Copyright BPH Migas 2014, All Rights Reserved

Presented at : INDOPIPE 2014 THE 5TH INTERNATIONAL INDONESIA GAS INFRASTRUKTURE CONFERENCE & EXHIBITION 17 – 18 June 2014 Royal Ambarrukmo Hotel, Yogyakarta - Indonesia Copyright © BPH Migas 2014, All Rights Reserved.

INDONESIA OIL AND GAS DOWNSTREAM REGULATORY AGENCY (BPH MIGAS) KEY FUNCTIONS. To “Regulate”, “ Stipulate” and “Supervise” following matters: 1.. Transportation Tariff of Natural Gas Through Pipeline;. 2.. Price of Natural Gas for Households and Small Scale Customers;. 3.. Natural Gas Transmission and Distribution Business.. 4.. Suply and distribution of Oil Base Fuels;. 5.. National reserved of oil base fuels;. 6. Open access for storage and distribution facilities of Oil Base Fuels and Natural Gas;. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS of NATURAL GAS TRANSPORTATION FACILITIES. Purpose : In order to joint utilization natural gas transportation facilities can be carried out in transparent, accountable and fair. Objectives :
Increase domestic used of natural gas;
Optimalization of natural gas transportation facilities utilization;
Guarantee equal treatment to all shippers.. Copyright © BPH Migas 2014, All Rights Reserved.

Oil and Gas Law No 22/2001 Government Regulation No 67/2002 Government Regulation No 36/2004 Minister Regulation No 19/2009 Minister Decree No 2700/2012 BPH Migas Regulation No 15/2008 about Open Access of Natural Gas Distribution Facilities. 4. Copyright © BPH Migas 2014, All Rights Reserved.

LEGAL BASIS 1. Oil and Gas Law No 22/2001 Article 8 paragraph 3 “Business activity of natural gas transportation through pipelines that concern to public interest is regulated, so the utilization can be used by all users” Description:  Because of natural gas pipeline is natural monopoly facilities, its utilization is regulated and supervized in order to guarantee equal treatment to all user;  What is meant by public interest in this provision are producer’s interest, consumer’s interest and other community which related to transportation of natural gas.. Copyright © BPH Migas 2014, All Rights Reserved.

LEGAL BASIS 2. Government Regulation No 36/2004 Article 31 paragraph 1 “Business entity should give same opportunity to other party to utilized natural gas transportation facilities owned by consideration of technical and economical aspects” Description :  What is meant by technical consideration is against available utilization of natural gas transportation facilities can be used by other party without disrupting the operational activity of the owner;  What is meant by economical consideration is that other party who want to used natural gas transportation facilities should be considered about economic interests of owner facilities such as return of investment.. Copyright © BPH Migas 2014, All Rights Reserved.

LEGAL BASIS 3. Government Regulation No 36/2004 Article 10 pharagraph 2 letter b dan Article 31 pharagraph 3 “Joint utilization of natural gas transportation facilities is regulated, stipulated and supervized by BPH Migas with consideration of technical and economical aspects” 4. Minister Decree No 2700/2012 about Master Plan National GasTransmission and Distibution Network year 2012 - 2025 Implementation of tender operational natural gas transportation through piplenies on transmission section and distribution area category I (Open access) refered to second dictum conducted by Regulatory Body after consideration from Menteri ESDM c.q. Direktur Jenderal Minyak dan Gas Bumi. 5. Minister Regulation No 19/2009 about Gas Business Activities trough Pipelines Article 9 : In conducting business activities of natural gas, entities have to used transmission pipe and/or distribution pipe available.. Copyright © BPH Migas 2014, All Rights Reserved.

LEGAL BASIS 6.. BPH Migas regulation Nomor 15/P/BPH MIGAS/VII/2008 about Joint Utilization of Natural Gas Transportation Facilities Regulate following matters : a. Purpose and objectives of joint utilization natural gas transportation facilities; b. Requirement of joint utilization natural gas transportation facilities; c. Application and approval procedures of access through natural gas transportation facilities; d. Rights and obligation of transporter and shipper; e. Preparation and approval mechanism of Access Arrangement (AA); f. Reporting obligation of implementation AA by Transporter; g. Supervision of AA implementation; h. Transitional provision.. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS BENEFIT.  Open access is logic consequences from business activities that are natural monopolies  In developed countries, is used to reduce natural gas transportation cost, initially to public interest (in Indonesia open access is mandatory by law)  BPH Migas consistenly strives to open access in transmission gas pipeline system, with the promulgation of Access Arrangement and assignmet arrangemnet of toll fee on natural gas transmission pipelines  For distribution area, BPH Migas have not been able to implement open access and toll fee because the pipeline network was “dedicated hilir”. 9. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS CONSTRAINS.  Lack of understanding of most business operators and stakeholders over the consquences of Natural Monopoly on natural gas transportation business, which is the most important consquences is Open Access,  The disagreement triggered reluctance business to implement Open Access,  With the dedicated downstream business license, business operators as if to deny the legitimacy of Open Access on their pipeline facilities.. 10. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS OPPORTUNITY  OPPORTUNITIES 1. Most of natural gas transmission pipeline in Indonesia was. transmission pipe owned by PT Pertamina Gas (East Java Gas Pipeline), transmission pipa owned by PT PGN such as natural gas pipeline section Grissik – duri, Grissik – Singapura, SSWJ I dan SSWJ 2, transmission pipe owned by PT EHK and transmission pipe owned by PT Majuko Utama Indonesia, have been operated as open access pipe. 2. “Dedicated hilir” pipeline belong to some private companies are generally operated on high pressure are very likely to be operated as open access pipeline. 3. Some pipeline section on dedicated hilir distribution area owned by PT PGN, which is large pipe sections operated on high pressure are likely to be operated as open access pipeline. 11. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS CHALLENGE  CHALLANGE 1. Owner of bigest natural gas distribution network in Indonesia is PT. PGN Persero Tbk, however since the beginning the network is not prepared for open access. 2. PT PGN’s distribution area network still allows to be open access, however it’s implementation requires stages and time.  Stage-1 is chose distribution pipe network which able to operated as oppen access pipeline, that is particular pipeline segment on high pressure pipe network.  Stage – 2, is doing accounting unbundling (separated accounting) against pipeline segment as mention on stage-1. 12. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS CHALLENGE  Stage – 3, BPH Migas stipulate tariff after accounting unbundling is. implemented on pipeline segments as mention on stage-2  Stage - 4, PT PGN prepare hardware and software on preparation of open access on segmented pipeline as mention on stage-2  Stage – 5, PT PGN prepare of access arrangement on segmented pipeline as mention on stage -2. 3. For distribution area on medium pressure and low pressure need more time and stages to be operated as open access pipeline 4. For natural gas distribution area on low pressure, in some countries with consumers less than 100.000 are not required to implemented open acess and unbundling.. 13. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS CHALLENGE 5. Somethings have to be considered on the implementation of open access/unbundling on. dedicated hilir pipeline system, are : a) Regulation and rule of thumb that have to be fullfill for open acess/unbundling on. distribution pipeline, (multi entry point and multi exit point), which are : i. “Spot market” mechanism on upstream and downstream gas business commodity. ii. Determination of tender for eligible trader (tender winner entitled to be a gas buyer. and get certificate as shipper/trader/retailer) On this mechanism, shipper/trader/retailer have to compete in order to improve services to costumers. b) Operational and technical condition distribution area nowadays was design as “tools to sell” not “tools to transport”, because of the original infrastructure was built based on demand ‘build on demand” not based on planning Catatan: Pipa dedicated hilir yang diwajibkan Ditjen Migas untuk open access, fungsinya berubah dari “Tools to Sell”menjadi “Tools to Sell and Transport”. 14. Copyright © BPH Migas 2014, All Rights Reserved.

OPEN ACCESS CHALLENGE c). Monitoring, regulating and legal consquences : i. Operation and technical aspect :  Configuration fixes, distribution pipeline system according to the open access rules;  Development of IT system for monitoring, flow control and management of capacity in order to accommodate rights and obligations for multi shipper  Transporter will require shipper to maintain reliability of gas distribution through availability of gas in the pipeline to maintain balancing stock ii. Commercial aspects :  Distribution tariff scheme which accommodate all components of the cost including risk cost, due to changes in city planning as well as incentives for quality operation and development of new areas.. 15. Copyright © BPH Migas 2014, All Rights Reserved.

BPH MIGAS’S ROLE RELATED TO OPEN ACCESS BPH Migas has play a significant role related open access of natural gas facilities to increase the utilization of domestic used, this is evidenced by : 1. BPH Migas stipulate tariff to all transmission pipe in Indonesia, which meant all of those pipe are ready to be open access. 2. BPH Migas enacting regulating account (accounting unbundling or separated accounting) between transportation business and others. 3. BPH Migas has approved Access Arrangement (procedures for utilization of natural gas transportation facilities) at all transmission pipe in Indonesia.. 16. Copyright © BPH Migas 2014, All Rights Reserved.

CONCLUSION 1. Open access is the most appropriate way to optimize utilization of gas pipelines. 2. Utilization of gas pipeline optimally (open access) caused reduction on transportation cost so the gas price would be affordable and the country competitiveness will be increased, therefore all participants have to comply open access regulation 3. Implementation of open access on transmission pipe is already applied in Indonesia. 4. Implementation of legal unbundling on natural gas transportation business on transmission section and natural gas commercial business can be done, especially if the tariff has been stipulated by regulatory body and accounting unbundling on those section has been applied. 5. However, implementation of open access on distribution pipeline, considering complexity of distribution pipe network, can be done stages, starting from high pressure pipe, then medium pressure and may end on low pressure pipeline.. 17. Copyright © BPH Migas 2014, All Rights Reserved.

THANK YOU INDONESIA OIL AND GAS DOWNSTREAM REGULATORY AGENCIES (BPH MIGAS) Copyright © BPH Migas 2013, All Rights Reserved.

ATTACHMENT OPEN ACCESS PIPELINE DATA Copyright © BPH Migas 2014, All Rights Reserved.

Transporter that have been implemented Open Access. No I. Entities PT Transportasi Gas Indonesia. 1. Grissik - Duri. 2. Grissik - Batas Negara Singapura. II. PT Perusahaan Gas Negara (Persero) Tbk. 3. SSWJ I. 4. 5. Area. Description. Open Access. Pertamina Receiving Point - Pagardewa. Sumsel. Pagardewa - Labuhan Maringgai. Sumsel, Lampung. Labuhan Maringgai - Bojonegara. Lampung, Banten. Open Access. SSWJ II Grissik - Pagardewa. Sumsel. Pagardewa - Labuhan Maringgai. Sumsel, Lampung. Labuhan Maringgai - Muara Bekasi. Lampung, Jawa Barat. Sumatera Utara Wampu - Belawan. Binjai. Pantai Pakam Timur - Hamparan Perak. Deli Serdang. Hamparan Perak - Paya Pasir. Medan. Open Access. Copyright © BPH Migas 2014, All Rights Reserved.

Transporter that have been implemented Open Access. III 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21. PT Pertamina Gas Nanggroe Aceh Darussalam Point B - Pupuk Iskandar Muda PIM - Asean Aceh Fertilizer Asean Aceh Fertilizer - Kertas Kraft Aceh Sumatera Utara Pangkalan Batu - Pangkalan Brandan Pangkalan Brandan - Wampu Pangkalan Batu - Pangkalan Brandan Pangkalan Brandan - Wampu Sumatera Selatan Teras - Rambutan Rambutan - Betung Betung - Prabumulih Prabumulih - Cambai Prabumulih - Cambai Cambai - Simpang Y Cambai - Simpang Y Lembak - Simpang Y Simpang Y - Pulau Layang. Area. Description. Aceh Utara, Lhokseumawe Aceh Utara Aceh Utara Langkat Langkat, Binjai Langkat Langkat, Binjai Open Access Muara Enim Muara Enim Muara Enim, Prabumulih Prabumulih Prabumulih Prabumulih, O. Ilir, M. Enim Prabumulih, O. Ilir, M. Enim Muara Enim, Ogan Ilir Muara Enim, Ogan Ilir Copyright © BPH Migas 2014, All Rights Reserved.

Transporter that have been implemented Open Access No.. Sumatera Selatan. Area. 22 23 24 25 26 27. Pulau Layang - PUSRI Simpang Y - PUSRI Simpang Y - PUSRI Cambai - Simpang Y Limau Timur - Prabumulih Beringin - Limau Timur Jawa Barat & Banten. 28. Kandanghaur Timur - Cilamaya. Indramayu, Subang, Karawang. 29 30 31 32 33 34 35 36 37 38. Cilamaya - Citarik Cilamaya - Citarik Citarik - Dawuan Citarik - Tegalgede Tegalgede - Nagrak Nagrak - Bitung Bitung - Cilegon SKG Mundu - PLTG Sunyaragi SKG Mundu - Balongan Balongan - Kandanghaur Timur. Indramayu, Karawang Karawang Karawang Karawang, Bekasi Bekasi, Bogor Tangerang, Bogor Tangerang, Serang Indramayu, Cirebon Indramayu Indramayu. 39. Kandanghaur Timur - Cilamaya. Indramayu, Subang, Karawang. 40. Citarik - Tegalgede. Description. Palembang Ogan Ilir, Palembang Ogan Ilir, Palembang Prabumulih, O. Ilir, M. Enim Prabumulih Muara Enim, Prabumulih. Karawang, Bekasi. Open Access. Copyright © BPH Migas 2014, All Rights Reserved.

Transporter that have been implemented Open Access No. 41 42 43 44. Jawa Timur. 45 46 47 48 IV 49 V. Pagerungan - ORF Porong ORF Porong - Gresik Gresik - PLN Gresik Gresik - PLN Gresik Kalimantan Timur Tanjung Santan - SKG Bontang KM 53 - SKG Bontang KM 53 - SKG Bontang Tanjung Santan - Manifold KM 29 PT Energasindo Heksa Karya Tempino Kecil - P. Selincah PT Majuko Utama Indonesia. 50. Cilegon - Ciwandan. Area. Description. Sumenep, Sidoarjo Sidoarjo, Surabaya, Gresik Gresik Gresik Open Access Kutai Kertanegara, Bontang Bontang Bontang Kutai Kertanegara, Bontang Jambi. Open Access. Cilegon. Open Access. VI 51 VII. PT Rabana Gasindo Usama SKG Tegalgede - Stasiun Gas Citeureup PT Rabana Gasindo Utama. Bekasi & Bogor. Open Access. 52. SKG Tegalgede - Cikarang Listrindo. Bekasi. Open Access. VIII 53. PT Gasindo Pratama Sejati Citarik - SKG Tegalgede - Stasiun Gas Cikarang. Karawang & Bekasi. Open Access Copyright © BPH Migas 2014, All Rights Reserved.