Infrastructure & Renewable Energy Business Development Gigih - PowerPoint PPT Presentation

Infrastructure & Renewable Energy Business Development Gigih Prakoso SVP Corporate Strategic Growth Jakarta, 8 April 2014 PT Pertamina (Persero) Jln. Medan Merdeka Timur No.1A Jakarta 10110 Telp (62-21) 381 5111 Fax (62-21) 384 6865 http://www.pertamina.com

AGENDA Energy Demand & Infrastructure 1 Renewable Energy Project 2 3 Partnership Project with JICA

AGENDA Energy Demand & Infrastructure 1 Renewable Energy Project 2 3 Partnership Project with JICA

The government has set national energy targets for 2025, encompassing a shift in the mix toward coal, renewables and gas Indonesia’s National Energy Mix (Mboe) 2010-2025 shift – Perpres 5/2006 CAGR +6% (overall) Comments 59%  Perpres 5/2006 aims to secure national 2,785 energy supply by achieving, by 2025: 17% Renewable – energy elasticity ratio (rate of energy +13% consumption growth vs. rate of economic growth) < 1 23% Gas – A shift in the energy mix toward a more +7% sustainable one (from oil to renewable, coal and gas) 24% Oil +1% 1,138  Minister of Energy & Mineral Resources 7% has the responsibility to develop the 20% Blueprint of National Energy Management, defining the high level requirements for the 48% 36% Coal +9% development of critical infrastructures (in particular for coal and gas) 25% 2010 2025 Source: Development Target of Renewable Energy 2025 – Minister of E&MR; Team analysis 3

Energy demand mix evolution is driven by consumer growth and fuel substitution – regulation impacts both dimensions Role of Regulations Consumer Growth – Power Example  Industrial regulations are key to growth of Indonesia Power Consumption Forecast, GW consumer segments: 100 – Facilitation in setting up industry units Consumer Growth 50 +8% – Pricing driving customer acquisition 0 – Public service obligation etc. 2012 2014 2016 2018 2020 2022 2024 2026  Fuel pricing regulations impact economic Fuel Options for Consumers substitution between fuels: Gas Products End Consumer Oil Products – Price subsidies on gasoline, diesel and Transport Gasoline natural gas will determine their demand mix Power CNG Industrial  Mandates may drive substitution of certain Diesel Fuel Commercial fuels: Substitution Fertilizer Fuel Oil – Substitution of gasoline and diesel with Steel CNG may be boosted by mandating CNG Household LPG Natural use in public transport Refinery Gas Petrochemical  Regulatory thrust on alternate energy may Jet Fuel Aviation drive its adoption over conventional fuels 4

Within the likely consumer growth, substitution and regulatory scenarios, Indonesia can expect a surge in oil and gas demand Indonesia – Demand Outlook Gasoline Diesel Natural Gas Million Liter /Day Million Liter /Day MMSCFD High Low 310 - 336 8081 – 10479 91 - 107 3 – 3.5X 1.3X 2.5 – 3.5X 26 16 2,398 75 310 3,400 91 96 8,081 2013 2025 2013 2025 2013 2025 Jet Fuel LPG CNG Million Liter /Day Million Tonnes MMSCFD 160 – 2,555 37 12 25 – 400X 2.5X 2X 2,395 5 14 6 160 2013 2025 2013 2025 2013 2025 5

This demand growth entails ~$30 bn investments in infrastructure across the oil and gas value chain, excluding supply infrastructure Investment Required $ Bn, Till 2025 Supply infrastructure Pipeline Vessel Retail Storage Truck investment depends 3.2 – 4 7 – 8 2 – 5 3.5 – 4 ~0.2 on: • Decision to build infra vs. import G&D fuel ~8 • Feedstock availability • Business case Storage Bridger Refueler Vessel DPPU ~0.3 – 0.8 ~0.2 ~0.03 ~0.4 ~0.1 Refinery Jet Fuel STS/Ref. T Vessel Filling Plant Pres. Term. Trucks 0.6 – 1.5 ~0.4 ~0.7 ~0.02 ~1 LPG GPU Natural Gas Vessel Regas Tr. Pipe Dist. Pipe CNG Retail 1.3 – 3.5 ~0.5 – 1.2 ~0.05 – 0.7 ~0.25 ~0.1 * Liquefaction LNG CNG * Transmission pipeline investments will depend on detailed planning of regas and pipelines 6

Pertamina has been proactively thinking about infrastructure development and has developed supporting tools for planning Initiative : Pertamina Infrastructure Strategy 2025 Initiative : Pertamina Infrastructure Planning (Models & Tools) (Models & Tools) Integrated Energy Infrastructure Gap Identification Prioritization 1 3 4 5 Model Integration Model Model Model  Model integrated energy  Translate projected demand  Identify gaps by comparing  Prioritize infrastructure demand up to 2025 into required infrastructure required infrastructure to existing gaps based on quantitative using thumb rules infrastructure + RJPP projects criteria  Integrate internal Pertamina study & bottom-up approach – analysis by consumer industry Infrastructure RJPP Infrastructure 2 Database (Existing) Projects (Planned) Output : In addition , business Prioritized Gaps model reference book serving as inputs to developed to guide infrastructure partnership decisions planning  Create a single “source of  List of infrastructure projects truth” on existing infrastructure in RJPP i.e. 2014-2018 Source: Team analysis 7

Analysis suggests retail & storage as key gaps by 2018; additional infrastructure is required across regions/fuels to meet 2025 demand Gap Analysis – Summary Key Gaps - 2018 Regional Distribution - 2018 NS SS WJ CJ EJ K S P Retail appears to be the limiting Gasoline & infrastructure across regions for gasoline Diesel Retail and diesel Short term overcapacity in most regions, Gasoline & except South Sumatra, East Java, and Diesel Storage Sulawesi (Under capacity by 2025 across most regions) Additional storage required in South LPG Storage Sumatra, Java, Kalimantan and Papua DPPU Capacity Capacity shortage across regions will be a limiting factor in serving Jet Fuel demand Natural Gas Short term overcapacity in regasification Infrastructure (Under capacity by 2025) Overcapacity Under capacity NA Source: Team analysis 8

Gap mitigation will require extra investments – business model options have been evaluated with a view of attracting partners Business Model Options Business Model Review – Key Drivers Infrastructure Options and Examples  Funding constraints could be addressed by Merchant / JV Integrated Model Tolling Model Model attracting partners through implementation of Storage Pertamina & alternate business models Pertamina Storage Player Commodity Trader  Partnership options across the value chain of Oil Integrated Model Tolling Model Infra relevant infrastructure have been evaluated on the Pipeline basis of: Pertamina Pipeline Owner – Capability requirement : Level and Retail COCO CODO DODO sophistication of resources required from Pertamina Merchant / JV Tolling Integrated Model Model Model – Implementation risk : Pertamina’s risk appetite Liquefaction Pertamina & Pertamina & Liquef Liquefaction tolling in building the infrastructure Upst./Downst. Co. project company company – Funding requirement : Pertamina’s available Own Time Charter Spot Charter funding given the overall investment perspective Shipping Pertamina & Ship Pertamina & Ship Gas – Balance sheet implication : Implications of Ship Owner Owner Owner Infra investments to Pertamina’s financial statements Merchant / JV Tolling Integrated Model (e.g. distinction between operational vs financial Model Model Regas lease) Pertamina & Pertamina Regas Company Regas Company – Attractiveness for partner : Creation of an Dedicated for Collocate with Independent CNG incentive model to attract potential partners CNG Retail Public Transport G&D Station Station Key Gaps – 2025 Most attractive Model Asset Owner Source: Team analysis 9

Regulatory support is required to effectuate favorable demand mix and infrastructure investments Key Support required from Regulators  Regulatory support is required for Indonesia to achieve the target of oil substitution by increase in gas and renewable penetration. Certain steps in this direction could be: – Facilitating substitution driven by economics through pricing regulations : e.g. Liquid fuel price deregulation and/or subsidies on alternative energy / CNG Facilitation of Target Energy Mix – Volume allocation of substitutes to consumers to create certainty of supply : e.g. preferential allocation of gas to city gas distribution, fostering fuel substitution – Mandates facilitating substitute adoption : e.g. mandating use of CNG in public transport  Attracting global players to provide access to their existing infrastructure or invest in new infrastructure to support Indonesia’s energy demand: Facilitation of Infrastructure – Facilitating use of assets of global players : e.g. Gas shipping activities Investments – Attracting infrastructure investments : e.g. providing tax breaks to global investors Facilitation of  Attracting investment in exploration & production as well as supply infrastructure such as Supply refineries by easing the regulatory regime appropriately Enhancement Source: Team analysis 10

AGENDA Energy Demand & Infrastructure 1 Renewable Energy Project 2 3 Partnership Project with JICA

Renewable Energy Projects in Pertamina – updated 2014 RE Project 2012 2013 2014 2015 2016 2017 2018 Green Diesel 493 Ribu KL Bioethanol 30 Ribu KL/year 76 Ribu (offtake) KL/year Bioavtur 257 Ribu KL 1) 2) Wind 10 MW 60 MW Hybrid System (solar & wind) Algae Legend: Project Plan Commercial Milestone R&D stage 12