OPTIMIZING DOMESTIC GAS

ALLOCATION FOR THE DEVELOPMENT

OF NATIONAL INDUSTRY

March 2017
Sampe L. Purba
VP of Natural Gas Commercial Division, SKK Migas
Natural Gas Value Chain
 Natural Gas Value Chain

Added Value
The longer the chain, the more added value can be obtained

Sumber: Ferrostaal
 Natural Gas Based Petrochemical Production Route

Natural Gas

Notes :
Present in Indonesia
Absent in Indonesia
Priority of National Industry
Development Blueprint
 NILAI TAMBAH GAS BUMI
Natural Gas Added Value

GAS PRICE Natural Gas

CAPACITY REVENUE ADDED VALUE LABOUR
DEMAND ASSUMPTION REQUIREMENT
PRODUCT
(Million US$ /
(tonnes/yr) (MMSCFD) (US$/ton) (MMBTU/Ton) (US$/MMBTU) (Persons)
year)
1 2 3 4 5=1X3 6 = 3:4
Urea 2.300,000 180 250 26 575 9,68 1.000
Poly-
propylene
720.000 411 1.200 189 864 6,37 500
Polyethylene 240.000 121 1.100 166 264 6,62 500
Sub Total 712 1.703 7.25 2.000
LNG 712 6,00 1.366 6,00 250

Note: Added value calculated from product market price against raw material price

Example:
3 petrochemical product value chains can give 20% higher added value and
employs 8 times the labour of LNG value chain processing the same amount of gas.
 Petroleum/condensate based Petrochemical Products

Petroleum
(Naphtha)

Notes :
Present in Indonesia
Absent in Indonesia
Priority of National Industry Development Blueprint
 Current Condition of
Petrochemical and Fertilizer Industry
 Petrocemical Industry Obtaining Gas Allocation
from Upstream O&G Industry

Ammonia Urea

Ammonia

Natural
At the Propylene Polypropylene
Gas moment

Ethylene Polyethylene

Methanol
PVC

Dimethyl
Ether
8
 PRODUK Natural
PETROKIMIA BERBASIS
Gas / Syn-gas based SYN-GAS (C-1)
Petrochemical Products

AMMONIA DERRIVATES
2014 (MT) Last 5 Years
No. Product Name Growth
Production Import Export Demand (%)
1. Ammonia 5.524.545 59.252 684.400 4.899.397 1,21
2. Urea 6.469.606 120.750 1.118.085 5.472.271 -0,92
3. Nitric Acid 465.568 15.657 5 481.220 151,95
4. Ammonium Nitrate 441.600 161.167 83.071 519.696 126,24
5. Ammonium Sulfate 816.001 864.452 7.525 1.672.928 0,74
6. Carbon Black 135.200 150.462 16.057 269.605 -0,04

National Ammonia and Urea industry is strong enough

Amonium Sulfate and Carbon Black have a slow growth and still rely on 50% imports
 Natural Gas / Syn-gas based Petrochemical Products

METHANOL DERIVATES
2014 (MT) Last 5 Years
No. Product Name Growth
Production Import Export Demand (%)
1. Methanol 455.150 557.362 404.152 608.360 -1,50
2. Acetic Acid - 111.864 1 111.863 -

We produce methanol within the country, however most of its production is

exported, leaving domestic demand of 600 thousand MT almost entirely relying on
imports.
There is no new investment in methanol production since 2009, and thus there is
no growth.
Methanol Industry is crucial to support Government Program of Biodiesel 20
which 20% of its 6 Million Tons/year volume made by methanol trans-
esterification.
Methanol is required for making Formaldehyde needed to increase national
Plywood production capacity to export.
To reduce the reliance of imported LPG, Methanol can be made into DME and
blended into LPG.
 The Imports of Petrochemical Raw Materials
1,000,000 Source : trademap.org

900,000
Import Value (in thousand US$)

800,000

700,000

600,000
2008
500,000 2009
2010
400,000
2011
300,000 2012

200,000

100,000

0
Metanol Ammonia Etilena Propilena Polietilena Polipropilena
Petrochemical Products Import

The import value of olefin petrochemicals are significant and growing

 Utilization of Natural Gas for
Fertilizer and Petrochemical Industry
 Utilization of Gas in Indonesia 2016

140 24
LPG Domestik ICP
2.63% 22
LNG Domestik Export Pipeline
6.10% 120 Domestic Pipeline
111.55 112.73 20
Export LNG
105.85
Kelistrikan Domestic LNG
18
97.02 96.51
15.71% 100
15.63
16
Pupuk 14.49
79.40 13.52 13.95 13.53 13.82
LNG Ekspor 13.38

US$/MMBTU
9.95%
US$/BBL

80 14
29.34% 72.31
11.43 11.41 11.34
64.26 12.84 12.04 12
Industri 61.58 11.68 11.67
9.86 9.82
21.68% 60 10
8.33 8.65
49.21
9.87 9.68 7.71 45
7.08 8
8.39
40
Ekspor Gas 6.195.49 6
Pipa 6.19 6.35 4.81
5.80 5.65
BBG11.67% City Gas 5.23 5.11 4
Lifting Minyak
20 4.83
Transportasi 0.04% 4.12
2.83% 3.81 3.73 3.67
0.05% 3.15 2

0 0

2011
2006

2007

2008

2009

2010

2012

2013

2014

2015

2016
Tahun
(1 boe = 5.8 MMBTU)
13
 Utilization of Gas For Industrial Sector
117 BBTUD
US$ 5.1/MMBTU
1
2
Refinery
Pupuk
482 BBTUD 908 BBTUD
US$ 5.8/MMBTU Direct to end User Petrokimia
US$ 5,7/MMBTU
Via Midstream 1600 BBTUD Other Industries
US$ 4.7/MMBTU

1118 BBTUD
US$5,3/MMBTU

125 BBTUD
US$ 4.8/MMBTU

166 BBTUD
US$ 6,4/MMBTU 3
85 BBTUD
US$ 6.6/MMBTU
PGN
Pertagas Niaga
Trader Lain

868 BBTUD
US$ 5,4/MMBTU

14
Gas Cost as a percentage of Cost of Goods Sold (COGS)

15
15
 Example of Upstream Revenue distribution
9.00

8.00

7.00
HARGA GAS (US$/MMBTU)

6.00

5.00

4.00

3.00

2.00

1.00

CR Operating Cost CR Depreciation Net PEP Share PPh Migas PNBP

Catatan :
- Menggunakan asumsi harga gas diatas US$4/MMBTU
- Share split Bagi Hasil PEP 60:40
- Asumsi menggunakan provisional entitlement Q2 2016
- Asumsi cost recovery menggunakan pendekatan proposional terhadap revenue per sales kontrak (untuk Outlook 2016) 16
 Gas Price Component - Industri Indonesia 2016

Pipeline Gas LNG

Distribusi Downstream : USD 1,5

Distribusi Downstream: USD 1,5 Transmisi USD 0,89

Regasifikasi USD 1 3 Midstream

Transmisi Midstream: USD 0,89
Shipping USD 0.6
PNBP USD 0,92
PPh USD 1,19 PNBP
Contractor Upstream : PPh
Share USD 1,2
USD 5,9 Contractor Share WAP : USD 4.36 (FOB)
Opex (range 3.63 - 8.24) Range (4.23 5.1)
Cost Recovery Opex
Capex USD 2,6 Capex

Weighted Average Price (Status: 1 Jan 16 30 Sep 16)

17
 The Challenge in Utilizing Natural Gas
for Fertilizer and Petrochemical Industry
 The Nature of Upstream Oil and Gas Industry
Requires big investment and op. cost
Data Acquisition Capital Intensive

Requires state of the art technology

Data Interpretation Technology Intensive

Success is a gamble
Drilling High Risk

The development of upstream oil and gas

Success Risk Fail industry in Indonesia is based on PSC, where
PSC contractors have to gamble a lot of
capital to find new reserve and bring it into
New Reserve development, to recover the investment
economical uneconomical through oil and gas sales.

PSC contractors do not enjoy the added

value of Petrochemical Industry.
Development Other Area

Petrochemical industry need to compete with energy sector to obtain gas supply
PRIVATE AND CONFIDENTIAL 19
 Typical Structure of Project Financing in Petrochemicals Project

*) Loan Agreement arranged by

Owner with their own guarantee
Owner Lender

30% owner equity +

*) Relatively High Interest Rate +
70% Investment Loan
Initial Working Capital [Principal + Interest] + Shorter Tenor (max. 3 years
Operating Working disbursement + 7 years
Capital Loan repayment)

3 Years Project
EPC Contractor Off-Taker/Buyer
Petrochemicals
Engineering, Procurement Off-take / Long Term / Short
and Construction Contract 10 Years or Term Sales Agreement
max 20 Years

Gas Supplier

Raw Material Supply Agreement

Observe mismatch : Feedstock cost, Project Schedule, Supporting Utilities,

Infrastructure, Off taker/ Buyer, End-User
Case Study Field Development Scenario matching with Buyers
Asap, Merah dan Kido
 Challenges in Reservoir Condition

Deep Water mostly in eastern part Indonesia

Mostly Tertiary

Western part
Eastern part
Deep Water Area > 200m
20 prospects and 40 leads in Mesozoic; 3 leads in Palezoic. 6 PSCs in DeepWater :
Avg GCF 23% (Moderately Risk) - StatOil - Marathon
Total Risked Resources 0.39 BBO + 5.7 TCF. - Chevron - Talisman Sageri
- ExxonMobil Oil - COPI

Most fields in the western part are in tertiary stage, Most fields in the eastern part are deepwater,
depleted reservoirs with high production cost. They cost more to drill and develop.

PRIVATE AND CONFIDENTIAL 23

 Challenges in Infrastructure Connectivity

(Berdasarkan Buku Rencana Induk Infrastruktur Gas Bumi Tahun 2015-2030)

Separated by the sea and long distances, gas infrastructures are disconnected.
It takes extra cost to deliver to users by building pipeline or transport it as LNG
 Future Strategic Upstream Oil and Gas Projects

IDD
Production:
Bangka: 120 MMscfd (2016)
Gehem Hub: 420 MMscfd (2020) KASURI
JANGKRIK Gendalo Hub: 700 MMscfd (2020)
Production (2017): Ongoing reservoir
ANDE ANDE LUMUT 450 MMscfd, DONGGI SENORO certification
4100 bopd
Production (2018) Production :
25000 bopd Senoro: 310 MMscfd (2015),
ACEH
6000 bopd
Donggi: 60 MMscfd (2016), TANGGUH TRAIN-3
RIAU Matindok : 65 MMscfd
NORTH EAST
ISLANDS
KALIMANTAN (2017), 500 bopd Production (2019):
SUMATERA 3,8 MTPA LNG ,
3200 bopd
KEPODANG BUKIT TUA CENTRAL
SULAWESI
Production Production (2016):
CENTRAL (2015):
116 SUMATERA
MMscfd 20000 bopd PAPUA
50 MMscfd
SOUTH SUMATERA
SOUTH
SOUTHSULAWESI
MAHAKAM 3 ABADI
LAMPUNG

BANYU URIP
WEST
JTB-CJAVA Production (2015):
120 MMscfd, MASELA
Production (2025):
990 MMscfd
Production (2015) Production (2019)CENTRAL
JAVA EAST
165000 bopd 330 MMscfd JAVA MADURA BD
Production (2016):
110 MMscfd,

PSC period is 30 years, to include exploration and exploitation period.

Petrochemical Plants require low flowrate gas supply exceeding PSC length. 25
Downstream Development of
Indonesian Petrochemical Industry
 The Plan to Develop Petrochemical Industry

SKK Migas supports Government Plan to

develop Petrochemical Industry in Indonesia.
We recommend new development to go in single
phase and not separated into two phases
to avoid further delay on the development of
the next phase,
to ensure the demand of the product,
to create significant and permanent
multiplier effect (employment and
technology transfer)

Sumber : Presentasi Ferrostaal

 Downstream and Upstream Mutual Support: Sharing is Caring

Upstream Downstream Segregation

Upstream Oil and Gas Investment based on PSC have to recover its investment
within PSC period.
Petrochemical Industries (Downstream) are not bound by PSC time and requires
long term contract to ensure project economics and stability, which is often beyond
PSC period.
Petrochemical Industry gains low margin and benefits from economy of scale,
therefore asks for lower gas price.
PSC contractors need commitment from its buyers to ensure project economics.
PSC contractors does not enjoy the added value of Downstream, therefore prefer to
sell it to the highest bidder.

Proposed Solution :
Downstream need to have some share in the Upstream Project
Downstream Project can be developed by the Parent Company of the PSC
Contractor and its partners, at the same time as the Upstream Project.
By doing so, the government should grant PSC extension as an incentive for the
added value enjoyed by the country, under the provision that the Downstream
Project are developed simultaneously.
 Thank You
Terima Kasih
slpurba@skkmigas.go.id
sampepurba@gmail.com
 Brief CV

Sampe L. Purba, is a Professional in oil and gas related managerial business

around 15 years. He has involved in almost all value chain of Oil and Gas key
managerial role namely Planning department, Legal,General Support, Finance,
and Audit. Currently he serves as VP Gas Commercialization in SKKMIGAS

Mr. Purba entered some Universities both domestics and abroad. He holds
undergraduate and post graduate degrees in Economics, Commerce and Law.
He is also alumni of Prestigious Regular National Leadership Course in National
Resilience Institution Republic of Indonesia

Mr. Purba registered as active member of Professional Association such as

Association of International Petroleum Negotiators (AIPN), Indonesian Petroleum
Society, Indonesian Accountant Association, Indonesia Bar Association, Associate
of Certified Fraud Examiner, Indonesia Chamber of Commerce

As part of maintaining and updating his knowledge and sharing of experiences,

Mr. Purba actively attends and gives workshop, conferences and seminar
domestic and abroad.

Mr. Purba also active communicating his ideas on many strategic and current
issues, through newspapers, radio, TV, journals and book. Some of his thought
can be followed in http.//maspurba.wordpress.com

30
PRIVATE AND CONFIDENTIAL
 Brief CV

Gangsar Sulaksono, is an Engineer previously involved in the

development of bio-based chemical process for producing fuel
and polymer.

He then joined BP Migas in Project Management and Facility

Maintenance Division before transferred to Gas Commercial
Division.

He graduated from Tohoku University Japan holding

undergraduate and post graduate degrees in Chemical
Engineering.

He has a broad interest in technology and energy industry.

31
PRIVATE AND CONFIDENTIAL
 Fulfilling Domestic LPG Demand with Petrochemical Product

6,000

5,000

4,000

kilo Tonnes
3,000

2,000

1,000
Properties unit LPG DME MeOH
Vapor Pressure kPA 520 530 13 -
Liquid Density kg/m3 540 667 792 2012 2013 2014 2015
Heating Value MJ/kg 46 28.8 23 Upstream Lifting Consumption
Bottle Fill % 80 85 Source: SKK Migas Accounting and Statistik Migas (MESDM)
Price

Indonesia has converted household kerosene use into LPG in 2008, LPG consumption grows 10% annually
Since the natural decline of rich gas production and new reservoirs found are lean gas, LPG production cant keep up

Blending DME that can be produced locally from Methanol into LPG can reduce the reliance of LPG imports
There is a possible demand of 825 000 tonnes DME if the Govt. of Indonesia decides to blend 15% DME

The use of DME require comprehensive Cost-Benefit Analysis considering

the higher sales price and possible multiplier effect
 Expanding Fuel Conversion from Oil to Gas and Renewables

80,000

70,000

60,000

Million Liters
50,000

Diesel Gas Renewables 40,000

30,000

20,000

10,000

0
2013 2014
Diesel LNG Crude Oil and Condensate Lifting Fuel Consumption (mix)
Source: SKK Migas annual report and Statistik Migas (MESDM)

Indonesia consumes more oil than it produces

Efforts to reduce its consumption can be done in various ways

By reducing oil consumption,

we will have less pressure to use naphtha for fuel,
Private Public Transport and use it for petrochemical industry instead
(Natural Gas or Electric)
 LOKASI PROYEK HULU MIGAS DI KAWASAN
TELUK BINTUNI

Terletak di Kabupaten Bintuni, Provinsi Papua Barat

 Saat ini, infrastruktur gas di Indonesia sedang dalam tahap pembangunan, pipa
transmisi dan terminal LNG adalah infrastruktur kunci untuk membawa gas dari
sumber menuju konsumen
THAILAND LAOS Manila
Bangkok
LNG Receiving Terminal
CAMBODIA Philipines
Ban
Mabtapud
Existing Pipeline
Phnom South
Penh
VIETNAM
Planned Pipeline
Ho Chi
Minh City China
LNG Plant
Khanon Erawan
Arun Regasification Sea
Cap: 1.5 MTPA
Songkhla Bangkot
Planned LNG
Onstream 2014 Receiving Terminal
Lawit
Jerneh
NATUNA
Guntong (PLAN) Kota
LNG ARUNPenang
Banda Aceh BRUNEI Kinibalu
Alpha
West Natuna
Lhokseumawe WEST Kerteh Duyong Bandara Seri
Mogpu Natuna
MALAYSI
A Begawan
Kuala Bintu
Port Klang
Medan Lumpur EASTlu
Port Dickson
MALAYSIA LNG BADAK (HULU) Pacific Ocean
Dumai Manado
SINGAPORE Kuchin
Ternate HALMAHERA
g
Duri Batam Bintan
Bontang LNG Plant
& Export Terminal
Attaka
Padang KALIMANTAN Samarinda Tunu
Balikpapan
Bekapai LNG TANGGUH
Sorong (HULU)
Jambi
FSRU LAMPUNG SULAWESI Jayapura

Grissik Palembang Cp: 3 MTPA Banjarmasin LNG SENORO MATINDOK (HILIR)

Onstream 2014 BURU IRIAN JAYA
SERAM

Ujung
Pandang
Ardjuna
Fields
FSRU NR Jakarta Cirebon Semarang MADURA
Bangkalan
I Pagerungan
N D O N E S I A
J A V A Surabaya
Kapasitas : 3 MTPA SUMBAWA Maluku Selatan
FLORES Merauke
Onstream Mid of 2012 LOMBOK
BALI
Indian Ocean SUMBA
TIMOR LNG MASELA (HULU)
(PLAN)

35
PRIVATE AND CONFIDENTIAL
 Pasokan LNG Domestik
in MMSCFD

SURPLUS

DEFICIT

36