September 2009 (09/09)

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1 Highlights Features 2 3 Committee Highlights A review of the main activities of the IPA Committees during the 1st half of 2009 Company Profile Pertamina EP Professional Division Highlights on the education and knowledge transfer activities of the committee CSR Spotlight on the LBD program of Chevron Special Events Some facts and information on the evolution of the IPA Convention Letter From the Editor Welcome to the first edition of IPA E-newsletter! With the new look and feel, IPA website and E-newsletter will present you with the news update of IPA organization and its company members. We are so excited to give you the latest update of each IPA committee and the news of our new IPA President, Ron Aston. We will also present you with our successful the 33rd IPA Conference and Exhibition and highlight the Corporate Social Responsibility stories of one IPA s company members, Chevron Indonesia. IPA chooses to have the E-newsletter to substitute the previous newsletter as part of its commitment to the environment, by using less paper. However, if you still want to obtain the printed edition of this newsletter, simply print out this E-newsletter or send a note to IPA secretariat, and we will send you a copy. To make this newsletter more attractive, we invite readers to contribute articles surrounding oil and gas operations activities. We also look forward for your feedback of this new edition. Please send your article and feedback to newsletter@ipa.or.id Happy reading. Editor Our new IPA President: Ron Aston On June 11, 2009, Indonesia Petroleum Association (IPA), announced that the IPA Board of Directors elected Ron Aston as the new president of the organization. Mr. Aston is the 32nd IPA President, replacing the former IPA President, Roberto Lorato following the end of his assignment and service in Indonesia. With the election of Mr. Aston, we trust that the existing good relations and cooperation between the organization and Indonesian government will continue in the future, said Dipnala Tamzil, Executive Director of IPA. IPA has been supporting and working with government of Indonesia to address crucial issues in oil and gas sector for more than 30 years. I m very excited and looking forward to serve the organization and contribute more to the development of oil and gas industry in Indonesia, said Ron Aston, IPA President. Mr. Aston, is also the President of Talisman Energy Inc. in Indonesia. IPA is a non-profit organization with more than 50 company members and 94 associate members. The organization was formed in 1971 and has acted as bridge between the industry and the government of Indonesia. 1

2 Commitee Highlights Regulatory Affairs Committee Regulatory Affairs always become one of the busiest committees in the IPA organization. In the first half of 2009, the commitee has succeeded to address some important issues such as Cost Recovery, new Work Plan and Budget (WP&B) process in BPMIGAS and the use of national bank. This effort require a huge commitment from each committee members, wherein the members work together with BPMIGAS to provide feedback on regulations implemented in oil and gas industry. Communications, CSR and Local Relations Committee As a new committee in IPA organization, the Communications, CSR and local relations committee is inviting new members. To date, more than 10 public relations practitioners from various IPA company members joined the committee and are ready to build the committee not only to promote IPA organization to external stakeholders but also as a think tank of Communications, Media, Corporate Social Responsibility and Local Relations (local stakeholders relations). LNG, Gas and CBM Committee As one of the new committee in IPA organization, the IPA Board further decided that Coal Bed Methane (CBM) should be established as a subcommittee under the LNG, Gas and CBM Committee. The CBM subcommittee has been active in support of Government plans to issue a new implementing regulation for CBM. The CBM subcommittee is also providing input on suggested changes to the form CBM PSC. A meeting of the full LNG, Gas and CBM Committee is planed in the near future. Human Resources Committee It s quite a busy year for Human Resource Committee. In first half 2009, the committee has participated in three important meeting with BPMIGAS to socialize HR Management to PSC. BPMIGAS PTK 018 on People and Cost Recovery was conducted in Jogjakarta in February and followed by WP&B for People and Manpower Planning (RPTK) both in Bandung in April and June respectively. The HR committee also facilitate discussion with Manpower Office in regards to Manpower Regulation No. 4/2009 related to Revocation of Min. Decree No. 27/2000 on Compensation Program for Contractor Employees at end of Employment Agreement for Specific Period Local culture in Indonesia is very important, wherein the country has more than 300 tribes. Most of the oil and gas company in Indonesia operate in remote areas therefore, cultural sensitivities is very important for them to be able for the personnel to understsand about local culture. Human Resources Committee working with BPMIGAS provided Introduction of Indonesian Culture to ExpatriateS. As part of the committee program, this training is part of the technical training program. IPA through HR commitee has been active in supporting Indonesia s education particularly in oil and gas sector. With its University Assistance Program, the committee provides one day courses on various technical topics to students at Univ. Padjajaran (Bandung), Univ.Trisakti (Jkt), UPN (Jogjakarta), Univ. Gajah Mada (Jogjakarta), Univ. Lampung (Lampung), Univ. Hasanudin (Makassar), Univ. Brawidjaja (Malang) and Univ. Indonesia (Jakarta). In addition, the committee provides assistance to lecturers from various universities to attend IPA Commercial Training Courses, IPA Annual Convention and to purchase text books. Data Management Committee The Data Management Committee just establish a Forum for Joint Cooperation between Industry and Government related to technical standards and data management systems. This forum is very important to bridge communication between oil and gas industry and government that should be increased and intensified. The establishment of this forum was done in the first half of Finance & Tax Commmittee The Finance and Tax Committee is always busy in dealing with new regulations for the industry issued by the Government. The Committee formed a joint effort with Regulatory Affairs Committee to address Cost Recovery Issue and discuss with BPMIGAS to finalize the implementing guidelines related to Minister of Energy and Mineral Resources Regulation No. 22/2008. The committee also actively participate in providing input to various important Government of Indonesia regulations. This process is very important as it will capture the input and concern of oil and gas company community to the government. 2

3 Company Profile Pertamina EP Pertamina EP (PEP) is one of the most prominent oil and gas producers in Indonesia, will strive to put its best efforts in undertaking the nation s duty to fulfilling the needs of Indonesia s community at large. Pertamina EP is a subsidiary of PT Pertamina (Persero) that manages the upstream oil and gas operation in Indonesia. As the strategic arm s length, Pertamina EP plays a very important role in maintaining the sustainability of Pertamina upstream oil and gas business. Regarding to its strategic role, the management and employees of Pertamina EP are committed to conduct transformation to become a world class company. Since 2006, Pertamina EP has set several transformation programs in a form of Three Years Strategic Planning (REPETITA). In the first REPETITA ( ), our vision is to be a respectable, cost effective and efficient oil and gas producer. At present, we are in the second REPETITA ( ) and our vision is to be the number one oil and gas producer in Indonesia. Next in the third REPETITA ( ) our vision is to attain Pertamina EP World Class. It has been PT Pertamina EP s commitment to constantly foster standard ethical behavior and to implement professional business ethics throughout internal and external interactions. Such behavioral standards, that we call core corporate values, have been perceived as fundamental as well as strong groundwork of a continuous relationship with the stakeholders. Sincere represents integrity, honesty, and avoiding conflict of interest. Strong signifies visionary, excellence, and focus. Sensible characterizes mutual respect, environmental friendly and harmonious relationship with stakeholders. Soon after its establishment on 13 September 2005, PEP has been dedicating to undergo its core business with strong commitment, to work hard and be productive, have motivated PEP in elevating Indonesia s position as a net oil importer. Consequently, PEP has strived to constantly increase the oil and gas production capacity, to which its daily capacity of production that currently achieve barrel oil per day (BOPD) or barrel above 2009 target. At this stage, PEP owns four main backbone fields for their high production capacity. As a consequence, any impacts resulted from those fields will eventually affect the whole PEP production. The four working fields are Tambun, Limau, Sukowati and Poleng. Production capacity of Tambun field is 15,000 BOPD, Limau field is 12,000 BOPD, Sukowati field is 31,000 BOPD, and Poleng field is 8,500 BOPD. In total, all the four main fields contribute 40 percent of the targeted 125,000 BOPD. Gas production capacity of PEP hit 1040 million standard cubic feet per day (MMSCFD) and dedicated to supply domestic market. With 140,000 km2 of working area, PEP is a Contractor of Cooperation Contract operating in the most widespread area in Indonesia. This also means that PEP owns 20 percent shares of national oil reserve and 10 percent of national gas reserve. These potentials will eventually turn Pertamina into the largest oil and gas producer in Indonesia. 3

4 In achieving its future end objective, PEP has designed its strategy First Quality, then Growth, then Strive for Excellence. Related to the PEP has also created programs to be prioritized to support the overall company s growth. The first point is related to sustainable increase in production and reserves, through operational excellence, proper reservoir management, accelerated EOR program in the focused fields and a more effective partnership management. Finding new reserves is one of the targets to be accomplished. It shall be conducted through focused exploration program, by redeveloping its fields, intensifying regional studies, evaluating new concepts, and through unitization of adjacent fields. In moving forward to become a world-class company, achieving HSE excellence is also a major concern for Pertamina EP. It is performed by prioritizing safe and environmental friendly operations. An LBD partner s employee is working in one of Chevron s facilities The LBD program is an innovation of community development (CD) which was awarded the Padma Award from the Ministry of Energy and Mineral Resources in Chevron applied the LBD program for the first time in its operation area in Sumatra in 2001, and continued to expand it to Kalimantan operation area and geothermal operation in West Java. This program is intended to develop local small companies or cooperatives surrounding Chevron s areas of operations to become reliable, professional and competitive suppliers in providing goods and services, while at the same time boost the local economy. CSR Chevron Through LBD, Chevron Empowers Small Company and Cooperative Chevron continues to empower the economy of the communities around its operation areas. Through the Local Business Development (LBD) program, which was pioneered by Chevron, we consistently introduce the concept of LBD and open opportunities of business partnership with the local small company and cooperatives. The program is focused on offering trainings and workshops to provide local entrepreneurs the knowledge on how to do the required job properly and safely according to the principles adhered by Chevron. Some of the trainings are on Health, Environment, and Safety (HES), procurement procedures, business ethics, project management, technical aspect, financial management and other soft skill trainings that are required to develop the capacity performance of the LBD s partners. Participants of LBD s Smith System training in Rumbai, Pekanbaru 4

5 Professional Division Head of BPMIGAS Sumbagut Mulyawan (third from left), Sr. VP Sumatra Operations Support Chevron A.H. Batubara (forth from left) posed together during an LBD Forum in Rumbai Country Club The tangible progress is the improved capacity and competence as well as business interactions of small businesses and cooperatives nurtured through LBD, said Yanto Sianipar, Vice President Policy, Government and Public Affairs Chevron IndoAsia Business Unit. Since the program was introduced, more than 700 small suppliers have been certified, around 3,000 contracts awarded and approximately 6,000 jobs created. In total, Chevron has spent US$31.5 million in goods and services through LBD. Annual purchases have increased from US$1.5 million in 2001 to US$7.1 million in The projects included in the LBD are projects with a maximum contract value of Rp200 million per project in Sumatra and Kalimantan, while in West Java, the value per project is Rp500 million. In its development, the LBD program is adopted as a new model in implementing community development in the oil and gas sector in Indonesia, particularly for local economic empowerment. It is expected that through this program, the local entrepreneur will change their mindset, from just receivers of projects to business players who are willing to learn to enhance their competence and competitive power, simultaneously creating business interactions between the local community and Chevron. Local entrepreneurs respond positively to the LBD program. H. Nuraidah, one of the LBD partners from Samboja sub-district, is thankful to have been given the chance to participate in the LBD workshop. All these years, we have only been sub-contractors of a big company working in partnership with Chevron. With the LBD program, small entrepreneurs have the opportunity to work directly with Chevron, she said.

6 Special Events IPA Convention: Endeavors to create sound investment climate Since IPA Convention was first launched 33 years ago, the Convention has carried themes that take a deeper insight into the role played by the oil and gas industry in the development of Indonesian economy, beyond the industry s direct stakeholders. Every IPA Convention features leaders in management, geosciences and engineering from around the world and involves some 2000 delegates, 100 exhibitors, government officials and other stakeholders. IPA also thinks it important to bequeath the know-how and technology to young people who will become future oil and gas professionals and engineers. To achieve the goal, IPA collaborates with several universities including the University of Indonesia (UI), Bandung Institute of Technology (ITB), University of Gajah Mada (UGM), University of Brawijaya and University of Lampung. Several students from different local and overseas universities were invited to present their papers in the Convention s Technical Session over the last several years. Out of 100 papers presented in every Convention, several are prepared by students. On top of that, students can learn papers previously presented by professionals at IPA s library. From the above facts, it is clear that IPA has been instrumental in helping realize the transfer of knowledge and technology, not only from international industry to national industry but from the industry to the community. Changes As part of the Indonesian and global community, IPA has been continuing to carry out its tasks from one period to another despite changes that have impacts on oil and gas industry, such as the changes in the country s leaderships, oil and gas management, oil and gas law and global situation. Certainly, organizing the event in each period in which change takes place has its own dynamism. For example, after the reform era in 1998 onwards, aside from Technical Session, the Convention also features Plenary Session 1 and 2, where the ministers in charge of economic affairs, international donors and lawmakers take turns to present their views on general issues. There has been openness after the reform era. PSC contractors, the community, and the government officials can deliver their views in an open manner, said Ananda Idris, who chairs the organizing committee of the IPA Convention and Exhibition It is not surprising that there are more varied nontechnical issues presented in the Conventions held after the reform era, including those related to problems that hamper the industry s growth and investment in the industry. From what has happened over the past years, it is clear that IPA can consistently organize the event under any circumstances. The Convention has not only been held when Indonesia remained an oil exporter before 2005 and when IPA members enjoyed windfall profit from the high price of the black gold, which among others, were recorded in the mid 2008; but also at a time when Indonesia s oil and gas reserves started to deplete, when realized investment in oil and gas shows downward trend and when the global crude oil price slid significantly like what we have seen today. This explains why every Convention carries themes adjusted to the actual situation. For example, this year when the world is hit by the economic slowdown, Plenary Session 1 and 2 are themed Global Crisis, its Impact on the Nation s Economy and Future Energy Demand and Delivering Energy in a Challenging Environment respectively. Over the years, IPA has faced different challenges in holding the Convention. Amid the declining oil production and lack of realized investment, Indonesia has to compete with other oil and gas producing countries that equally strive to become more competitive and offer more added values in order to attract investment. To be more competitive and offer added value, mutual understanding on the part of the government as policy maker and operators of the industry is highly needed. And this can be achieved through constructive dialogs. 5

7 Through its annual Convention, IPA facilitates the dialogs. Without doubt, IPA Convention has evolved into Indonesia s premier and most influential oil and gas event, not only in terms of transfer of know-how and technology but also the role its plays in bridging the industry and the policy maker, especially with respect to creating a sound investment climate. Key Facts the 33rd IPA Convention and Exhibition: Dates : 5th 7th May 2009 at the JCC Theme: Managing Resources & Delivering Energy in a Challenging Environment Opened by HE President Susilo Bambang Yudhoyono 2995 registered delegates and participants incl. exhibitors 98 exhibition booths covering 3077 m2 110 technical papers and posters presented, incl. 13 student papers Signing of 10 PSC, 3 CBM & 5 Gas Sales Contracts Announcement of new oil & gas acreage and work areas 3 Plenary Sessions with senior speakers representing the Government, Industry and International Institutions : 1. The Global Crisis, its Impact on the Indonesian Economy and Energy Demand 2. Delivering Energy in a Challenging Environment 3. Indonesian PSC- Current Approach and Challenges Special luncheon talk on Extractive Industry Transparency Initiative (EITI) Inquiries, Responses and Contributions to our are welcome at newsletter@ipa.or.id 6