Falling oil prices.

Impact on Indonesia upstream oil and gas and the countrys economy
1. Background How oil price drops
Shale oil discovery
Shale oil production more affordable and/or more user friendly technology?
US oil reserve oversupply?
OPEC not to decrease their oil production
Relation with US economic growth? Indirect relation with USD value growth?
China India economic drops lesser oil import
Iran embargo sanction lifted
Russia embargo?
New progress on alternative energy source: wind, geothermal, clean coal gasification,
nuclear, solar,,?
Others
Europeans to use gas more than oil
ISIS sold cheap oil
2. Impact on oil and gas Indonesia upstream

Project holdback

Project cancellation

Exploration cost-cut

Existing production facility efficiency improvement

Personnel cut/ layoff

Stricter project selectivity

Cost effective procurement program

Shifting to Gas Paradigm

Decreasing profitability of Indonesia oil field Previous profit 70usd/bbl, current

profit 10 usd/bbl

Decreasing national earning from oil & gas sector Q2 2015 earning from oil and
gas sector only achieve 46% from APBN target Deficit cash flow
3. Impact oil and gas Indonesia midstream-downstream

Cost effective procurement program

Stricter project selectivity

Benefit on the cheaper feedstock

New potentials on integrated refinery-petrochemical-energy

New potentials on integrated gas prod- LNG-Petrochemical energy

4. Indonesias policy-strategy due to falling oil prices

Being more selective on oil and gas project

More to oil and gas domestic allocation than to export..??

Focusing more on infrastructure development programs

Increasing storage capacity of Crude Oil Re-injected crude oil

Focusing on profitability of each oil & gas field Re-evaluation of production cost

Secondary policies in utilization of gas i.e. : 40% of car/motorcycle production have

to be equipped with converter kit, source for 35000 MW power plant in Indonesia has
to be fulfilled from upstream gas/sources, etc.

Indonesia Upstream Crisis (In a brief). :

Operational
Performance

Financial
Performance

Description
Production continues to

decline
Insufficient reserve

replacement to support the

long term production

targets

Lower net profit margin

Low cash ratio

Related Expertise
in Upstream
Business

EOR Progress is not

significant
Unconventional HC potential
has not been proven yet
Insufficient talent to support
operation & Production
growth

Challenges
Production has not been in
optimal mode
EOR progress is not significant
Unclear strategies on planning
to move C2, P2 to be P1
Lack of planning on how to
lengthen the R/P
Accelerate new discoveries
High Production Costs for
mature field
Lack of Proper Depreciation
Management
Cost Recovery Management
and economic has not been
properly managed
Low Global Oil Price
Unclear strategy on EOR
Development and Lack of
EOR Expertise
Lack of synergy in partnership
Reduce exploration risks in
unconventional by
cooperating with focus,
competent & efficient
partner
Lack of planning on talent
empowerment &
recruitment

How long the oil price will stay at this low level ??? Unpredictable..

Global Liquid Production Cost Curve

Worldwide Upstream Crisis Responses