OVERVIEW

The 36^th Annual Convention and Exhibition of the Indonesian Petroleum Association (IPA) was held between May 23^rd - 25^th in Jakarta, Indonesia with the theme:

 

 

"Working Together to Meet Indonesia's Energy Needs"

The Convex was a great success, with a strong array of panelists and speakers, extensive discussion on the key issues facing the oil and gas industry in Indonesia, the highest number of participants and visitors yet and an exceptional media turnout.

 

HIGHLIGHTS

•  More than 8,000 visitors to the Convex, including over 3,200 registered participants, a 10 per cent increase on 2011.
•  Over 400 journalists registered at the Convex from a range of national, international, local and specialist media outlets.
•  Opening ceremony attended by His Excellency, Mr. Jero Wacik, Minister for Energy and Mineral Resources.
•  Exceptional industry participation, with 150 companies setting up booths at the Convex.
• Introduction of Ms. Elisabeth Proust as the newly appointed IPA President to a wide industry audience.

 

From the outset, the Convention was organised to bring together senior government officials, CEOs from the oil and gas industry and other experts to share their views on how the oil and gas industry can work together with the Government and regulatory authorities to develop solutions to meet growing energy demand in Indonesia.

The Convex was designed to act as a bridge between industry and policymakers to address opportunities and challenges faced by the sector and to devise possible solutions for the benefit of all stakeholders.

At the start of the Convention, Elisabeth Proust, President, IPA, said: "The IPA believes that, in order for the oil and gas industry to continue to supply energy to support Indonesia's economic growth, it is necessary for all stakeholders, from Government institutions, central and local government representatives, NGOs and communities, as well as the industry itself, to focus on the 3 Cs - Consultation, Cooperation and Coordination".

• Opening ceremony: The IPA President, Elisabeth Proust and the Minister for Energy and Natural Resources, Jero Wacik, provided opening addresses during the ceremony.
  
  During her opening address, Elisabeth Proust emphasized that;
  
  
  • The oil and gas sector is a true enabler of Indonesia's economy, accounting for 7% of Indonesia's GDP, over 25% of state revenues and US$16 Billion of direct investment annually. In addition, she added that declining oil production from 1.3 million BPD in 2001 to about 900,000 BPD in 2011 reflects the maturity of existing fields and the lack of new developments, emphasizing that Indonesia needs to unlock new resources and realize the potential of gas reserves, together with further development of sustainable renewable energy resources.
  • In response to the Presidential decree no 02/2012 for more coordination between government bodies and regional authorities, the industry has extended this call for coordination amongst the oil and gas industry as a whole. The IPA is committed to opening up opportunities for collaboration amongst all stakeholders which will help boost investment in Indonesia and lead to increased production.
  • The IPA President concluded by saying that The Gamelan Spirit which is the spirit of Consultation, Cooperation and Coordination amongst the oil and gas stakeholders is essential to achieve government production goals and exploit the huge natural resources that are needed to meet Indonesia's energy needs and to support the rapidly growing economy.
    
    
  The Minister for Energy and Natural Resources, Jero Wacik, raised several key points during his opening address;

• The Government of Indonesia is open to further talks with industry stakeholders to provide incentives to stimulate future growth in the petroleum sector.
• The government also recognizes the huge contribution of the industry to the economy and encourages all stakeholders to think positively, develop trust and work together to achieve the targets set by the government.
  

 

PLENARY SESSIONS

As well as technical presentations, three plenary sessions were held over the two-day duration. All were extremely well attended and covered issues of critical importance facing the industry. The three sessions can be broadly summarized as follows:

Plenary Session I - ‘What are Indonesia's current and future energy needs?'

Panelists: Herman Agustiawan, of the National Energy Council; Nur Pamudji, President Director, PLN; Suryo Bambang Sulisto, KADIN; Hendy Santoso, PGN;

Moderator : Muhamad Husen, IPA board member.

Facilitator : Boston Consulting Group.

• The National Energy Council forecast that energy demand in Indonesia will rise threefold by 2030, from the current annual consumption of 150 million tons of oil equivalent. At the same time, the country's GDP is expected to reach US$4 trillion, up from US$1 trillion currently.
• Herman Agustiawan, of the National Energy Council, said the government needed to have clearer targets and incentives for energy infrastructure, to ensure the security of the country's long term energy supplies.
• Nur Pamudji, President Director of state electricity company PT Perusahaan Listrik Negara, said that Indonesia currently uses about 30,0000 megawatts of electricity per annum, with only 70 percent of households are connected to power. As the country's population is expected to grow, so is the demand for electricity, he said.
• Last year, power demand rose by 11 percent and up to 30 percent was contributed by higher consumption by Indonesian middle class, he added.
• "We must take a serious approach towards energy generation and we need breakthroughs in policy to make Indonesia more attractive for companies to invest," Suryo Bambang Sulisto, Chairman, Kadin. "Without energy there will be no investment and without investment there will be no jobs," Sulisto said.
• The key points of the discussion at the IPA plenary session focused on the need for Government policies to help drive increased investment in the energy sector to support further development of resources, including renewable and unconventional energy sources.
  
  

Plenary Session II - ‘How to create an environment to meet the demand?'

Keynote Speaker:  R Priyono, BPMIGAS Chairman.

Panelists:  Hari Karyuliarto, Pertamina; Tor Fjaeran, STATOIL; Ramlan Malek, PMU PETRONAS; Lukman Mahfoedz, Medco Energi International; Ahmad Yuniarto, Schlumberger.

Moderator : Jeff Shellebarger, IPA Board Member

Facilitator : Boston Consulting Group.

• The session heard that, as oil production in maturing blocks has declined and domestic energy consumption has increased, Indonesia has been looking for ways to develop its gas and energy reserves in an effort to sustain economic growth in the country.
• Share of oil in the primary energy mix is set to fall from almost 50 percent to about 24 percent by 2025, while natural gas is expected to remain at a similar rate of around 20 percent in 2025.
• R. Priyono, Chairman, BPMIGAS, said: "Learning from what we did with oil extraction, we need to develop our gas reserves wisely. Natural gas needs to play an important role in facilitating investment in the wider petroleum sector".
• At the session, the panelists were informed that proven natural gas reserves in Indonesia amount to 109 trillion cubic feet, the largest in the Asia-Pacific region, according to British oil giant BP, followed by Australia and Russia.
• In terms of licensing exploration activity in new sites, Tor Fjaeran, President Director, Statoil, said: "The process of energy exploration needs to be expedited. For example, in Norway, fiscal incentives, tax changes and automatic license extensions are just some of the incentives used to speed up the process of exploring and developing new production fields".
• Other speakers noted the importance of including all industry stakeholders in the discussion on enhancing gas production.
• However, despite the Indonesian government encouraging the development of several projects with large potential pockets of gas, industry players expressed some concerns.
• Attractive incentives and better infrastructure need to be established in order to give sufficient return for investment, particularly when reserves are now mostly located in remote, eastern areas in the country. Land acquisition also remains a problem for the industry.
• To learn from Indonesia's neighbor Malaysia, Petronas shared their experience with the Malaysian government, which provided tax incentives to pave the way for energy projects and create multiplier effects to the economy. 
• In summary, borad based efforts by multiple stakeholders required to raise investment and activitiy levels, requiring a stable and favorable investments environment to incurease production of oil and gas, contribute to Indoensia's energy security and provide essential revenues for the nation.
  
  

Plenary Session III - ‘How do we work together to achieve PI No. 2 Year 2012?'

Keynote Speakers: Ibu Evita Legowo, Ditjen MIGAS; Bambang Brodjonegoro, Head of Fiscal Policy Body, Ministry of Finance;

Panelists : Lambok Hutahuruk, BPMIGAS;  Soetrisno, Forestry Minister Expert Staff; Sugiharto, President Commissioner PT. Pertamina

Moderator : Sammy Hamxah, IPA Board Member.

Facilitator : Boston Consulting Group.

• The need for a collaborative approach amongst all stakeholders to deal with the gap between supply and demand was highlighted, along with the pressing need to increase production in order to meet targets stated in the decree.
• This message was reinforced by the Boston Consulting Group, who noted that the Decree has established an ambition and expectation but that successful collaboration to achieve these expectations demands alignment across all stakeholders. This is less about policy and more about implementation and increasing the level of coordination between government agencies to achieve the target of 1 million BOPD by 2014.
• Evita Legowo highlighted the challenges facing the industry in achieving the production levels stated in the decree and stressed the need to accelerate new field development, improve equipment reliability and to increase the number of working areas. She also highlighted the need for improved consultation, cooperation and coordination with relevant agencies to resolve issues relating to regulations, licensing, security and land overlapping concerns.
• Government and industry are agreed on the need to establish a task force under the coordination of the Coordinating Minister of the Economy to accelerate exploration.
• The Finance Ministry stressed the importance of oil lifting to Indonesia's economy and the state budget, particularly due to fluctuations in world oil prices. Missing targets could lead to fiscal vulnerability.
• Bambang Brodjonegoro, of the Ministry of Finance, said that a more relaxed Government Regulation No. 79 would be issued soon, encouraging business players to engage in greater consultation.
• The government admitted that no meetings or coordination had been held to date at the ministerial level to discuss real steps in relation to the Presidential decree no. 02/2012. So far there have been only 2-3 meetings among the second echelon of Ministerial personnel in related ministries and agencies.
• The Coordinating Minister of the Economy, Hatta Radjasa, is due to report on the decree's progress to the Indonesian President by July 2012.
• In conclusion, the panelists agreed that the establishment of a task force, involving the private and public sectors, sector, under the umbrella of the Ministry of Economic Coordination, is now critical to achieving the oil production target of one million barrels per day by 2014.
  
  
• Special Session on Revisions to Oil and Gas Law No. 22 Year 2001.
  
  Panelists: Ibu Evita Legowo, MIGAS; Satya W. Yudha, Member of Commission VII, DPR; Pri Agung Rachmanto, Reforminer Institute; Anggito Abimanyu, UGM;

  Moderator: Suyitno Patmosukismo, IPA Executive Advisor

  • Suyitno Patmosukismo as Moderator provided the background to the Oil and Gas Law Revisions and, on behalf of the IPA, noted that the existing law had been relatively successful and that a major revision now will only increase uncertainty for future investment.
  • Satya Yudha from the DPR outlined the government position, including a summary of the complex issues involved, the legal basis and the projected timeline for implementation of the new revision of the Law.
  • In summary, the government position is that strategic assets must be protected and that signature bonuses of 40% are to be given to regional government in addition to a participating interest of 10%. He added that PSC extensions in future can be requested 7 years before the actual expiry date, giving the government a 3 month period to respond to the request. In extending the Contract, Pertamina and local enterprises are to be given 1^st right of refusal.
  • Evita Legowo emphasized that several activities had been conducted to collect input and comments from all stakeholders, in addition to roundtable discussions and seminars throughout Indonesia. She summarized the findings by stating that Oil and Gas shall be managed based upon national energy security, that oil and gas shall be considered a strategic national asset and that energy resources shall be managed by the government of Indonesia as the holder of the mining rights.
  • She added that Upstream business activities shall continue to be executed and controlled through Joint Cooperation Contracts while Downstream activities shall be executed through Business Licenses issued by the GOI.
  •  It was noted that consultation amongst all stakeholders is crucial to create the stable regulatory environment that will attract much-needed investment in the country.Clear regulations, both at national and regional level, on the land acquisition issue and other fiscal and tax incentives, were cited as challenges.
  • Other speakers reaffirmed the desire to have a bigger participation of national companies in the oil and gas sector, noting that that this could still be achieved with or without amendments to the Law, but rather through implementing regulations. Comprehensive studies are badly needed and revisions of the law at this time could be potentially dangerous to the investment climate. 
    
    
• Media Talk Show with BPMIGAS
  
  Panelists: Kornelius Purba, Senior Managing Editor, Jakarta Post (Moderator), Pieter P. Gero, Kompas; Arif Budisusilo, Bisnis Indonesia; Wahyu Muryadi, Majalah Tempo; Primus Dorimulu, Suara Pembaruan
  
  
  • The speakers highlighted the need for transparency from companies, Government and agencies. The media also needs better information on the industry in order to be objective and to better educate the public.
  • It was also noted that there is a certain amount of misunderstanding on the oil and gas industry amongst the media.
  • Perceptions exist that most oil and gas fields are owned by foreign companies, and that communities are not sufficiently benefiting from the production of oil and gas.
  • The overall conclusion was on the need for greater communication to the media from the relevant Government Ministries and from the industry.
    
    

AWARDS

A key element of the final day of the Convex was the awards ceremony. Awards were announced for the outstanding technical papers presented over the three days of the Convex, and for the best booths set up by exhibitors.

• Best IPA Booth
• Best IPA Photo Competition
• Technical Program Committee
• The Winning Bidder ESDM

 

CLOSING CEREMONY

The 36^th IPA Convex closed with a broad agreement on the need to create improved fiscal and technical initiatives to accelerate investment in the sector, in order to meet rising energy demand in the country. In particular, experts from both Government and industry pointed out the need for a joint task force to push forward necessary reforms to drive the growth of the oil and gas industry, as well as other key observations:

• Oil and gas industry experts and government officials alike highlighted the importance of the sector to Indonesia's economy and the need for a collaborative approach to support its sustainable expansion.
• "Ultimately, all stakeholders need to engage in a meaningful discussions to find solutions for the challenges that the oil and gas industry currently faces," Elisabeth Proust, President, IPA, said in her closing speech.
• "We need to explore and develop new reserves. We need to increase oil and gas production. We need to foster a spirit of consultation, cooperation and coordination between all stakeholders from the public and private sectors to meet these goals," said Ms. Proust. 
• Delegates at the Convex also noted the need for clear regulations at national and regional level to address key issues like land acquisition, and for other fiscal and tax incentives, to help drive further oil and gas industry development. 
• The need for reforms was being driven by the likely tripling of energy demand in Indonesia by 2030, driven by economic growth and a growing population, the Convention was told.
• In particular, frontier exploration in remote areas of Indonesia would require better infrastructure and attractive incentives to give a sufficient return on investment, said Ms. Proust.
• Overall, the key points arising from the Convention focused on the need for multi-stakeholder consultation to create the stable regulatory environment required by the industry to support its future growth and to help address the production target  of million barrels per day laid out in Presidential Instruction No. 2 2012.