Pidato Pembukaan Presiden IPA - Konvensi dan Ekshibisi IPA ke 35
Your Excellency Bapak Boediono, VP of the Republic of Indonesia,
Your Excellency Bapak Darwin Saleh, Minister of Energy and Mineral Resources,
Ibu Evita Lebowo, Director General MIGAS,
Bapak Hardiono, Vice Chairman of BPMIGAS
Members of House of Representative, DPR
Ambassadors,
Distinguished participants, IPA colleagues, ladies and gentlemen.
Good morning, Selamat pagi, I am delighted to welcome you all to the 35th Annual IPA Convention & Exhibition with the theme “Indonesia Energy: Growth, Security and Sustainability”
The country is poised for strong economic growth and needs energy to fuel it. It also needs to secure energy supplies for the future and to do so in a sustainable manner.
Indonesia has huge natural resources and can be self sustaining in its energy requirements by unlocking them. Focus needs to move from mature oil production to realising the potential of gas reserves, both conventional and unconventional and other forms of energy; geothermal, bio-fuels and renewables. Industry needs to explore for, develop and produce gas in increasingly difficult frontier areas in order to meet domestic needs and still generate valuable export revenues. To achieve this will require a step change in exploration activity and huge additional investment. Policies should be aimed at encouraging this and the IPA’s principal role is to coordinate with government to ensure it happens.
ROLE OF THE IPA
The Indonesian Petroleum Association was formed over 40 years ago and today its member companies account for virtually all the country’s oil & gas production whilst its associate member companies provide the bulk of the service and advisory requirements. In addition there are 2,000 individual members representing the cream of young Indonesian professional staff for whom the IPA organises training courses, workshops, field trip and seminars aimed at developing them as future leaders of the industry.
The Mission of the IPA is clear, it is to fully realize the hydrocarbon potential of Indonesia for the benefit of all stakeholders; investors, the Government and above all the people of Indonesia.
To achieve this, the IPA works very closely with the Government, particularly ESDM and our regulators MIGAS and BPMIGAS as true partners of choice where the keys to success are mutual respect & trust as well as a common goal & vision.
The oil & gas sector makes an enormous contribution to the economic wellbeing of the country; it accounts for 7% of Indonesia’s GDP and contributes over 25% to state budget revenues. The sector provides direct employment for over 300,000 Indonesian workers and indirect employment for countless more. It contributes almost US$19 billion in direct investment. The sector is the true enabler of the economy, the key to future economic growth and success.
These however are just the numbers, what they don’t convey is the true performance of the industry in Indonesia and the outstanding contribution IPA member companies have made.
The giants of the industry have made a huge contribution to Indonesia
Chevron – is the long time major oil producer in country & is poised to undertake a major deepwater gas development offshore E Kalimantan
Total – is the country’s leading gas producer and has been investing in Indonesia for over 40 years
ExxonMobil – is the long time supplier to Arun LNG and joint operator with Pertamina of Cepu the most recent major oil find
ConocoPhillips – is the operator of two major gas configurations bringing vital supplies of domestic gas and generating export revenues
BP – is the operator of the Tangguh LNG facility in the technically challenging and very remote area of Papua
VICO (the collaboration between ENI and BP) – is a major gas producer now focused on realising CBM potential in Kalimantan
Indonesia’s own companies make a major contribution:
Pertamina – the country’s NOC is a leading producer of oil and gas onshore and has expanded offshore to increase oil production in ONWJ
Medco – is the leading Indonesian independent with both domestic and international production
EMP and Star Energy – are both valuable domestic producers and at the other end of the spectrum PT Ephindo and Supreme Energy are proving real pioneers in CBM and Geothermal
International NOCs and IOCs play a vital financing and operational role: Companies such as INPEX, Japex, CNOC, Kufpec, Statoil, Petronas, PTTEP
And a whole host of global independents have long chosen Indonesia as home for their upstream activities: Anadarko, Marathon, Murphy, Husky, Hess, Santos, Premier, Talisman
The global service sector is comprehensively represented in country:
Schlumberger, Halliburton, Weatherfords, Bakers, Transocean,
As well as Indonesia’s own service cos: Tripatra, Apexindo, El Nusa, …etc
All these companies are IPA members, all are very active and all want to invest more in Indonesia
In addition IPA companies contribute enormously to community development and CSR programmes for the communities they interface with - be it in healthcare, education, social welfare or capacity building.
The IPA directly contributes member funds to support disaster relief efforts across Indonesia most recently donating US$ 25,000 to the Indonesian Red Cross for victims of the Merapi eruption.
The IPA places great emphasis on education for young Indonesian students and in conjunction with this year’s event I am proud to announce that the association will be awarding 25 scholarships to Under-Privileged Students at a number of major universities throughout the country.
Ladies and Gentlemen….the oil & gas industry is a great industry, it does great things in Indonesia and the IPA is committed to working with the government to do even greater things in the future.
LETS EXAMINE WHAT’S NEEDED TO SECURE ENERGY SUPPLY
Gas increasingly represents the future focus in Indonesia but brings with it more complexity and a need for far greater financing particularly when the gas is found in remote and very challenging areas. As His Excellency the Vice President himself highlighted last year the paradigm has changed with domestic requirements taking priority over export revenues. Industry fully supports this but it can only be achieved with the installation of much needed domestic infrastructure ¬– transmission pipelines, liquefaction plants, receiving terminals – all of which must be underpinned by long term supply agreements to secure the necessary financing. Cost, duration and quantities will impact the economics but the principal driver will be price - the gas price must be market driven and not limited by producers providing indirect subsidies to end users.
Whilst government policies to prioritise domestic needs are fully understood it is essential not to forsake the enormous benefits of export revenues at a time when the supply and demand centres are imbalanced and there is comparatively little infrastructure to enable widespread domestic consumption. Let’s respect existing export contracts and benefit from the significant revenues they generate.
Exploration is the key to future production and it is essential to encourage as much activity as possible. Although the direct offer mechanism has been successful in doing so, recent tender rounds have been comparatively disappointing and more needs to be done to attract exploration investment in significant quantities. The IPA is keen to work with MIGAS to restore momentum. The industry is looking anxiously for success in the Makassar and Semai campaigns both of which are technically and financially very challenging and efforts must continue to encourage activity into other frontier areas. The mature basins are essentially fully explored and increasingly the future lies in remote areas…….industry must be encouraged to go there.
Industry must also be encouraged to explore for and develop the extensive Unconventional Gas Resource that Indonesia possesses. Around the world, we see the growing importance of CBM and Shale gas and they can play a vital role for Indonesia but to do so need to be supported by appropriate regulations, incentives and partnerships to ensure that the necessary investment is forthcoming.
In tomorrow’s panel discussion the Boston Consulting Group will discuss the investment required to secure Indonesia’s future energy requirements, the numbers are huge. I have borrowed a key slide from their presentation to highlight the fact that investment needs to be tripled to an estimated US$23 billion per annum from 2020 onwards.
WHAT ARE THE POLICIES NEEDED TO BOOST INVESTMENT
In order to obtain this level of funding it is essential to keep the investment climate positive. Strong cooperation between Government and industry is essential to ensure this and the recent experience with the shipping law (cabotage) provides a perfect example of the power of strong collaboration. A potentially damaging impact on production and investment was averted by amending the regulations to provide exemption to highly specialist vessels required by the oil & gas industry
- Similar cooperation is required in finalising the implementing guidelines for GR 79 on Cost Recovery which continues to concern the industry - adding to uncertainty rather than removing it - as well as threatening the bedrock of the industry in Indonesia - contract sanctity - this is the most critical issue that needs to be addressed
- In addition to the above industry looks for a Fiscal Regime that is tailored to a maturing oil sector whilst incentivizing gas development and exploration activity
- Industry looks for Government to provide a regulatory regime that facilitates approvals in a speedy fashion – the IPA strongly believes this would have the greatest impact on increasing current production. Both MIGAS and BPMIGAS work constantly to accelerate their approvals processes but industry would also like to see greater cooperation shown by all government agencies particularly at the early stages of policy formulation - use industry as a sounding board and principal partner
- We would like to see a Clear & Transparent process for PSC licence extensions to avoid any slowdown of investment in the latter years of a contract life.
IPA member companies are the best ambassadors for future investment, either by themselves or from new entrant companies - treat them well, provide them with Clarity, Consistency and Certainty and they will attract further investment. Ours is a joint venture industry where companies are more focused on cooperating than competing and a mantra for the IPA is to focus on making the pie bigger for everyone, investors and government alike.
CONVENTION PROGRAMME
Over the next three days this year’s convention is anticipated to be the largest ever. More than 150 exhibitors and almost 4,000 visitors are expected to attend to see the very best that the industry has to offer in Indonesia.
Around 130 Technical Papers will be presented by industry professionals
3 Plenary Sessions will be held to discuss how Indonesia can become self sustaining in its energy supply
Tomorrow evening a Gala Dinner will be held and we are delighted that HE Minister Darwin Saleh will again join us and make a keynote speech
And on Friday prior to the Closing Ceremony the DG MIGAS will announce new licence areas to be awarded
An exciting new addition this year is the Energy Edutainment Corner, which is designed to educate visitors, including high school and college students about the oil and gas industry in Indonesia, hopefully inspiring them to participate in the future success of the sector, I encourage you to visit it.
CLOSING REMARKS
Distinguished guests
For decades, the oil and gas industry has been Indonesia’s economic enabler, the key to economic success and it must continue to be so in the future.
Massive investment is needed and it needs to come fast - policies need to encourage, incentivize and accelerate existing production and stimulate exploration in new & challenging environments. Addressing key policy issues and establishing clear priorities are critical to enhancing the investment climate in Indonesia.
To HE the Vice President of Republic of Indonesia, to HE the Minister of Energy and to other distinguished guests I would once again like to extend our sincere appreciation for joining us today.
To all participants, we welcome your attendance and trust you will enjoy the experience.
And finally, to all industry colleagues, we bid you a very warm welcome with the message that working together we can achieve the future Growth, Security and Sustainability of Indonesian Energy for the benefit of all stakeholders; Investors, the Government, AND above all the people of Indonesia.
ENJOY THE CONVENTION - THANK YOU - TERIMA KASIH BANYAK
