Pipeline M A in Indonesia Opportunities under the New

Pipeline M&A in Indonesia Opportunities under the New Law Peter Roberts Adam Summerly 0

Peter Roberts Jones Day, Hong Kong Ph: (852) 3189 7286 Fax: (852) 2868 5871 Email: peterroberts@jonesday. com Adam Summerly Jones Day, Singapore Ph: (65) 6233 5994 Fax: (65) 6536 3939 Email: asummerly@jonesday. com 1

Introduction · The “Old” Oil & Gas Law · The “New” Oil & Gas Law · The PGN South Sumatra Pipeline Project · Development of the Trans-ASEAN Gas Pipeline 2

The “Old” Oil & Gas Law · Law 44/1960 “Mining undertakings of mineral oil and gas are exclusively carried out by State Enterprises” · Law 8/1971 Pertamina appointed as the only State Enterprise granted the mining authority to transport gas in Indonesia 3

The “Old” Oil & Gas Law cont’d · Regulation 37/1994 • Pertamina’s exclusive transportation authority opened up to PGN • PGN obliged to: – develop, produce, supply and distribute processed gas – develop and construct transmission lines – supply and distribute natural gas in accordance with GOI policies · No opportunity for private sector participation in owning onshore gas pipelines in Indonesia 4

The “New” Oil & Gas Law 3 components: · Law 22/2001: passed by Parliament on 23 October 2001, ratified on 23 November 2001 · Elucidation: Supplement to State Records No. 4152 5 · Implementing regulations: yet to be established for downstream business activities

The “New” Oil & Gas Law cont’d · Transportation activities may be conducted by: • • state-owned business entity regional government-owned business entity cooperatives; small companies private business entities · Business entities undertaking Transportation must be established, function and be located in Indonesia 6

The “New” Oil & Gas Law cont’d “Transportation shall be the activity of transferring Natural Oil, Natural Gas and/or the product of their processing from the Operational Area or from the gathering place and Processing, including Natural Gas transportation through transmission and distribution pipelines. ” 7

The “New” Oil & Gas Law cont’d · Must obtain a Business License to undertake Transportation business activities · Business entity engaging in Transportation may not engage in Upstream Business Activities · The Minister shall stipulate a master plan for a gas transmission and distribution network · A Business Entity holding a Business License for natural gas pipeline Transportation “shall only be granted a certain Transportation segment” 8

The “New” Oil & Gas Law cont’d · The Regulatory Body will implement and regulate pipeline gas Transportation · Regulation will cover • tariffs • price of gas for households and small customers • natural gas transmission and distribution businesses · Open access regime for pipelines that “concern public interests” 9

The “New” Oil & Gas Law cont’d It is now open for private sector participants to: acquire interests in existing pipeline infrastructure participate in future pipeline infrastructure projects 1 0

PGN South Sumatra Pipeline Project 1 1

PGN South Sumatra Pipeline Assets Grissik – Duri A 540 km gas pipeline from the Grissik gas fields in South Sumatra to the Duri steamflood project in Central Sumatra (transporting approximately 300 MMSCFD) Grissik – Batam – Singapore A 500 km gas pipeline from the Grissik gas fields to Batam and to Singapore, supplying gas to Singapore utilities (ramping up to 350 MMSCFD in 2009) 1 2

PGN South Sumatra Pipeline Background · Construction of the project funded by: • • • ADB EIB JBIC PGN Partial divestment of equity · Partial divestment to experienced international investors a condition of ADB financing 1 3

PGN South Sumatra Pipeline Acquisition · Competitive bidding process · 4 bidders shortlisted in early 2002 · Successful bidder Transasia Pipeline Company Petronas Gulf Indonesia (now Conoco. Phillips) Singapore Petroleum Corp Talisman Energy 1 4 35% 15%

PGN South Sumatra Pipeline Acquisition · Acquisition agreements executed on 12 September 2002 · Purchase price around US$187. 6 million · Expected to close mid-October 1 5

PGN South Sumatra Pipeline Investment Structure PETRONAS (35%) TALISMAN (15%) SINGAPORE PETROLEUM CO (15%) CONOCO PHILLIPS (35%) TRANSASIA PIPELINE 40% 1 6 PGN PT TRANSGASINDO 60%

PGN South Sumatra Pipeline Investment Schedule 2002 • PT Transgasindo created as a wholly owned subsidiary of PGN • Business license issued to PT Transgasindo • Grissik-Duri pipeline assets transferred from PGN to PT Transgasindo GTA to Duri for Caltex steamflooding operations September 2002 • Execution of Transasia Pipeline Co’s buy in to PT Transgasindo 1 7

PGN South Sumatra Pipeline Investment Schedule October 2002 • 40% of shares in PT Transgasindo to be transferred to Transasia Pipeline Co August 2003 • expected completion of construction of the Grissik -Batam-Singapore pipeline November 2003 • expected transfer of the Grissik-Batam-Singapore pipeline to PT Transgasindo GTA to Singapore for Gas Supply Pte Ltd GTA to Batam for PGN’s distribution network 1 8

Future Opportunities · Indonesian Integrated Transmission System • South Sumatra to West Java • East Kalimantan to East Java • East Java to West Java · Trans-ASEAN Gas Pipeline • Duri to Malaka • East Natuna to Sabah • Arun to Pauh 1 9

Trans-ASEAN Gas Pipeline 2 0

THANK YOU 2 1