink zone is for PSC Contractors who have been performing major part of their Firm Commitment.

PSC Contractors deserve to be in the Blue zone when fulfilled all Firm Commitments, Financial Commitment, and

EBA.

When the PSC Contractor has met the basic category and enters the Blue zone, SKK Migas subsequently

conducts an assessment based on the fulfillment of advance category, which is the discovery of hydrocarbons.

Assessment for the advance category is divided into 2 zones, namely Green and Gold.

A PSC Contractor may be in the Green zone when they are already in the Blue zone and has a technical discovery.

Meanwhile the Gold zone is reserved for PSC Contractors with results of basic assessment that are in the Blue zone

and has the possibility of economic discovery. From the results of performance assessment, 13 PSC Contractors

entered the Black zone, 15 PSC Contractors entered the Red zone, 21 PSC Contractors entered the Pink zone,

33 PSC Contractors entered the Blue zone, 10 PSC Contractors entered the Green zone, and 4 PSC Contractors

entered the Gold zone.

In addition to the award, SKK Migas also seeks intensively and comprehensively to support accelerated

commercialization of Exploration CAs to become Exploitation CAs which were recognized by the recommendation

and approval for the first plan of development (POD I). Internal problems in the PSC Contractors were a major

cause of unfulfilled Firm Commitment. Other obstacles of the PSC Contractors to fulfill their Firm Commitment

includes regulations, the availability of tools and operations, subsurface problems, and fiscal issues.

EXPLORATION AND

EXPLOITATION

COMMITMENT

MONITORING

WORKSHOP

IN JAKARTA,

27 MAY 2015

51


The event was attended by hundreds of investors and business entities who are keen to see the business

opportunities of flare gas utilization.

The discussion was held to optimize the outcome of the upstream oil and gas activities, including flare gas. Flare

gas still has economic value and is still beneficial for usage by the public and industries, but the use of flare gas still

face serious challenges both in operations and regulations.

Currently there are approximately 200 MMscfd of flare gas spread in distant locations with a volume range of 0.1 to

5 MMscfd in every location. The challenge is how to utilize the flare gas in a remote area.

Utilization of flare gas also encounters challenges in terms of regulation. Currently the use of flare gas is treated the

same as conventional gas, by prioritizing the supply to the power sector. This is still a constraint in the monetization

of flare gas in Indonesia.

PANEL DISCUSSION

OF FLARE GAS

MONETIZATION

IN INDONESIA

IN JAKARTA,

16 JUNE 2015

52


SKK Migas facilitated stakeholders to discuss the opportunities of mini oil refinery development by emphasizing on

identification of business opportunities of mini refinery in Indonesia.

The presence of mini oil refineries nearby areas of operation could be a solution to high

demand of fuel needs as well as solutions to the conditions of fields spread all around

Indonesia in remote areas, lack of transport infrastructure and pipelines, and also

inaccessible location from the buyer. Transportation of oil from these fields has been done

using a truck or stream transport. These two methods are very sensitive to the availability of

the transport fleet, weather conditions, and social security conditions. While transportation

by pipelines is not always economically viable considering the distance can reach 100 to

400 kilometers.

The above conditions often lead to the production of oil in these fields must be suspended

until the availability of the transport fleet, which remains suspend a high cost. As a result,

the lifting of oil from these fields were not optimal, which ultimately resulted in devaluation of

the field economic value.

SKK Migas expects this panel discussion to formulate recommendations to the government

as an input for the preparation of mini refinery development roadmap.

PANEL DISCUSSION

OF OUTLOOK AND

EXPERIENCES ON

USING MINI OIL

REFINERY

IN INDONESIA

IN JAKARTA,

27 AUGUST 2015

53


Indonesia HR Summit is an annual event that brings together HR practitioners all around Indonesia. Jointly held

with the Association of Human Resource Management (PMSM) Indonesia, the Indonesia HR Summit took place

from 8-9 September 2015 with the theme "Shaping a Strong Organization Capability to Sustain Harmonious

Industrial Relations in the World's Business Turbulance". This event provided an opportunity for professionals in the

HR field to share their experiences as well as build and expand the network with HR practitioners in the country

and abroad.

Not only the Minister of Energy and Mineral Resources, The 7th Indonesia HR Summit 2015 presented Minister of

Marine and Fisheries, Susi Pudjiastuti, as one of the speakers. On this occasion, Susi stressed the importance of

human resources contribution to improve the efficiency of work processes.

Many interesting and provocative concepts were discussed in diffeerent points of view throughout the 7th Indonesia

HR Summit 2015. The importance of building industrial relations, business diversity, as well as the character and

business ethics became the most discussed topic during the summit. The bottom line of this annual meeting is the

importance to stay positive and continue to take initiatives to endure the current economic slowdown situation.

THE 7TH INDONESIA

HR SUMMIT 2015

IN YOGYAKARTA,

8 SEPTEMBER 2015

54


The conduct of Exploration and Production Forum in 2015 upheld the theme "Riset & Eksplorasi: Masa Depan

Cadangan dan Produksi Migas Nasional". The forum is expected to be a means of sharing knowledge between

SKK Migas, PSC Contractors, and geoscientists in terms of exploration and exploitation of oil and gas in

Indonesia. For the past years, there were no significant reserve increase. At the same time, reserves that have

been discovered is continuously being produced and lifted. Potential discovery of new reserves in Indonesia is still

very large. The potential resources are still waiting to be explored. Crude oil prices' condition that have dropped

dramatically since the end of last year, justifies business decision to reduce exploration and exploitation activities in

the upstream oil and gas industry. In the contrary, these conditions should be used as an opportunity to increase

exploration activity, both geological and geophysical surveys, exploration drilling, and also studies.

The drop of crude oil prices implicated the decline in cost of goods and services supporting the upstream oil and

gas industry. Hence, it opens opportunities to boost exploration activities with expectations that when the reserves

are discovered, oil prices will return to normal.

The results of the discussion in the Exploration and Production Forum became a reference in formulating

appropriate strategies of exploration and exploitation in every area so that the PSC Contractors can carry out

these activities optimally.

FORUM EP 2015

IN JAKARTA,

21-23 SEPTEMBER 2015

55


SKK Migas conducted a series of publicizing activities of the upstream oil and gas industries in Aceh Province,

12-15 October 2015. The activity entitled "Mengenal Lebih Dekat Industri Hulu Minyak dan Gas Bumi", is

comprised of four discussions at universities and a discussion session with the mass media and non-governmental

organizations. The event was part of SKK Migas' support on the establishment of the Oil and Gas Management

Agency of Aceh (BPMA).

The event brought speakers from the Directorate General of Oil and Gas, Ministry of Energy and Mineral

Resources, and Head of Mining and Energy of the Province of Aceh. SKK Migas delivered materials of the

upstream oil and gas business, not only concerning exploration and production activities, but also regarding

the governance of this strategic sector. The events were done at the Universitas Syiah Kuala, Universitas Islam

Negeri (UIN) Ar-Raniry, Universitas Abulyatama, and Universitas Malikussaleh. More over, SKK Migas also held a

discussion session with the media, non-governmental organizations, and youth organizations.

MENGENAL LEBIH

DEKAT INDUSTRI

HULU MINYAK DAN

GAS BUMI

IN ACEH,

12-15 OCTOBER 2015

56


Until now, upstream oil and gas sector and universities were already linked through a cooperation of study,

scientific competition writing, and other cooperations. To widen the relationship, SKK Migas jointly held the

Academic Forum on Upstream Oil and Gas Industry with Institut Teknologi Bandung (ITB), Universitas Indonesia,

and Universitas Trisakti at the Hall of Universitas Indonesia in Depok on 25 November 2015.

Many challenges were encountered by the upstream oil and gas sector in maximizing production and lifting of oil

and gas for the prosperity of the people of Indonesia. One of the challenges was operational obstacles which often

hamper efforts to optimize the upstream oil and gas production, increase state revenues, and generate a multiplier

effect on the local, regional, and national economy. The problems that arise were often due to misunderstandings

or lack of thorough understanding of the upstream oil and gas industry.

The expectations through this event and by continuous cooperation, academic circles could be an effective agent

of information. The objectivity of scholars/academics could support the efforts of SKK Migas and all parties in the

upstream oil and gas sector in providing a factual understanding to the public about business prospects in the

upstream oil and gas. In a larger scale, academics are able to become the ground support for the development of

Indonesia, unexceptionally the upstream oil and gas sector.

ACADEMIC FORUM

IN DEPOK,

25 NOVEMBER 2015

57


Since 2013, SKK Migas' Exploration Division have been mapping prospects and suspended structures that may

be developed in the near term of every year. In the workshop, Pertamina EP was given the opportunity to propose

the PSE for structure findings that were considered economically viable and convenient to develop. On that event,

Pertamina EP presented 12 structures consisting of 32 closures with a total potential reserve resources (2C)

amounted to 351 MMboe and 11 prospects with potential reserve resources (2C) amounted to 179 MMboe.

Based on the Exploration Division's evaluation, there were nine acceptable and actionable PSE namely

Melandong, Northern PDM, Bambu Merah, Mangkang, North KTB, Karang Makmur, Gandaria, Tundan, and Step

Out Sangata with a potential resource reserves (2C) drawn by 285 MMboe. Furthermore, SKK Migas set the PSE

target for PT. Pertamina EP in 2016 with a potential reserve resources (2C) drawn by 228 MMboe derived from

5 structures, namely Benggala, Bambu Besar, Akasia Bagus, Bunyu, and Tapen.

The workshop also discussed about Pertamina EP's exploration in Eastern Indonesia. Eventhough oil and gas

reserves finding in Eastern Indonesia for the last few years was quite significant, Pertamina EP seems less

aggressive in exploring their contract area.

DETERMINATION OF

EXPLORATION STATUS

(PSE) WORKSHOP

IN YOGYAKARTA,

22-23 DECEMBER 2015

58


COOPERATION WITH OTHER INSTITUTIONS

The success of upstream oil and gas activities is strongly influenced by the support of stakeholders. Therefore,

in 2015, SKK Migas signed several cooperation agreements with other institutions as follows:

In order to establish a great relation with stakeholders and the community near the area of operation, SKK Migas

continue to improve cooperation with civil society organizations and local educational institutions. One

manifestation of these efforts is by cooperating with Universitas Papua. Cooperation between SKK Migas and

Universitas Papua was outlined in the memorandum of understanding (MoU) signed by the Chairman of

SKK Migas, Amien Sunaryadi and the Rector of the University of Papua, Suriel S. Mofu in Jakarta on 24 March 2015.

Through this cooperation, SKK Migas and Universitas Papua carry out activities that could synergize with the

upstream oil and gas industry, one of the example was conducting a mapping of customary rights (hak ulayat) and

social mapping of communities in West Papua Province as well as help facilitating relations with indigenous people

in the region inspite of smooth operations in the upstream oil and gas industry. These activities were carried out

in line with the efforts of SKK Migas and PSC Contractors to embrace indigenous peoples in order to support the

upstream oil and gas operations in West Papua. The continuity of operations in the upstream oil and gas industry

was expected to provide maximum benefit for the people in West Papua.

In addition to maintaining good relations with local communities, the cooperation is expected to contribute

the development of human resources, particularly those from the West Papua Province. The synergy between

academics and professionals will support the efforts of universities in preparing human resources capability to

compete in the ASEAN Economic Community (AEC).

MEMORANDUM OF

UNDERSTANDING

WITH UNIVERSITAS

PAPUA IN JAKARTA,

24 MARCH 2015

59


In addition to the internal security of PSC Contractors, SKK Migas also cooperated with the police and army,

including the Indonesian Navy. As a national vital object, oil and gas facilities and equipments operates to maintain

the continuity of the national energy supply as well as being a symbol of the state sovereignty, especially those

located in border areas. The facilities and the equipments need to be secured to prevent disrupted oil and gas

production activities.

The Charter Agreement Extension between SKK Migas and the Indonesian Navy signed by Amien Sunaryadi

and the Indonesian Chief of Navy, Admiral TNI Ade Supandi in Surabaya on 12 May 2015. This cooperation is

valid for five years from 2015 to 2020. The signing was commenced as a refinement of the previous agreement

signed in 2010 following a change of nomenclature from BPMIGAS to SKK Migas. Furthermore, the upstream oil

and gas industry still needs the support from the Indonesian Navy in handling surveillance and patroll considering

security risks at sea are more complex. Currently, there are 28 offshore producing PSC Contractors spread all over

the oceans of Aceh to Papua. Offshore activities of producing PSC Contractors should be safe guarded due to

security problems such as theft of operation equipments and illegal fishing by foreign and traditional fishermen that

could disturb operations.

Indonesian Navy will support SKK Migas to prevent terror and sabotage towards offshore oil and gas facilities as

well as securing facilities and infrastructure of upstream oil and gas activities. Additionally, Indonesian Navy will

provide training to develop human resources of the security department and also exchange information over the

placement of personnel (liaison officer).

THE SIGNING OF

THE CHARTER

AGREEMENT

EXTENSION BETWEEN

SKK MIGAS -

INDONESIAN NAVY

IN SURABAYA,

12 MAY 2015

60


SKK Migas takes proactive steps through cooperation with educational institutions, both domestic and abroad.

On 20 October 2015, SKK Migas established a formal cooperation in the field of education with University of

Aberdeen. Cooperations set out in the MoU was signed by the Chairman of SKK Migas, Amien Sunaryadi and

Emre Usenmez as Internationalization Deputy Director for the School of Law at the University of Aberdeen.

Based on the MoU, SKK Migas and the University of Aberdeen have agreed to conduct mutual cooperation

and collaboration in upstream oil and gas activities. One of the focus of the activities in this agreement is the

development of personnels through post-graduate courses.The partnership also provides an opportunity for both

sides to exchange materials, information, research, and also academic and professional publications. Educational

opportunities provided is not limited to post-graduate courses. Manpower of national upstream oil and gas

industry could attend special short-term training programs as well as brief studies.

Furthermore, SKK Migas and the University of Aberdeen can exchange an opinion on technical, financial, and/or

any related legal matters related to upstream oil and gas activities. Although the MoU focuses on five main points,

but the scope of cooperation and collaboration involved could expand and is not limited to those activities.

Up until today, SKK Migas has cooperated with various educational institutions, both universities and training

institutions. Similar cooperation has also been done by PSC Contractors to support the development of local

human resources. In collaboration with the University of Aberdeen, the employee's knowledge is expected to

develop so that the qualifications of human resources in the upstream oil and gas sector shall exceed.

MEMORANDUM OF

UNDERSTANDING

SKK MIGAS WITH

UNIVERSITY OF

ABERDEEN IN BALI,

20 OCTOBER 2015

61


Competence of qualified manpower in finance is needed by SKK Migas in exercising supervision and control,

in auditing the operating costs of upstream oil and gas activities. To meet this need, SKK Migas established

cooperation with PKN STAN. Such cooperation is embodied in the MoU signed by the Chairman of SKK Migas,

Amien Sunaryadi and Director of PKN STAN, Kusumanadji. The agreement was signed on an additional event at

the reunion of the Alumni Association of STAN (Ikanas) in the PKN STAN Campus in South Tangerang on

21 November 2015.

Cooperation between SKK Migas and PKN STAN includes audit of the PSC Contractors' compliance in the

scope of supply chain management. This cooperation is closely related to the task of SKK Migas in conducting

supervision and control, especially those associated with the monitoring of operating costs from the beginning until

the PSC Contractor proposes a cost recovery.

In addition, SKK Migas and PKN STAN agreed to support the development of human resources in the financial

sector through cooperation in education and training. This cooperation includes providing education and training

by PKN STAN for SKK Migas employees regarding State Financial aspects. SKK Migas also plays a role in

preparing qualified manpower by providing internships for PKN STAN students.

Concerning education and training in the PKN STAN, SKK Migas will provide a speaker or competent sources

from the upstream oil and gas industry. Over the next three years, SKK Migas and PKN STAN will also collaborate

on research and community service. Equipped with the right understanding, the students are expected to be

ready when entering the career in the upstream oil and gas as well as when working in government agencies that

are associated with SKK Migas specialized in audit, such as the Finance and Development Supervisory Agency

(BPKP), the Supreme Audit Board (BPK), and the Directorate General of Taxes Ministry of Finance.

THE MOU SIGNING

WITH INDONESIA

STATE COLLEGE OF

ACCOUNTANCY

(PKN STAN) IN

SOUTH TANGERANG,

21 NOVEMBER 2015

62


CONSTRAINTS ON THE ACHIEVEMENT OF PRODUCTION TARGET

The Postponed Onstream Project Schedule

1. Banyu Urip Full Scale – MCL (46,000 bopd & 37 MMscfd)

2. Ridho Field – Odira Karang Agung (1,600 bopd)

3. TBA Field – JOB Pertamina PetroChina Salawati (600 bopd & 3 MMscfd)

4. Bukit Tua Field – Petronas Ketapang II (100 bopd & 4 MMscfd)

5. Kepodang Field – Petronas Muriah (13 MMscfd), constraint in downstream

6. Bayan Field – Manhattan Kalimantan Investment (50 bopd & 33 MMscfd)

Contribution Activities and Existing Decline of Pertamina EP

Economic Field (EMP Tonga, EMP Gebang)

Unplanned Shutdown

• Production Facilities (Equipment, Electrical, Operational, Hose, SBM) (7,600 bopd & 91 MMscfd)

• Offtaker (Buyer Absorption) (1,700 bopd & 100 MMscfd)

• External (Social and Natural Disturbances) (600 bopd & 1 MMscfd)

• Subsurface (sand, watercut increase, etc.) (500 bopd & 2 MMscfd)

TOTAL

CHALLENGES IN THE ACHIEVEMENT OF PRODUCTION TARGET 2015OPPORTUNITY LOSS

OPPORTUNITY LOSS

bopd

48,350

9,200

200

10,400

68,150

60

-

-

194

254

MMscfd

63


CHALLENGES IN THE ACHIEVEMENT OFPRODUCTION TARGET

A. Global Condition

- Decline of world oil prices

B. Main Obstacle

- Postponed onstream schedule

- Sharp decline rate (about 28%)

- Subsurface problems

- Operational problems

- Unplanned/planned shutdown

C. Other Constraints

- Land acquisition and permits problems

- Procurement problems

- Low absorption from buyers

- Problems in CA management regarding extension of CA

EFFORTS ENDEAVORED

• Efficiency in cost spending to maintain the economic value

• Monitor more intensively on ongoing projects

• Increase development wells, workover, and well services

• Handling subsurface problems

• Minimize operational problems

• Reduce unplanned shutdown

• Coordinate more actively with related institutions

• Formulate a better procurement strategy

• Encourage problems settlement in the midstream and downstream

• Give certainty of CA management long before expiration of contract

EFFORTS ENDEAVORED 64

MAJOR PROJECTS | SKK MIGAS ANNUAL REPORT 2015


CHAPTER III

MAJORUPSTREAM PROJECTS


67

A total of 71 development projects of upstream oil and gas

production facilities in both oil and gas plan of development

carried out in 2015. Of the various stages of the projects that has

been carried out in 2015, 12 projects are scheduled onstream in

2015, 25 projects are scheduled onstream in 2016, 14 projects

are scheduled onstream in 2017, 5 projects are scheduled

onstream in 2018, 9 projects are scheduled onstream in 2019,

5 projects are scheduled onstream in 2020, and 1 project is

scheduled onstream in 2024.

ADDITIONAL CAPACITY OF UPSTREAM OIL AND GAS PRODUCTION FACILITIES 2015-2020

2015 2016 2017 2018 2019 2020 2024

300

250

200

150

100

50

-

214

MBO

EPD 137

47

148

25

223

25

55

8

237

21

-

155

214

Oil

Gas

2015

Pelikan

Bukit Tua

Senoro

South Mahakam 3

Kepodang

Mila dan Asti

BanyuUrip

2016

Donggi

Wasambo

Karendan

CPP 2

IDD Bangka

2018

Lengo

TSB Phase 2

Ande-Ande Lumut

SP

2017

Madura BD

Matindok

Jangkrik

Paku Gajah

MDK

MDA-MBH

Petapahan

2024

Abadi

2020

Jambu Aye Utara

BP Train-3

Kilo

YY

OO-OC-OX

2019

Jambaran Tiung Biru

West Belut

Buntal-5

KLD

Gajah Putri


68

MAJOR UPSTREAM PROJECTS OF OIL AND GAS UNTIL 2024

SKK Migas supervises specifically for the projects categorized as large-scale projects that have significant value

and production capacity. Five mega scale projects are Banyu Urip Project in Bojonegoro, East Java by ExxonMobil

Cepu Limited (EMCL); Indonesia Deep Water (IDD) Project in the Makassar Strait, East Kalimantan by Chevron

Indonesia Company (CICO); Abadi Project in the Arafura Sea, Maluku by Inpek Masela Ltd.; Jangkrik Project in the

Makassar Strait, East Kalimantan by Eni Muara Bakau B.V.; and Tangguh Train-3 Project in Bintuni, West Papua

by BP Berau Ltd. SKK Migas specifically assigned one task force unit of project acceleration (UPP), for each mega

project in order to support the implementation of those projects.

ANDE ANDE LUMUT

EPC Tender StageProduction (2018):25,000 bopd

JAMBU AYE UTARA

Preparation Tender FEED StageProduction (2020):110 MMscfd

KEPODANG

Onstream (Q3-2015)Production:116 MMscfd

BUKIT TUA

Onstream (First Oil Q2-2015, full onstream 2016)Production:20,000 bopd; 50 MMscfd

BANYU URIP

Construction (partly onstream Q4-2015, full onstream Q1-2016)Production:185,000 bopd

JIMBARAN TIUNG BIRU - CENDANA

EPC Tender StageProduction (2019):330 MMscfd

MADURA BD

Construction StageProduction (Q1-2017):110 MMscfd

MDA dan MBH

FPU: EPC Tender StageWHP: Construction StageProduction (Q4-2017):175 MMscfd

SOUTH MAHAKAM 3

Onstream (Q3-2015)Production:120 MMscfd

ABADI

Revised Stage of POD-1Production (Q4-2024):7.5 MTPA (1,200 MMscfd)

DONGGI SENORO

SENORO:Onstream Q2-2015310 MMscfd; 6,000 bopd

DONGGI:Construction Stage60 MMscfd (Q2-2016)

MATINDOK:Construction Stage 65 MMscfd (Q1-2017), 500 bopd

JANGKRIK

Construction StageProduction (Q3-2017):450 MMscfd, 200 bopd TANGGUH TRAIN-3

FEED Stage (Final)Production (Q2-2020):3.8 MTPA (700 MMscfd), 3,200 bopd

IDD

BANGKA:Construction Stage115 MMscfd, 4,000 bopd (Q2-2016)

GENDALO-GEHEM:Revision Stage of POD-1Gendalo Hub: 700 MMscfd, 20,000 bopd (Q4-2022)Gehem Hub: 420 MMscfd, 27,000 bopd (Q2-2023)


Banyu Urip Project is the Banyu Urip Field development project of Cepu CA in the Regency of Bojonegoro, East

Java, with capacity of 165 Mbopd undertaken by ExxonMobil Cepu Limited (EMCL). The implementation of Banyu

Urip Project is divided into five parts of EPC contracts (Engineering, Procurement, and Construction), with the

progress made in 2015 as follows:

a. EPC1 : Construction of Central Processing Facility (CPF) and 3 Wellpads.

• 12 December 2015 : start-up Train A 12 December 2015

• 13 December 2015 : 4 hydrocarbon wells of Wellpad B flows into the CPF Train A at a rate of ± 40,000 bopd.

• 15 December 2015 : stabilized crude from the CPF Train A is sent via pipeline to the FSO.

b. EPC2 : Onshore oil pipeline construction of 72 km.

• Has been operating since 18 January 2015

c. EPC3 : Offshore oil pipeline construction of 23 km including the mooring tower.

• Has been operating since 28 January 2015

d. EPC4 : Construction of floating storage offloading (FSO) ”Gagak Rimang”.

• Conversion of MT Chios tanker having capacity of approximately 2 million barrels operated on

28 January 2015

e. EPC5 : Construction of infrastructure facilities.

• Fly Over Road operated on September 2014, raw water basin having capacity of 2.75 million m3 operated

on March 2015. The main building consist of offices, logistic warehouse, maintenance building, open yard

storage operated on September 2015.

In addition to those five EPCs, conducted drilling wells in Wellpad A, Wellpad B, and Wellpad C with a total of

42 wells using 2 drilling rig unit (Discovery 8/DS-8 and Discovery 9/DS-9). Banyu Urip Project completion was

delayed approximately 19-23 months from the initial EPC contract schedule due to among other:

• The negative impact related to the socio-economic (i.e, the amount and duration of the permit process, the

obligation to use local sub-contractors/vendors/workers, protracted of land acquisition, as well as anarchist

demonstration)

• The poor performance of the EPC Contractor (i.e, engineering delays, shortage of labor and construction

equipment, low labor productivity of sub-contractor, contractor financial problems)

69

BANYU URIP PROJECT -EXXONMOBIL CEPU LIMITED


While waiting for the completion work of EPC, the Early Production Facility (EPF) of Wellpad A and the Early

Oil Production of wellpad B have been strived in producing oil in early phase, as well as changing scenario of

commissionning CPF. The scenario changes in the form of partial commissioning by prioritizing the completion

of the oil separation process that divided into three phases, namely Phase-1 through the start up Train A with a

production target of 90 thousand bopd; Phase-2 through the start up Train B with a production target of

135 thousand bopd; and Phase-3 full scale with a production target of 165 thousand bopd.

Until end of 2015, the overall progress of Banyu Urip Project achieved 98.87% (actual) out of 99.90% (recovery

plan) and 100% (contractual baseline). Most of the work has been handed over from the Project Team EMCL to the

Operational Team EMCL. With the start up of CPF achieved, the average production by the end of December 2016

will be 169.31 bopd. The remaining work in 2016 is the completion work of EPC1 to achieve full scale capacity, as

well as the completion work of EPC5 in second quarter of 2016.

70


INDONESIAN DEEPWATERDEVELOPMENT PROJECT -- CHEVRON INDONESIA CO.

The Indonesian Deepwater Development (IDD) Project is a development project consist of four CAs located

in Makassar Strait which are Ganal CA, Rapak CA, Makassar Strait CA, and Muara Bakau CA (unitization). In

those four CAs, there are five fields which will be developed namely Bangka Field, Gehem Field, Gendalo Field,

Maha Field, and Gandang Field. The production from the wells drilled in those five fields is planned to flow in an

integrated manner through two hubs of Floating Production Unit (FPU) i.e. Gehem Hub and Gendalo Hub, and one

Subsea Tie-back Bangka at West Seno. Gas from FPU will be flowed to LNG Bontang Plant for further process to

be LNG.

IDD PROJECT LOCATION IN MAKASSAR STRAIT

71


Production capacity from Bangka Field approximately 115 MMscfd of gas and 4 Mbopd of condensate. The first

gas production (gas onstream) from Bangka Field is estimated to be in the first quarter of 2016.

The Development of Gendalo - Gehem Fields are delayed causing the IDD Project to be uneconomical in the

context of fist Plan of Development (POD-1 IDD) scenario, in connection with:

1. The declining volume that may be produced within the term of the existing PSC resulting from the delay in the

implementation due to several agreements with various related parties have not been finalized.

2. The increase of investment costs resulting from the change of market price.

3. The drop of gas price due to the weak market of LNG Asia in the future.

Based on these matter, Chevron Indonesia Co. propose Revision of POD-1 for IDD at the end of December 2015

which covers the following matters:

a. Additional reserves in the form of secondary reservoir from Maha and Gandang Fields (excluding POD-1 IDD

that has been previously approved);

b. Adjustment to the terms and conditions for the extension of the contract for Makassar Strait CA, Ganal CA, and

Rapak CA with reference to revision of POD-1 IDD.

Referring to the proposed revision of POD-1 IDD, First Production forecasts (gas onstream) to Gendalo Hub is

scheduled in the fourth quarter of 2022, and then Gehem Hub is scheduled in the second quarter of 2023.

Production capacitiy of Gehem Hub is estimated 420 MMscfd of gas and 27 thousand bpd of condensate, while the

production capacity of Gendalo Hub is expected 700 MMscfd of gas and 20 thousand bpd of condensate.

INDONESIAN DEEPWATER DEVELOPMENT PROJECT SCHEME

72

KUTEI BASIN

Gehem Field

Gandang Field

Gendalo Export Pipe

Maha Field

Gendalo Field


ABADI PROJECT -INPEX MASELA LTD.

Abadi Project is a development project of Abadi gas field by Inpex Masela Ltd. in Arafura Sea with sea depth

between 600-800 m. Gas production from Abadi Field is carried out to fulfill the domestic and export demands.

Abadi gas field is located in Masela CA, signed by the Government on 16 November 1998.

ABADI GAS FIELD - MASELA BLOCK

73

ABADI FIELD


The Plan of Development (POD-1) for Abadi Field was approved by the Government of the Republic Indonesia

dated 6 December 2010, in which the government agreed that scenario of Abadi Field development is using

production facilities of Floating LNG (FLNG) with capacity of 2.5 Mtpa of LNG and 8,400 bopd of condencate

during the production period of 30 years (with the estimated recoverable gas reserves of 4.6 Tcf and condensate

reserves of 91.02 MMbo). Total investment of POD-1 is estimated to reach US$5 billion, while the operating cost is

estimated to reach US$4 billion.

Inpex Masela Ltd. submitted draft proposal of POD-1 Revision with the scenario of FLNG 7.5 Mtpa on 23 April 2015.

This proposal was supported by the reserve certification by Lemigas (Government Bodies for Hydrocarbon

Certification) which stating additional gas reserves (from Abadi drilling wells - 8, 9, and 10) were significant enough

to 10.37 Tcf (90% P1) and can meet the needs for FLNG scenario of 7.5 Mtpa, with the equivalent of 1,200 MMscfd

gas production until the year 2048. Until August 2015, SKK Migas evaluate the proposed POD-1 Revision and the

selection of the LNG technology proposed by Inpex Masela Ltd., including establishing LNG Technology Studies

Team with the task of reviewing LNG processing technology scenarios for the development of Abadi Field. Inpex

Masela Ltd. submit final proposal of POD-1 Revision for Abadi Field Development on 3 September 2015. Further

SKK Migas sent a recommendation letter for approval of proposed POD-1 Revision for Abadi Field to the Minister

of EMR on 10 September 2015.

Considering various inputs and responses that arise in the process of discussion proposed POD-1 Revision

for Abadi Field, then further study was conducted on the selected scenario of Onshore LNG plant (OLNG) and

Floating LNG plant (FLNG), including the impact and benefit for the community and local industry (multiplier

effects). The study was conducted by an independent consultant and completed on 23 December 2015 with the

conclusion that the FLNG give greater benefit than OLNG. Referring to the results of the study, 23 December 2015

SKK Migas submitted additional recommendation to the Minister of EMR as further consideration for approval

of proposed POD-1 Revision for Abadi Field. Until the end of 2015, the process of discussion proposed POD-1

Revision for Abadi Field Development unfinished.

74


TANGGUH TRAIN-3 PROJECT - BP BERAU LTD. Currently in Bintuni, West Papua, there are LNG Tangguh plant Train-1 and Train-2 which have been operated

since 2009. The refineries produced LNG from the processing of natural gas coming from several working areas,

namely Berau CA, Muturi CA, and Wiriagar CA, each of which is managed by the BP Berau, BP Muturi, and

BP Wiriagar Contractor.

The Plan of Development for Tangguh Train-3 (POD-2 Tangguh) is a further development after Train-1 and Train-2

(POD-1 Tangguh) and was approved by the government on 2012. The construction of Train-3 is purposed to

develop and produce and monetize gas reserves prior to the expiration of the PSC in 2035.

The benefits from Tangguh Expansion Program (Tangguh Train-3) are:

• to make available the basic need and to support the welfare of local people;

• to support the plan of development of the Indonesia Government for Papua area; and

• to supply gas for electricity in West Papua area.

Preparation of the development of Tangguh LNG Plant has commenced since 2014 with the initial/preparatory

work such as camp, infrastructure, gas production facility, and pipeline.

Due to the influence of oil prices that continued to decline, in 2015 strategy of Tangguh Train-3 Project has a minor

changes. Early work were supposed to be held separately, combined with the implementation of the EPC Onshore

Tangguh Train-3, but a change in preliminary work strategy is expected will not disturb the work schedule and the

schedule of onstream in July 2020.

75


PROGRESS OF TANGGUH TRAIN-3 FEED UNDERTAKEN BY 2 CONSORTIUM

2015 is also the last year in preparation for the construction of Tangguh Train-3 Project, which this year FEED

technical work has been successfully completed according to plan .

Two consortium implementing FEED has sent technical results of the FEED work on 5 December 2015. The

completion of the FEED work will be one of the basic for determining the Final Investment Decision Project (FID).

Funding scheme and Principles of Agreement (PoA) is also one thing that is important in the implementation of the

Tangguh Train-3 Project. Discussion of PoA Train-3 related several issues including the FTP (First Trance Petroleum)

settings, transportation, sale, as well as other matters concerning the supervision and operation of LNG.

18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Dec-14M01

Jan-15M02

Feb-15M03

Mar-15M04

Apr-15M05

May-15M06

Jun-15M07

Jul-15M08

Aug-15M09

Sep-15M10

Oct-15M11

Nov-15M12

Dec-15M13

Jan-16M14

PR

OG

RE

SS

% -

PE

RIO

D

PR

OG

RE

SS

% - C

UM

ULA

TIV

E

Progress% - Period

Actual % - Period

Progress % - Cumulative

Actual % - Cumulative

76


JANGKRIK PROJECT– ENI MUARA BAKAU

Jangkrik Field (JKK) gas development began with the discovery of gas reserves in 2009 and 2010. Meanwhile,

the development of Jangkrik North East (“JNE”) began with the discovery of gas reserves in 2011. The Plan of

Development (POD-1) for JKK Field was approved in November 2011 with cummulative gas sold at 913 Bscf,

plateau for 5 years 9 months. POD-2 for JNE Field obtained the approval in January 2013, with cumulative gas

production at 417.5 Bscf. The development of these two fields are targeted to produce gas with total of

450 MMscfd, among others 300 MMscfd from JKK Field and 150 MMscfd from JNE Field.

JKK and JNE Fields in Muara Bakau CA are located offshore Makassar Strait, around 70km North East of Delta

Mahakam - Makassar Strait with the depth of approximately 450–500 m from the sea surface, and managed by

eni Muara Bakau PSC Contractor.

The development of JKK and JNE Fields is carried out in integrated manner in a project named Jangkrik Complex

Project.

LOCATION OF MUARA BAKAU CA

77


Gas production from Jangkrik Complex will be further processed into LNG at the Bontang LNG Plant by utilizing

the Peciko - Bontang 42” Gas Pipe of East Kalimantan starting from the tie-in location at Km. 7, through the facility

sharing scheme with other existing PSC Contractors namely Total E&P Indonesie, VICO Indonesia, and Chevron

Indonesia Co.

Meanwhile, condensate production from Jangkrik Complex will be delivered to Senipah Tank by utilizing 12”

Condensate Pipe of Handil-Senipah under facility sharing scheme with Total E&P Indonesie.

In the implementation, Jangkrik Complex Project covered three major works for the production facility

consisting of:

a. EPCI 1 - Floating Production Unit (“FPU”), with gas capacity of 450 MMscfd;

b. EPCI 2 - Risers & Flowlines Installation (“RFI”) including onshore pipeline & ORF;

c. EP3 - Subsea Production System (“SPS”) and several packages to support drilling and completion of

development wells.

JANGKRIK AND EAST KALIMANTAN SYSTEM (EKS) PIPELINE

DESIGN OF JANGKRIK COMPLEXDEVELOPMENT PROJECT

78

1. Gas: Tie-in at Km. 7 with 42” pipe of Peciko2. Condensate: Tie-in at Km. 7 with 12” pipe of Handil-Senipah3. New 20” pipeline from Km. 7 to Km. 21.65 (PK6.3)-15 Km4. Tie-in 20” Jangkrik branch with 20” existing pipe of Handil-Nilam in Km 21.65

6" c

onde

nsat

e fro

m F

PU

20" Nilam-Badak MP

20" Nilam-Badak LP

20" Nilam-Badak Bypass

HANDIL

MAIN DESIGN

Products are delivered to East Kalimantan System

Design age: 20 years

DOMESTIC (PETROCHEMICAL)

Nameplate Capacity:

Condensate Export

Gas Export

Estimated production: 300 MMscfd Estimated production: 150 MMscfd

wells wells

4,100 bopd (condensate)1,000 bwpd (water)

IDD Project


The overall progress of Jangkrik Complex project until December 2015 has reached 57.42%. First gas production

from Jangkrik Complex Field is estimated to take place in the first quarter of 2017. The gas will mostly be utilized

to meet domestic demand either as industrial raw materials or as fuel.

TIME MANAGEMENT FOR JANGKRIK COMPLEX DEVELOPMENT PROJECT

79

MASTER SCHEDULE

Jangkrik Complex Project Development

Permits and Licences

Agreements for Facilities Sharing

Agreements with Buyers

Drilling Activities

Completion Activities

2nd Tie-in Pipeline Extension

SPS-EP3 Contract

Detailed Engineering, Procurement, and Fabrication

Offshore Campaign and SURF Hook Up

Hull/LQ and Topsides

Integration @ Shore, Towing, Mooring, Hook Up, and Commissioning

Agreement with TEPI, CICO

CA

CA

L01

Exploration Well

XX drill Start

LLIs PO Placement Starting Topside and LQ Fabrication

Flexible Pipes PO Rigid Pipes PO (12"&4" SMLS)

Rigid Pipes PO (24" LSAW)

Key Terms/HoA LNG SPA for domestic demand with Pertamina

PPU-ECM1Contract

PPU-ECM2Contract

Drilling

2013 2014

3Q 1Q 2Q 3Q 4Q4Q

Commercial


80

Land Certification

POA & BM Swap & Allocation Agreement

LNG Export HOAs CompleteLNG SPAs Qty A&B with Pertamina signed

Hull Ked Laying Hull mega block integration

LQ eretion on Hull Hull Dock Out Hull @ Karimun

Hull/LQ ready for Sail-awayOnshore Commissioning Completed

ITM loadout

@ Shore Comm. Start

FPU ready for SURF Hook up

1st GAS

Lot1 X-Tree Delivery

JNE-8dir drill completed

JKNE#1 drill completed

JKK Cluster2 drill completed

JKK Cluster3 drill completed JKK C1 drill completed

JNE Wells Ready

Completion LLI delivery

JKK4Dir

JKK3Dir JKK C1 ready JKK C3 ready JNE C1 ready

JNE Wells ready

JKK 11 Well Ready

X-Tree 7&8 Delivery Manifolds Delivery

Lot2 X-Tree Delivery Umbilical DeliveryConnector last Delivery

Start Hull Fabrication

Onshore work Started

Shore approach pretrench started

Early Work started ORF equipment Found start Hot tap start Mechanical Completion

PL Installation start

Shore Pull start Deep Water PL Installation start Manifolds Installation start SURF Hook up start

MWA Installation start

Coated Pipe 1st DeliveryFlex Pipe Delivery

MWA Fabrication Start

FPU Flag available FPU Class available

20172015 2016

1Q1Q 1Q2Q 2Q3Q 3Q4Q 4Q 2Q 3Q

JKK 11

JKK 11


SENORO PROJECT - JOB PERTAMINA-MEDCO TOMORI SULAWESI AND DONGGI MATINDOK PROJECT - PT. PERTAMINA EP

FIELD DEVELOPMENT OF SENORO GAS -JOB PERTAMINA - MEDCO TOMORI SULAWESI

Senoro Field is located in eastern part of Senoro-Toili CA which was discovered through the exploratory wells of

Senoro-1 in April 1999. The POD for Senoro Field was approved in 16 May 2005. The change of reserves and

allocation of gas as decided by the government has made changes in the estimated production that leads to the

change in the capacity of the production facilities used as the basis of the POD revision approved on

9 May 2011.

Net production of gas from Senoro Field is 310 MMscfd. The scope of work in POD covers, among others,

Production Facilities consisting of:

a. Central Processing Plant (CPP) with capacity of 2 x 155 MMscfd;

b. 30” Gas Pipe of 27 km from CPP Senoro to LNG Plant of PT. Donggi-Senoro LNG (“DSLNG”);

c. Condensate Jetty Terminal;

d. Supporting facilities.

JOB Pertamina Medco Tomori Sulawesi (“JOB PMTS”) is a joint operating body between PT. Pertamina Hulu Energi,

PT. Medco Tomori E&P, and Tomori E&P Ltd. The construction has been carried out since September 2012, the

current production facility has reached full gas onstream on 21 May 2015.

Indonesian President Joko Widodo was accompanied by Minister of Energy and Mineral Resources, Sudirman

Said, inaugurated Senoro project as part of Pertamina's Integrated Mega Project on 2 August 2015. Senoro gas

production supplied to the Donggi Senoro LNG Plant. Donggi Senoro LNG plant with a capacity of 2.1 Mtpa with

an investment of US$2.8 billion. The refinery has been the key to the development effort and monetization of gas

reserves which for 30 years has not been developed in Central Sulawesi. Donggi Senoro LNG Plant managed by

PT. Donggi Senoro LNG is an LNG plant built as the first downstream model in Indonesia, do not overload the

country's investment and provide a high multiplier effect for national and local economy.

GAS PRODUCTION ALLOCATION Allocation (MMscfd) Senoro Field Cendanapura Field TOTAL

PT. PAU

PT. PLN

PT. DSLNG

TOTAL

50

-

250

300

5

5

-

10

55

5

250

310

81


SENORO PROJECT LOCATION MAP

INAUGURATION OF INTEGRATED PERTAMINA MEGA PROJECT BY INDONESIAN PRESIDENT JOKO WIDODO

82


MATINDOK AREA PROJECT – PT PERTAMINA EP

The development of this Matindok Gas Field is based on gas discovery in Matindok Area at Donggi, Matindok,

Maleoraja, Minahaki, Sukamaju, and Mentawa Fields with total reserves of ~ 0.7 Tcf (GCA certification of EUR) and

based on the needs to utilize gas from Matindok Area for LNG and Power Plant.

POD for Matindok Area (Donggi, Matindok, Maleoraja, and Minahaki Gas Fields for gas supply to LNG plant) was

approved by BPMIGAS on 24 December 2008. The reserves in Matindok field were added to 852.75 Bcf and gas

production from Matindok Area became 105 MMscfd. The change was covered under Revised POD-1, approved

by BPMIGAS on 22 September 2010.

From the scheme above, it can be illustrated that the objective of the development of this field is to monetize gas

from Matindok Area of 105 MMscfd (net) with allocation of gas sale as follows:

a. As a gas supplier of 85 MMscfd jointly with gas from Senoro Area-JOB PMTS of 250 MMscfd to the LNG plant

of PT. DSLNG (buyer);

b. As a gas supplier of 20 MMscfd jointly with gas from Senoro Area-JOB PMTS of 5 MMscfd to PLN

(prospective buyer).

GAS SUPPLY SCHEMEFROM MATINDOK ANDSONORO AREAS

83

Gas Supply

Electricity, Gas Supply

Fertilizer, Gas Supply

Upstream Downstream


MATINDOK GAS DEVELOPMENT PROJECT

For the purpose above, at present production facilities are constructed in Matindok Area with allocation based on

the following areas:

a. Production Facility of Donggi Field (CPP Donggi) with design capacity of approximately 60 MMscfd to process

gas from Donggi and Minahaki Fields;

b. Production Facility of Matindok Field (CPP Matindok) with design capacity of approximately 65 MMscfd to

process gas from Matindok and Maleoraja Fields.

Production from Matindok Area may reach the peak of 116 MMscfd for 12 years, and subsequently the production

will continue declining until reaching the abandonment pressure after 20 years of production. The condensate

production will began in conjunction with gas production and will reach the peak of 643 bopd.

Gas production from Matindok Area is incorporated with gas from Senoro Area at the Tie-in Point 1 (TIP 1) and

Tie-in Point 2 (TIP 2). The condensate produced from both production facilities will be flowed to the production

facilities of Senoro Fied operated by JOB Pertamina - Medco EP Tomori Sulawesi.

THE PROJECT SCOPE OF WORK

1. Construction of Gas Plant with the following design capacity:

• Donggi Project : 60 MMscfd

• Matindok Project : 65 MMscfd

2. Construction of Trunkline Pipe

• Donggi Project to tie in point 1 : 35 km x 16"

• Matindok Project to tie in point 2 : 1 km x 16"

Construction progress of Donggi Project in December 2015 has already reached 97%. Production Facilities of

Donggi Project predicted to be onstream in June 2016. Meanwhile, the construction progress of the Matindok

Project in December 2015 has already reached 78%. The production facility of Matindok Project is estimated to

commence its onstream in March 2017.

Donggi and Matindok Gas Development Project (PPGM) is an important project for the oil and gas industry in

Indonesia and will play an important role in maintaining and strengthening the position of Indonesia as the largest

LNG exporting country in the world. PPGM development is believed to increase the contribution of the oil and gas

sector in contributing foreign exchange for the country and the possibility of partly for domestic fuel substitution.

84


KEPODANG PROJECT -PETRONAS CARIGALI MURIAH LTD.

Kepodang field is in the offshore East Java, about 180 km northeast of the Semarang city. Kepodang field is the

first field to be developed in Muriah CA. Original POD for Kepodang field of Muriah CA approved in 2005 and then

revised in 2012.

Muriah CA operated by Petronas Carigali Muriah Ltd. since 1 January 2004. The development scenario of Muriah

field is to produce gas in an integrated manner from upstream to the downstream scheme. Of the hydrocarbon

reserves in Kepodang field, it is expected to produce approximately 354 Bcf of gas. Daily rate of gas production

from the Kepodang field is estimated 116 MMscfd.

Scope of the integrated gas production facility development includes the upstream schemes consisting of the

construction of CPP (Central Processing Platform), consisting of 8 slots wells, WHT-C (Wellhead Tower-C),

consisting of 5 slots wells, infield flowline 10" of 2.7 km from WHT-C to the CPP, as well as onshore remote control.

Downstream scheme operated by PT. Bakrie and Brothers Tbk. (BNBR) and PT. Perusahaan Gas Negara (PGN)

consisting of the construction of a 200 km export pipeline and Onshore Receiving Facilities (ORF) in Tambak Lorok

Power Plant, Semarang.

KEPODANG FIELD DEVELOPMENT LOCATION

85

KARIMUN JAVA ISLANDS

PROVINCE OF CENTRAL JAVA PROVINCE OF EAST JAVA

MADURA ISLAND

JAVA SEA

BAWEAN ISLAND


CENTRAL PROCESSING PLATFORM(CPP)

ONSHORE RECEIVING FACILITIES (ORF)

Transporter will build and Own Control Building in ORF PCML will lease other

onshore remote control

DN350 (14"ND)200 km Export Pipeline: by transporter DN250 (10"ND)

2,7 km Flowline

DN150 (6"ND)4,7 km Flowline

ORF inside PTIP area

WHT-D

PHASE-2

WHT-C

Gas production is reserved for the domestic buyer for

the needs of electricity power plant in Central Java.

Kepodang project has been onstream in August 2015.

KEPODANG FIELD DEVELOPMENT LOCATION

Phase-1 Development

Phase-2 Development

Phase Total No. of Well

No. of Wellat CPP

No. of Wellat WHTC

No. of Wellat WHTD

1

2

6

4

4

1

2

1

-

286

EMPOWERING NATIONAL CAPACITY | SKK MIGAS ANNUAL REPORT 2015


CHAPTER IV

EMPOWERING NATIONAL CAPACITY


OPTIMIZATION OF CRUDE OIL PRODUCTION FOR DOMESTIC REFINERIES

89

In 2015, SKK Migas carried out the following commercialization activities:

A. The signing of several documents related to the Election in Kind commercialization scheme as follows:

NO.

1

2

3

NO.

1

2

3

4

DATE

13 August 2015

18 September 2015

1 October 2015

DATE

24 April 2015

24 April 2015

24 April 2015

14 July 2015

DOCUMENTATION RELATED TO THE ELECTION IN KIND COMMERCIALISATION SCHEME

Decision of the Chairman of SKK Migas Number: KEP-0131/SKK00000/2015/S2 on the Appointment of PT. Pertamina (Persero) as the Seller of the State Entitlement all Crude Oil and/or Condensate

Seller Appointment Agreement (SAA) of the State Entitlement All Crude Oil and/or Condensate between SKK Migas and PT Pertamina (Persero)

Letter of Chairman of SKK Migas Number: SRT-0836/SKK00000/2015/S2 of the State Entitlement Crude Oil and/or Condensate Supply forTuban Refinery during the period of Tolling October 2015 - January 2016

ENTIK PROCEDURE

ENTIK procedures of Condensate Geragai for Jabung CA the second quarter 2015 period between SKK Migas and Petrochina International Jabung Ltd and Petronas Carigali (Jabung) Ltd.

ENTIK procedures of Condensate Geragai for Jabung CA the second quarter 2015 period between SKK Migas and PT. Pertamina Hulu Energi Jabung

ENTIK procedures of Condensate Geragai for Jambi Merang CA the second quarter 2015 period between SKK Migas and Talisman (Jambi Merang) Limited and Pacific Oil & Gas (Jambi Merang) Ltd.

ENTIK BRC procedures from Mahakam CA the third quarter 2015 period between SKK Migas and Inpex Corporation

LIST OF CRUDE OIL / CONDENSATE COMMERCIALISATION WITH ELECTION IN KIND

LIST OF CRUDE OIL / CONDENSATE COMMERCIALISATION WITH ELECTION NOT TO TAKE IN KIND

B. For the Election Not To Take In Kind commercialisation scheme, has completed several Election Not To Take In

Kind procedures (“ENTIK Procedures”), as follows:


90

ENTIK Procedure set as follows:

• The authority and obligations of the Contractor given by SKK Migas to market the state entitlement crude oil

and/or condensate;

• Entitlement settlement mechanism between the Contractor and SKK Migas;

• The price of state entitlement crude oil and/or condensate;

• Billing mechanisms, payment mechanisms, and the costs incurred;

• Penalties in the event of late payment.

NO.

5

6

7

8

DATE

31 July 2015

31 July 2015

28 August 2015

30 December 2015

ENTIK PROCEDURE

ENTIK procedures of Condensate Geragai for Jabung CA the third quarter 2015 period between SKK Migas and Petrochina International Jabung Ltd and Petronas Carigali (Jabung) Ltd.

ENTIK procedures of Condensate Geragai for Jambi Merang CA the third quarter 2015 period between SKK Migas and Talisman (Jambi Merang) Limited and Pacific Oil & Gas (Jambi Merang) Ltd.

ENTIK BRC procedures from Mahakam CA the third quarter 2015 period between SKK Migas and Total E&P Indonesie

ENTIK procedures of Condensate Sengkang for Sengkang CA between SKK Migas and Energy Equity Epic (Sengkang) Pty. Ltd.

C. Five formula of temporary Indonesia Crude Oil and Condensate Price (ICP), had been determined, namely:

1. Senoro Condensate (Ref. Minister of EMR Decree No. 156.K/12/DJM.B/2015);

2. Ruby Condensate (Ref. Minister of EMR Decree No. 156.K/12/DJM.B/2015);

3. Ketapang Crude Oil (Ref. Minister of EMR Decree No. 584.K/12/DJM.B/2015);

4. Kresna Condensate (Ref. Minister of EMR Decree No. 584.K/12/DJM.B/2015);

5. Banyu Urip Crude Oil (Ref. Minister of EMR Decree No. 209.K/12/DJM.B/2015).

Furthermore there are crude oil and condensate of the ICP formula that will be determined futher in 2016, namely:

1. Akatara Crude Oil, PSC Contractor PT Hexindo Gemilang Jaya;

2. Tiung Biru Mix Crude Oil, PSC Contractor PT Pertamina EP;

3. Parit Field Crude Oil, PSC Contractor Pacific Oil & Gas Ltd;

4. Sungai Gerong Condensate, PSC Contractor PT Pertamina EP;

5. BD Field Condensate, PSC Contractor Husky-CNOOC Madura Limited.


There are also ICP of crude oil and condensate that will be evaluated, namely:

1. Sampoerna Crude Oil, PSC Contractor PT. Tiarabumi Petroleum;

2. Grissik Mix Condensate, PSC Contractor ConocoPhillips (Grissik) Ltd.;

3. Pagerungan Condensate, PSC Contractor Kangean Energy Indonesia;

4. Kerendan Condensate, PSC Contractor Ophir Indonesia (Bengkanai) Limited.

D. Realization of crude oil and condensate lifting during the period of January to December 2015 was

286.8 MMbo.

E. From January-December 2015, the average production of crude oil and condensate was 785.7 Mbopd,

with an average lifting of 785.7 Mbopd and total closing stock in December of 7.88 MMbo.

F. SKK Migas has approved the request of PT Pertamina (Persero) to supply the state entitlement’s crude oil

and condensate to TPPI Tuban Refinery in the framework of the operational tolling, it is considered that the

TPPI Tuban refinery is idle and can be utilized for the production of fuel so as to reduce fuel import and reduce

the use of country's foreign exchange. Starting on 29 September 2015, the state entitlement’s and the PSC

Contractor's crude oil/condensate have been channeled to the TPPI Refinery with a total distribution until

December 2015 amounted to 4.58 million barrels of oil/condensate.

The lifting of crude oil and condensate from the

GOI Share was used as much as possible to meet

domestic refinery feed requirements. The realization

of domestic lifting in 2015 was 60% of the total lifting,

i.e. 39% by SKK Migas and 21% by PSC Contractors.

The domestic lifting of the PSC Contractor Share was

carried out through pipelines and lifting by vessel upon

obtaining a sale and purchase agreement, mainly

performed by PT. Pertamina Hulu Energi and

PT. Pertamina EP.

The export lifting from the GOI Share was 1% of the

total lifting of crude oil and condensate; this is because

the First Tranche Petroleum (FTP) was very small and

the commercialisation which was carried out by the

PSC Contractor and/or Pertamina (Persero) could not

absorb it.

The export lifting from the PSC Contractor Share was 39% of the total lifting because no sale and purchase

agreement was made with Pertamina (Persero). SKK Migas through a shipping coordination meeting and

coordination meeting with other PSC Contractors continued to encourage and urge the PSC Contractors to

carry out a business to business negotiation with PT. Pertamina (Persero) in order to meet Pertamina’s refinery

feed requirements.

REALIZATION OF CRUDE OILLIFTING IN 2015

Domestic Lifting of the GOI Share

Export Lifting of the GOI Share

Domestic Lifting of the Contractor Share

Export Lifting of the Contractor Share

39% 39%

21%1%

91


INCREASING GAS SUPPLY TO MEET DOMESTIC DEMANDS

The average supply of gas for domestic consumption increased by 9% from 2003 through 2015. The utilization

of gas for domestic needs in 2015 could be significantly improved, even exceeding the volume of gas that was

exported. Up to 31 December 2015, a total of 3,882 MMscfd (56%) of gas was allocated for domestic demands,

exceeding the volume of exports, which amounted to 3,090 MMscfd (44%).

In order to accelerate the national economic growth and increasing competitiveness through the use of natural

gas as raw material or fuel for national economic activity as well as to ensure the efficiency and effectiveness of the

transfer of natural gas, the Government issued the Economic Policy Package III through a reduction of gas prices

for industries with effect from 1 January 2016. The policy was made with a decrease in gas prices in the upstream

and downstream side. The mechanism of price reduction is done through the reduction of non-tax revenues in the

sale of natural gas, as well as regulation in the downstream side as follows:

• Setting margins for natural gas trader which does not have the facilities;

• Setting dues and taxes on the transmission and distribution of natural gas;

• Setting margin/IRR for natural gas trader which have facilities.

Policies allocation and utilization of natural gas referring to the Minister of EMR Regulation Number 37 year 2015

regarding Provisions and Procedures for Determination of Allocation and Utilization of Natural Gas and Gas Prices,

where the government is trying to ensure the efficiency and effectiveness of the availability of natural gas as a

fuel, raw materials, or other purposes for domestic demand which oriented in an optimal utilization of natural gas.

Allocation and utilization based on national energy policy by considering:

• Public interest;

• State interest;

• A national energy policy;

• Reserves and market opportunities of natural gas;

• The infrastructure available or in planning in accordance with the Master Plan of Transmission and Distribution

Network of National Gas; and/or

• The economic field of oil and gas reserves to be allocated.

92


INCREASING GAS SUPPLY TO MEET DOMESTIC DEMANDS

NATURAL GAS UTILIZATION IN 2015

Electricity

Fertilizer

Industry

Oil Lifting

City Gas

Gas Fuel for Transportation

Pipeline Gas Export

Export LNG

Domestic LNG

Domestic LPG

Export

Domestic

o%

o%

4%

19%

10%

14%

3%

4%

32%

13%

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

02003

BB

TU

D

1,480

4,397

1,466

4,416

1,513

4,202

2,341

4,008

2,527

3,820

2,913

3,775

3,323

3,681

3,379

4,336

3,267

4,078

3,5503,402

3,774

3,237

3,785

3,090

3,882

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

3,631

93


DISTRIBUTION OF PIPELINE GAS FOR DOMESTIC DEMANDS IN 2015

The largest part of the domestic gas allocation is used for industrial purposes, electricity, and fertilizer at an

average 54% of the total gas allocation.

DOMESTIC GAS ALLOCATION 2015

Actual

Total Contract + Gas Allocation

Industry Electricity Fertilizer

25

20

15

10

5

0

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

2003

0.1

1.2

1.1

2004

2.7

2.3

1.2

2005

4.1

3.2

1.8

2006

4.2

4.4

1.9

2007

5.2

5.3

2.8

2008

5.9

5.8

2.8

2009

6.2

6.3

2.9

2010

10.1

6.9

3.1

2011

10.2

7.0

3.3

2012

10.3

7.6

3.6

2013

10.5

7.7

3.9

2014

10.8

7.7

4.2

2015

10.8

7.9

4.7

Elec

tric

ity

Fert

ilizer

Indu

stry

Oil

Lifti

ng

City

Gas

Gas

Fue

l for

Tra

nspo

rtat

ion

TC

FB

BT

UD

1,882.88

1,466.961,692.31

375.00

3.51 40.452.36 4.48

995.64

2.4

6.2

9.010.6

13.3

14.615.3

20.120.5

21.622.2

22.823.5

728.73

1,324.68

273.27

94


95

LNG LIFTING 2012 - 2015

DOMESTIC LNG LIFTING2012 - 2015

In addition to meet the increasing need of domestic LNG, exports of LNG cargo also decreased in connection with

the production decline due to natural decline and existing export contracts that have expired. On the other hand,

the fulfillment of this case because of the operation of several LNG regasification terminal in 2014 and 2015, namely

FSRU Lampung and Arun Regasification, following FSRU Nusantara Regas which have been operated since 2012.

1,000.0

900.0

800.0

700.0

600.0

500.0

400.0

300.0

200.0

100.0

0.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

2012

41.3

949.4

2012 2013 2014 2015

2013

67.5

888.4

2014

86.7

834.2

2015

114.0

811.0

TB

TU

TB

TU

DomesticExport

TBtu

41.3

67.5

86.7

114.0


96

The allocation of LNG cargo that has been allocated for domestic buyers since 2012 to FSRU Nusantara

Regas, Arun Regasification facilities (2014), and FRSU Lampung (2015) experienced a significant increase.

The government continues to increase the allocation of LNG for domestic needs, however on the other hand,

the buyer's absorption of LNG cargo can not be maximized due to various constraints such as delay in the

operation of FSRU Lampung and low-volume absorption of domestic buyers, so that the absorption target of

LNG by the domestic market last year are still unfulfilled.

LNG supply is expected to increase eventually in order to accomodate domestic demands parallel with the

increasing of LNG terminals both large and small capacity in Indonesia which supplies gas to electricity and

industrial needs.


97

LOCAL CONTENT GROWTH OF UPSTREAM OIL AND GAS INDUSTRY

UTILIZATION OF LOCAL GOODS AND SERVICES

To maximize the benefits of the upstream oil and gas industry for the nation, the upstream oil and gas industry

always tried to optimize the use of local content for all of their activities.

In 2015, the commitment for local content in the procurement of goods and services for the upstream oil and gas

industry (including those conducted through the approval of SKK Migas and by the PSC Contractors themselves)

reached 67.69% (cost basis) of the total value of the procurement of goods and services i.e. US$7,908 million.

A number of local entrepreneurs have taken advantage of the upstream oil and gas business opportunities,

including state-owned enterprises (BUMN), in the procurement of goods and services for the upstream oil and gas

industry. In 2015, the value of the procurement of goods and services supplied by state-owned enterprises was

US$981.93 million, whereas since 2009 the procurement value have reached US$5.48 billion.

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%2006

995

5,862

Goods

Services

2007

1,846

4,737

2008

1,400

6,568

2009

3,577

5,408

2010

3,811

6,976

2011

3,706

8,109

2012

5,082

11,531

2013

4,616

9,304

2014

5,548

11,807

2015

2,590

5,319

MIL

LIO

N U

S$

43% 43%

54%

49%

63%61% 60%

57%54%

68%% Local Content


98

GOODS/SERVICES PROCUREMENT OF THE STATE OWNED ENTERPRISES- 2010 TO DECEMBER 2015

NO.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

STATE OWNED ENTERPRISES

PT. Pertamina (Persero)

PT. Elnusa Geosains Tbk.

PT. Wijaya Karya (Persero) Tbk.

PT. Rekayasa Industri

PT. PAL Indonesia (Persero)

PT. Adhi Karya (Persero)

PT. Surveyor Indonesia (Persero)

PT. Hutama Karya (Persero)

PT. SUCOFINDO (Persero)

PT. Amarta Karya (Persero)

PT. Dahana (Persero)

PT. Biro Klasifikasi Indonesia (Persero)

PT. Telekomunikasi Indonesia (Persero) Tbk.

PT. Asuransi Jasa Indonesia (Persero)

PT. Pembangunan Perumahan Tbk.

BUMN dan PDN Lainnya

Total

VALUE (THOUSAND US$)

3,087,817.27

689,449.00

485,912.49

388,063.35

275,800.00

124,821.00

114,385.88

112,020.53

95,584.58

28,000.00

20,601.11

20,576.20

17,775.48

10,246.58

6,336.96

11,826.47

5,489,216.90

LOCAL CONTENT (%)

74.51%

73.15%

55.85%

47.58%

51.20%

95.52%

90.07%

92.41%

83.35%

61.34%

68.47%

85.34%

86.99%

71.93%

93.73%

61.40%

70.92%

TOTAL

1,600.00

1,400.00

1,200.00

1,000.00

800.00

600.00

400.00

200.00

0.002010 2011 2012 2013 2014 2015

107.28

MIL

LIO

N U

S$

678.50

1,378.84

1,108.93

1,233.73

981.93


99

INVOLVEMENT OF STATE/REGIONAL-OWNED BANKS IN THE OIL AND GAS BUSINESS ACTIVITIES

National banking has obtained capital strengthening from the policy on goods and services transaction payment

that must be made through national banks. This policy started to apply in 2009.

PSC CONTRACTORS’ GOODS AND SERVICES PROCUREMENT

Annual commitment value for the payment transaction through State/Regional-owned banks keeps decreasing,

where the world oil prices affects the value of the transaction.

ANNUAL TRANSACTION COMMITMENT 14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

2009 2010 2011 2012 2013 2014 2015

3,969.64,626.2

6,348.6

9,337.9

8,195.4

12,432.0

2,948.3

Transaction Value

April 2009 to December 2015

US$47.86 Billion

MIL

LIO

N U

S$

Mandiri 72.51%

BNI 17.47%

BRI 6.14%

Syariah Mandiri 1.05%

Mandiri & BNI 1.31%

Mandiri & BRI 0.03%

BNI & BRI 0.08%

Muamalat 0.03%

Regional-Owned Banks 0.23%

State/Regional-Owned Banks Commitment 1.15%


100ASR FUND

900

800

700

600

500

400

300

200

100

0

2009 2010 2011 2012 2013 2014 2015

134

BANK NEGARA INDONESIA

US$269 MILLION 35%

BANK RAKYAT INDONESIAUS$254.84 MILLION 33%

BANK MANDIRIUS$251.1 MILLION32%

167

232

344

497

635

775

Cumulative ASR Fund

The Amount of ASR Fund Balance by

31 December 2015

ABANDONMENT AND SITE RESTORATION

State-owned banks also obtained capital strengthening from the deposit of Abandonment and Site Restoration

(ASR) fund which reached US$775 million until December 2015.

MIL

LIO

N U

S$


101 NATIONAL VS EXPATRIATE EMPLOYEES

EXPATRIATES DEMOGRAPHIC BASED ON AREAS OF EXPERTISE

MANAGEMENT AND DEVELOPMENT OF PSC CONTRACTORS’ HUMAN RESOURCES

The total manpower of PSC Contractors in 2015 reached 32,769 employees consisting of 31,745 nationals and

1,024 expatriates.

The number of national and expatriate employees in the upstream oil and gas industry is highly dependent on the

number and type of activities undertaken during the year. The manpower employment experienced a declining trend

in 2015, mainly caused by the drop of world oil prices so that PSC Contractors tend to reduce their activities.

Note:• Expatriate employees data

is calculated based on the approval letter of expatriate use issued by SKK Migas throughout the year. Figures on the number of expatriate employees in the graph above does not describe the number of expatriate employees at a particular time.

• National employees data is calculated based on the WP&B 2015.

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

25%

20%

15%

10%

5%

0%

2,100

1,900

1,700

1,500

1,300

1,100

900

700

500

2006

Pro

ject

s

Dril

ling

G&

G

Res

ervo

ir

Engi

neer

ing

&

Ope

ratio

n S

uppo

rt

Ope

ratio

ns

Lead

ersh

ip

Fina

nce

Com

mer

cial

Bus

ines

s D

evel

opm

ent IT

Exte

rnal

Rel

atio

ns

Bus

ines

s C

ompl

ianc

e

Lega

l2007 2008 2009 2010 2011 2012 2013 2014 2015

21,835

1,069 1,032

960901 928

975890

1,0781,140

1,024

22,914 23,668 23,735 23,328

25,243 25,682

29,330

32,292 31,745

20.22%

16.07% 15.88%

14.04%12.47%

6.93%

5.08%

3.14% 3.05%2.59%

0.18% 0.18% 0.09% 0.09%

National

Expatriate


102

DATA COMPARISON OF THE NATIONAL EMPLOYEES TOWARDS THE APPROVAL FOR THE MANPOWER EMPLOYMENT PLAN (RPTK)

The employment of expatriate more on discipline expertise where nationals are still insufficient (e.g. project,

drilling, G&G, reservoir, engineering) or as the investor’s representative (leadership). In general, The expatriates are

required to posses at the minimum 10 years of experience. For the development of nationals employees,

SKK Migas encouraged PSC Contractors to conduct internationalization program (swapping & TDE).

Job opportunities for national employees based on the RPTK have been approved for 38,028 positions in various

fields, while filling the position as much as 31,745 people (83%). However considering the condition of industry

with a low selling price of oil and natural gas, then generally the PSC Contractor would delay filling vacant

positions.

Note:• National RPTK data

is based on the PSC Contractor's RPTK approval by SKK Migas.

• National employees data is calculated based on the WP&B 2015.

40,000

38,000

36,000

34,000

32,000

30,000

28,000

26,000

24,000

22,000

20,0002012 2013 2014 2015

32,630

25,682

29,330

32,292 31,745

34,883

36,443

38,028

National

National RPTK


NATIONAL EMPLOYEES DEVELOPMENT

SKK Migas does not only serve to supervise and control the human resources management throughout the

PSC Contractors, but is also obliged to ensure national employees receive competence development through

the transfer of knowledge both from expatriate and national employees, sending abroad, as well as a series of

development programs which is occured for national employees to be able to master the competencies needed in

upstream oil and gas activities that are high capital, high risk, and high technology.

Some of the initiatives that have been and are being made by SKK Migas in national employees competency

development are:

• Anticipating the implementation of AEC, SKK Migas actively contribute in preparing the standard of National

Work Competence Indonesia (SKKNI) in Human Resources (HR) in collaboration with the Ministry of Manpower

and Transmigration and the Association of Professionals in HR field. SKKNI preparation of HRM has been

completed with the issuance of the Minister of Manpower and Transmigration Decree No. 307/2014.

• In cooperation with seven universities, the Board of Education and Training of EMR, and PSC Contractors

in designing and implementing National Capacity Building Program (NCB) in Petrotechnical field in order to

accelerate fresh graduate of national employees competency.

• Become a sponsor of the annual program Indonesia HR Summit, which is SKK Migas contribution in the field of

human resource development throughout the industry in Indonesia.

• Encouraging the PSC Contractors to send the potential national employees to work in business units

abroad, through the Technical Development Exchange Program (TDE), Job Swapping, Job Assignment,

Internationalization, and post graduate education abroad.

NATIONAL EMPLOYEES DEVELOPMENTPROGRAM OF THE UPSTREAM OIL AND GAS INDUSTRY

250

200

150

100

50

0

2003

78

3

59

9

2004

62

5

70

25

2005

62

13

70

47

2006

62

15

36

132

3

2007

34

32

34

187

2008

60

30

75

240

2009

55

18

41

220

4

2010

50

10

36

144

3

2011

45

14

70

100

3

3

2012

34

16

97

67

5

6

2013

37

14

87

39

5

11

2014

43

17

36

34

4

6

2015

6

7

8

12

1

TO

TAL

TK

I

Job Swapping

TDE

Job Assignment

Internationalization

On The Job Training

S2 Program

103


SKK Migas also consistently evaluates the performance of the whole human resources management conducted

by all Production PSC Contractors through a yearly Career Development Monitoring (CDM) Program. Based on the

evaluation of the CDM, SKK Migas can find out the conditions of employment in the production PSC Contractor so

it can perform continuous improvement efforts together with the PSC Contractor, for a more effective and efficient

management of human resources in the PSC Contractors.

On initiatives in the field of HR competency development, SKK Migas obtain the HR Excellence Award 2015

from ARTDO International Organization in Cairo on 28 October 2015. This international award shows that what is

already done by SKK Migas related to human resource development in Indonesia, particularly in the upstream oil

and gas industry, has gained attention from international organizations. 104

INTERNAL SKK MIGAS | SKK MIGAS ANNUAL REPORT 2015


CHAPTER V

INTERNAL SKK MIGAS


AUDIT REPORT FROM THE SUPREME AUDIT BOARD (BPK-RI)

CONTINUOUS IMPROVEMENT IN THE GOVERNANCE ASPECT OF THE ORGANIZATION

107

Based on audit report by the Supreme Audit Board of the Republic of Indonesia (BPK RI) on SKK Migas' Financial

Statement for the 2015 Fiscal Year, SKK Migas obtained an unqualified opinion (WTP) predicate from BPK RI.

WTP opinion predicate on the SKK Migas' Financial Statement is the seventh WTP opinion predicate since 2008

until 2014.

However, the audit report from BPK RI also resulted some auditor recommendations that must be followed up by

SKK Migas. Until now, the follow up process of the recommendations are still continuously completed in order to

improve SKK Migas' governance.

After the decision of the Constitutional Court on November 2012 which decided that the task and functions of the

Executive Agency for Upstream Oil and Gas Business Activities (BPMIGAS) is managed by the Government until

the enactment of the new Law of oil and gas. Followed by the enactment of Presidential Regulation No. 9 of 2013

stated that the management of upstream oil and gas industry is conducted by SKK Migas. One of the matters that

are required to be completed immediately is the improvement in the governance of SKK Migas as a whole, which

covers business processes, Work Procedure Guidelines (PTK) and internal Standard Operating Procedure (SOP),

general administration management, and the organization of SKK Migas. Improvements are needed in order to

align with the applicable regulations and legislation without compromising the quality of service to stakeholders.

Efficiency, effectiveness, and bureaucratic reforms are the main goals in the improvement of this governance.

IMPROVEMENT IN THE BUSINESS PROCESS OF SKK MIGAS


108

Troughout 2015, the improvement of governance produce significant output that is ratification of eleven PTK

as follows:

Ratification of these PTKs harmonizes good governance on the main business processes of SKK Migas, for

instance related to the processes of Authorization for Expenditure, Work Program and Budget, Procurement

of PSC Contractor's Goods and Services, and Placed Into Service, that also defines the working relationship

between SKK Migas and PSC Contractors, for example in accounting policies of PSC Contractors and insurance

management. Ratification of these PTKs followed by alignment of business processes have directly generated

simplification of a more effective and efficient process in SKK Migas.

One of the ratified PTK is the PTK of Supply Chain Management Book Two regarding the procurement of goods

and services Revision 03 which applies a new paradigm in the management of supply chain that is the Right to

Audit clause towards the goods and services suppliers.

Simplification of bureaucracy in SKK Migas' internal process in 2015 is conducted in order to improve SKK Migas'

governance, for instance, simplification of general administration management in using e-mails for all business

letters of memo, announcements, invitations, and notes; change in the provisions of the minutes of meeting and

interim officials, as well as technology optimization through ePAU to simplify the general administration.

NO.

1

2

3

4

5

6

7

8

9

10

11

NAME OF PTK

PTK of Supply Chain Management Book One about General Provisions Revision 02 and Book

Two about the procurement of goods and services Revision 03

PTK of Increased Recovery Factor Through Pilot Tertiary Recovery Activity

PTK of Oil and Gas Production Facilities Maintenance Revision 01

PTK of Accounting Policies on Production Sharing Contracts

PTK of Placed Into Service Revision 02

PTK of Internal Management Book Five about Asset Accounting

PTK of Permits Procedure Certification of Port and Maritime Revision 01

PTK of Work Program & Budget Revision 01

PTK of Work Completion Approval

PTK of Authorization for Expenditure Book One about AFE Approval Rev. 01 and Book Two

about Closed Out AFE

PTK of Insurance Management Revision 01


CLEAN AND FREE FROM CORRUPTION, COLLUSION, AND NEPOTISM

In order to create the upstream oil and gas industry that is clean and free from corruption, collusion, and nepotism

(KKN), SKK Migas has continuously constructed some reformations and improvements of its governance by

implementing the corruption, fraud, and gratuity prevention programs.

Some of the activities are as follows:

OBLIGATION TO SUBMIT LHKPN

Since issuance of the decision letter of the Chairman of SKK Migas Number KEP-0334/SKK0000/2013/S0 on

the Obligation to Submission of State Official's Wealth Report (LHKPN), the entire Management and employees of

SKK Migas are required to submit their LHKPN.

According to the requirements on LHKPN, every two years or every occurrence of promotion/new position, the

Management and employees of SKK Migas are required to renew their LHKPN by filling out the LHKPN B form.

Below shows the submission of LHKPN by the Management and employees of SKK Migas throughout 2015:

LHKPN REPORT 2015

RECEIPT OF GRATUITY REPORT

Since the issuance of the decision letter of the Chairman of SKK Migas Number KEP-0161/SKK0000/2011/S0 on

Gratuity Controlling Guideline (PPG), all Management and employees of SKK Migas are required to report every

receipt of gratification.

In accordance with the Gratuity regulations, the Management and employees of SKK Migas are required to report

the gift by filling gratuity reporting form no later than 7 days after receiving it.

30

25

20

15

10

5

0

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Aug

ust

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

25

12

1

8

14

3 4

1 000 1

109


WHISTLE BLOWER SYSTEM (WBS)

Since August 2013, SKK Migas has opened a channel for reporting violations or a Whistle Blower System (WBS)

under the name of KAWAL SKK Migas. This channel can be used by both internal and external informers to report

any alleged violations committed by the Management and/or Employees of SKK Migas. All reports will be verified

by KAWAL SKK Migas to ensure their validity.

The criteria for alleged violations that can be reported are alleged corruptions, alleged violations of the Code of

Ethics, alleged violations of the Gratification Controlling Guidelines, alleged frauds, alleged conflicts of interest,

alleged abuse, and alleged dissemination or divulgence of the institution’s confidential information.

Throughout 2015, the number of reports on violations received from the WBS KAWAL SKK Migas

was 9 reports with details as follows:

Below shows the submission of gratuity by the Management and employees of SKK Migas throughout 2015:

All reports that have been filed with KAWAL SKK Migas have been followed up on in accordance with the

applicable regulations.

GRATUITY REPORT 2015

WBS REPORT 2015

4.5

4

3.5

3

2.5

2

1.5

1

0.5

0

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Aug

ust

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

0 0 0 0 0 0 0

11 1

2

4

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Aug

ust

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

1 1 1 1 1

2 2

In line with the scope

Not in line with the scope

110


111

IMPROVEMENT OF GOVERNANCE

In order to enhance governance and follow up Enterprise Risk Assessment results in 2014, for the first time

SKK Migas applied Enterprise Risk Management (ERM) which monitors implementation of the whole risk mitigation

plan in all working units of SKK Migas in 2015. ERM implementation in SKK Migas is expected to contribute

positively in SKK Migas' governance improvement to enhance assurance in the achievement efforts of organization

target on all functions in SKK Migas.

Series of SKK Migas' ERM were determined in reference to the ISO 31000 concept which is stipulated in

SKK Migas Risk Management Guidelines Number EDR-0028/SKKF0000/2015/S0.

Management Risk Cycle in SKK Migas basically consists of 6 process as follows:

Risk Assesment applied in 2014 is a chain process of Risk Identification-Analysis and Evaluation (including

enterprise risk and corruption risk) which has managed to draft SKK Migas' Risk Register that identifies

117 enterprise risks on a division level and 371 corrupution risks. Of these 117 risks on division level are then

consolidated in two stages. On the first stage, 117 risks were consolidated into 58 risks and on the second stage

58 risks reconsolidated into 8 enterprise risks (top risk).

RISK IDENTIFICATION

RISK REPORT

RISKANALYSIS

RISK EVALUATION

RISK MITIGATION

RISK MONITORING

0106

02

0304

05


112

The following are eight highest risks of SKK Migas based on the level of impact and likelihood to happen:

In accordance with risk management cycle, of 117 risks on a division level are then arranged their mitigation plan

to reduce the impact and likelihood of those risks. Of these 117 enterprise risks, every head unit in SKK Migas

as a Risk Owner, assisted by the Risk Champion, had developed a total of 299 ERM mitigation plans and

425 corruption risk mitigation plans in 2015.

The mitigation plan implementations were then monitored every quarter throughout 2015 by the Internal Control as

the Risk Management Unit where the results of risk mitigation monitoring were then reported to the Management.

NO.

1

2

3

4

5

6

7

8

RISK

Uncertainty of SKK Migas' status in the future

Not achieving the target of increasing oil and gas

reserves

Uncertainties of loading operating costs into cost

recovery

Not optimal effort to improve the reputation of

SKK Migas/upstream oil and gas industry

Failure to achieve the target of lifting of oil and gas lifting

Ineffectiveness of IT system to support the operation of

SKK Migas

Not optimal in oil and gas production

Not achieving the target of state revenues from oil and

gas sector

IMPACT

Very significant

Very significant

Very significant

Very significant

Significant

Significant

Significant

Significant

LIKELIHOOD

almost certainly

will happen

almost certainly

will happen

most likely

to happen

most likely

to happen

almost certainly

will happen

almost certainly

will happen

almost certainly

will happen

most likely

to happen

THE HIGHEST IMPACT AND LIKELIHOODRISK IN SKK MIGAS


113

In general, the target of SKK Migas' risk management monitoring in 2015 which is still in the early stages of ERM

system implementation is considered to achieve "Awareness" and "First-Stage Implementation". By the end of

2015, 62% of the entire ERM risk mitigation plan of every working unit has been successfully completed. The rest

are still a continuation of mitigation program in 2016. For the 2016 program, the Internal Control will initiate the

Risk Control Self-Assessment (RCSA), which will involve all Risk Owner/Risk Champion to identify, evaluate, and

measure the effectiveness of ERM risk mitigation implementation throughout 2015 and set the remaining Residual

Risk in each working unit which will then identify potential new risks in 2015-2016 to update the SKK Migas'

Risk Register in 2016.

ENTERPRISE RISK ASSESSMENT SKK MIGAS

MITIGATION RISK COMPLETION STATUS 2015

8 Enterprise Risks Level

58 Field Risks Level

117 Division Risks Level

HIGH

MIDDLE

LOW

371 CORRUPTION RISKS IN 28 BUSINESS PROCESSES

299 MITIGATION PLAN

425 MITIGATION PLAN

38%

54.5%

7.5%

143

201

27

ENTERPRISE RISK ASSESSMENT

ENTERPRISE RISK ASSESSMENT

SKK MIGAS RISK REGISTER

CORRUPTION RISKASSESSMENT

Finish

Process

Not Done30%

8%

62%


114

Below are the monitoring results of corruption risk mitigation that have been implemented in 2015:

MITIGATION OF CORRUPTION RISK FUNCTION SKK MIGAS 2015

DIVISION

Operational Support

Project Management And Facilities Maintenance

Government Entitlement Audit

Accounting

Crude And Condensate Commercialization

Production Operation

Plan Of Development Commitment Realization

Internal

Information System Management

Jabanusa’s Representative

Pamalu’s Representative

Sumbagsel’s Representative

Kalsul’s Representative

Sumbagut’s Representative

TOTAL

FINISH

28

20

0

1

2

9

0

32

38

5

5

7

7

4

158

IN PROCESS

0

0

0

0

0

8

1

4

0

2

2

0

0

3

20

NOT DONE

0

6

1

0

4

0

1

0

13

0

0

0

0

0

25


INFORMATION TECHNOLOGY PROJECT MANAGEMENT

SKK Migas has implemented the initiative for the application of technology to support SKK Migas internal

operations as well as the main duties and functions of supervising and controlling upstream oil and gas business

activities, primarily within the PSC Contractors.

The application of communication and information technologies by SKK Migas is intended as the tool to support

and improve the performance, effectiveness, efficiency, and transparency of oil and gas business supervision and

control by implementing an integrated strategic management information system, and as the provider of accurate,

complete, and on-time information which will be used in the decision making process of SKK Migas management.

Basic principle for the development and enhancement of the application system is an independent application

system from the particular technology platforms that can be developed, improved, and operated in the most

suitable environment to the organization, effectively and efficiently.

Systems that have been implemented are as follows:

INTEGRATED OPERATING SYSTEM (IOS)

The IOS is a strategic data/information exchange system of upstream oil and gas business activities between PSC

Contractors and SKK Migas, where the data are exchanged directly from the PSC Contractor operating system in

order to improve the effectiveness, efficiency, and transparency of the reporting on upstream oil and gas operation

activities.

115

INTEGRATED OPERATING SYSTEM

COMMUNICATION AND INFORMATION TECHNOLOGY SYSTEM

PSC CONTRACTOR SKK MIGASDAILY PRODUCTION

MONITORING

(A)

(D)

(D)

(B)(B)

(E)

(F) (C)

ACCOUNTING SYSTEM

SERVER OF PRODUCTIONMONITORING APPLICATION

(Policy-Driven)

(Policy-Driven)

(Policy-Driven)

HISTORIAN DATA, SCADA.

DATABASE

Prod M

Prod M

Prod ML

VP


116

The characteristics of the IOS are system-to-system or machine-to-machine connections without manual data

input process, and the data are directly collected from the source (database) located in the PSC Contractor

through data mapping process.

The development of IOS is basically a collaborative activity involving technical and Information System

Management (ISM) functions of SKK Migas and PSC Contractors, and third party support, if required.

The implementation of IOS covers the following strategic data:

• IOS for Production Monitoring & Lifting is a collaborative activity of Production Operation Division and

ISM Division, with supports from the relevant PSC Contractors in extracting production, stock, and lifting

data from the production data management system of PSC Contractor to SKK Migas, using ProdML data

exchange standards, in order to improve the monitoring of production, stock, and lifting

• IOS for Drilling Monitoring is a collaborative activity of Survey and Drilling Division and ISM Division, with

supports from the relevant PSC Contractors in extracting drilling, workover, and well maintenance plan and

realization data from the drilling operation system of PSC Contractor to SKK Migas, using WitsML data

exchange standards, in order to improve the monitoring of drilling, workover, and well maintenance activities

in PSC Contractor.

• IOS for Financial Quarterly Report (FQR) is a collaborative activity of Accounting Division and ISM

Division, with supports from the relevant PSC Contractors in extracting quarterly financial report from the

financial system of PSC Contractor to SKK Migas using an account combination, Chart of Account-COA

components (Cost Center, WBS, etc), by using XBRL data exchange standards to maintain the accuracy

and validity of data/information from PSC Contractor to SKK Migas

• AFE Manager/Integrated is an integrated system to evaluate and approve the AFE proposed by PSC

Contractors, in order to improve the quality and transparency of data related to the submission, revision and

approval of AFE and Close Out AFE of the PSC Contractor, and to improve the effectiveness and efficiency

of decision making process of SKK Migas Management.

• IOS for Interconnection System SKK Migas with the Ministry of Finance building a data exchange

between SKK Migas with the Ministry of Finance, in this case the Directorate General of Budget (DJA), the

Directorate General of State Assets (DJKN), the Directorate General of Taxation (DGT). It is to optimize the

reporting process from SKK Migas to the Ministry of Finance

• IOS for Asset Lifecycle Management based on IOS for Commom Framework (CF) build a prototype

of the PSC Contractor's data reporting assets of State Property (BMN) system to system from the PSC

Contractor to SKK Migas to improve the quality and transparency of data.

• GIS Implementation of Oil and Gas Resources Management (PILOT) as a system monitoring

subsurface data based on GIS and monitoring, controlling SKK Migas especially exploration, exploitation,

commitment monitoring plan, and the realization of oil and gas field development in terms of the PSC.


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INTERNAL INFORMATION SYSTEM (IIS)

In addition to the requirement of integration and interconnection to PSC Contractors and stakeholders, the

application of information and communication technology is also implemented to improve SKK Migas internal

performance primarily in relation to the improvement of effectiveness, efficiency, and transparency of

SKK Migas operations.

Application mechanism or method through the implementation of information system is intended to accelerate

business and administration processes within SKK Migas with reference to the prevailing governance.

Several IIS programs that have been implemented are among others:

• Enterprise Resource Planning (ERP) system to manage internal finance (FI/CO module), personnel

(human resources) (HCM & ESS Module), office facilities, assets and inventory, and procurement processes

(MM module).

• Electronic General Administration Management (e-PAU) to manage administration, correspondence,

and archiving activities.

• Use of e-mail in creating electronic official forms to support the acceleration of SKK Migas operation

business process in relation to the communication and approval process.

• The development of SOA-based Enterprise Architecture (EA) is the mapping and alignment of

business process between functions, business process with application system, in order to enhance

communication between organization and business, to improve consistency, accuracy, accuracy of time,

integrity, quality, availability, access, and to accelerate the integration of system.

• Performance Management System is an integrated system, which can manage, display, and analysis of

data about the performance of each part in SKK Migas so as to help achieve SKK Migas target.

The first system in SKK Migas with an integrated concept of

multi-systems (it is a role model of integration system) which will be used as a reference to the integrated and distributed

system similarly applied in SKK Migas.

Mobile Application(Prototype)

Java Server Faces (JSF)

Liferay Portal

webMethods Integration Server webMethods Business Process Management

SupportingDatabase

SupportingDatabase

Employment Data

Exchange Server

ERP - Human Capital Management (SAP)Active DirectoryAlfresco ECM


• Information Systems Development of Sales and Revenue of Oil and Gas

Build an integrated information system in sales process and revenues of oil and gas between related

functions, namely Accounting Division, Crude and Condensate Commercialization Division, and Natural Gas

Commercialization Division and monitoring of accounting receipts and accounts payable.

• Permits and Formalities System Development (SPF)

Building an asset data reporting system of PSC Contractor’s State Property Land (BMN Land) web based

on from PSC Contractors to SKK Migas to improve the quality and transparency of data.

• Development Monitoring System of Value Added Tax (VAT) and Income Tax

Develop Income Tax monitoring systems for oil and gas and VAT reimbursement of PSC Contractors in order

to facilitate the business processes flow of SKK Migas Taxation and Levy Department and interfaced with

stakeholders system with the aim of improving the quality and transparency of data.

• Funds Management System PSC Contractor is a web-based system for deposit funds management of

PSC Contractors conducted by the Department of Treasury and Risk Management and Taxation Division.

• Development of Supply Chain Management SI is a system that support the procurement and

monitoring of inventory movement of the PSC Contractor, procurement, and asset management.

INFORMATION SYSTEM MANAGEMENT & QUICK-WIN

In addition to the SOT and SII, in fiscal year 2015 has built multiple applications in order to support operational

management and in order to improve the performance of SKK Migas outside of regular program SOT and SII.

Some applications system that have been built under the direction of Head of SKK Migas as follows :

• Dashboard PSC Contrators Oil and Gas Lifting for the upstream oil and gas' stakeholder necessity

• Oil and Gas Customs Portal

• PIS Online Survey and Drilling Function

• Application for Monitoring SKK Migas Law Case

• Application for Management Report VPMR

• Application for Timesheet Management

• Application for Integrity Pact

• Application for Monitoring SKK Migas Desentralization Budget

• Application for Monitoring Audit Report

• Application for Monitoring Law Case in PSC Contractor

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The national upstream oil and gas business activities are supervised and controlled in various aspects; such as

contract, budget and operation, finance, until reporting. All activities must be synergize one to another, and the

reporting of all aspects should have reference in order to avoid duplication and inconsistency in the reporting

and information. In order to prevent and avoid any duplication of data and inconsistencies in the reporting and

information of the existing applications, since 2012 the master data has been developed to integrate data from all

available applications and is expected to be completed in 2018.

The management of integrated master data is also expected to facilitate workflow and access to the data, as well

as to improve the quality of data by providing a “single source of truth”.

Crude Oil Price Dashboard application which contains information regarding the movement of Indonesia and the

world crude oil prices, can be accessed through SKK Migas site.

CRUDE OIL PRICE DASHBOARD

Implementation of data integration that has been carried out this year :

• Design the Integration Master Data Management (MDM) from data source MDM application system to the

MDM database and SOT application as user applications.

• Implementation MDM Alignment Phase-1 for data of Contract Area and Contractor Name from PSC Contract

Management application as MDM data source application into the MDM database environment.

DATA PROCESSING AND MANAGEMENT

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The purpose of Implementation of MDM Data Integration is so that the datas of Contract Area and Contractor

Name generated and used by all functions in SKK Migas have the same format and standards and are also

consistently updated so that it becomes an accurate information.

In order to increase the SKK Migas workers competence in the field of data processing and analysis, along with

the Human Resources Division has been convening in-house training with the topic of "Data Mining" and "Data

Proccessing and Data Analytic" for functions at SKK Migas.

In order to increase awareness regarding data security, along with Information Technology Operations (OTI) team

has been socialized it through the PC Wallpaper media.

With the change of operatorship for CA ownership or government decisions related to transfer in PSC Contractor’s

CA management, coordination related to Information Technology Migration (IT) has conducted such as IT

infrastructure, IT applications, Telecommunication, IT Asset Management, Petro Application and Data Management

aspects, so that the managament transfer process of ended CA, can run seamless or no interruption of

operations. Information Technology mitigation process has been going well and now the CA which has changed

over it’s operatorship and or operation/management transfer, in terms of information technology has been running

as expected.

MDM DESIGN ALIGNMENT PHASE-1

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The requirement of information technology facilities and infrastructures are very critical to support the operations of

SKK Migas, therefore the availability of reliable Information Technology facilities and infrastructures is mandatory.

Service level is a mean to measure the reliability of information technology facilities and infrastructures in providing

services to any of users.

According to 2015 performance, the overall information technology service level is 99.8%, above the target of

99.5%.

SKK Migas has provided two services that support users who are mobile by using a gadget or laptop/notebook

which are:

• Video Conference and Call Conference through the public network for meetings or collaboration. This facility

is available for the level of Head of Division and SKK Migas' Management.

• Virtual Private Network (VPN) Service is a special securely network through a public network/internet, so that

employees who are out of SKK Migas' office can still access the data or multiple applications as they do in

the office.

OPERATIONS OF THE INFORMATION TECHNOLOGY

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ATTACHMENT | SKK MIGAS ANNUAL REPORT 2015

MAP OF THE INDONESIAN OIL AND GAS AND UOG CONTRACT AREAS IN 2015

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LEGEND OF MAP OF THE INDONESIAN OIL AND GAS AND UOG CONTRACT AREAS IN 2015

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AREA IColor Description Of CA’s Legend: Exploitation CA : 84

Exploration CA : 118

CBM Exploration CA : 46

CBM Under Termination Process CA : 8

MNK Exploration CA : 5

CA Under Termination Process : 56


126



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AREA IIColor Description Of CA’s Legend: Exploitation CA : 84







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Color Description Of CA’s Legend: Exploitation CA : 84






AREA III


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SKK Migas Head Of�ce

Wisma Mulia Building 35th Floor

Jl. Gatot Subroto No. 42

Jakarta 12710

PO BOX 4775

Indonesia

Phone:

(+62-21) 29241607

Fax:

(+62-21) 29249999

www.skkmigas.go.id

ANNUAL REPORT 2015 - s3. · PDF filePREFACE S MIGAS ANNUAL REPORT 2015 03 SKK MIGAS VISION AND MISSION VISION To become a proactive and trustworthy entity, as

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