SUPPLY CHAIN MANAGEMENT DOING BUSINESS WITH ETHICS AND INTEGRITY

-- PHE WMO PERSPECTIVE --

PHE WMO – SUPPLY CHAIN MANAGEMENT

Vendors Day Bersama – East Java 2017

Batu, 27 – 28 Juli 2017

PHE WMO OVERVIEW

CORE VALUES & CPI RESULTS

ETHICS & INTEGRITY LEADERSHIP

Contents

1

2

3

2016 Awards & Achievements:

•Zero Accident (TRIR = 0)

•Gold PROPER (Ministry of Environment)

• ISRS-8 Level 6 (DNV)

•Local Content Award (Ministry of ESDM)

•MURI Award on ISO14064 Certification and

ISO9001 Certification for Integrated SCM

•Patra Nirbaya Karya Madya (Ditjen Migas)

•Career Development Management Award

(SKK Migas)

•Fuel & Operational Efficiency Award (SKK

Migas)

•Oil & Gas Production Target Achievement

(SKK Migas)

•Patra Adikriya Madya (Pertamina)

•Local Hero Award (Pertamina)

Area: 1,666.26 km2

13,450 Oil (BOPD)

Gas (MMSCFD) 103.84

9,430

103.25

Production Profiles 2015 2016

Oil Prod Declining Rate 49.8% 24%

PHE WMO Profiles & Achievements

Milestone 1

International Standards & Best Practices ISO 14001 (2016) OHSAS 18001 (2015) ISRS-8 Level 6 (2016) Proper Gold (2016) ISO 9001 (2016 - SCM) HSE Management System CDM (HR)

[ 2-3 Years ] Top Three East Java Oil

& Gas Producers ISRS-8 Level 7 (DNV) Independent Safety

Culture [DuPont Chart]

ISRS-8 Level 8 (DNV) Culture of Quality

(Dupont)

Best-in-Class Leader Position [Top

10%] ISRS-8 Level 8 (DNV) Green Company Comprehensive

performance measurement

Employs state of the art information systems

Adopts cost effective technology

Works in collaborative cross functional terms

Milestone 2

Milsetone 3

World Class

[ 5-6 Years ] Top Ten National Oil &

Gas Producers ISRS-8 Level 8 (DNV) Interdependent Safety

Culture [DuPont Chart] Proactive Organization

(Dupont Chart) ISO 31000

Vision

Mission

To be a world-class oil and gas company

To maximize the oil and gas potential of West Madura Offshore through safe and reliable operations for the benefit of stakeholders.

2025

Journey to the World Class Standards

Asset Key Indicators

Reserve & Production Growth

• Exploration N-7 & Boyo-1 • Wells Development

12A1/12A2/2A3 & 24 • Oil & Gas 28,361 boepd

• Seismic for PHE-2, Exploration fo PHE-11 & PHE-10

• Wells Development PHE-7 & PHE-48

• Oil & Gas 45,137 boepd (Year 2021)

• Wells Development N-7, PHE-53, PHE-2, Ngimbang & Basement, PHE-11 Phase-1 & Pase-2

• Oil & Gas 54,689 boepd (Year 2027)

Operational Excellence • TRIR: 0 • ISRS-8 Level 7 • Reliability & Integrity:

98.50%

• TRIR: 0 • ISRS-8 Level 8 • Reliability & Integrity:

99.00%

• TRIR: 0 • ISRS-8 Level 8 • Reliability & Integrity:

99.50%

Cost Efficiency • Opr. Cost $15.25/BOE • Opr. Cost $10/BOE • Opr. Cost $8/BOE

People Development • Critical Position is fullfilled • Technical & Leadership Competeny

• Technical & Leadership Competeny

o High declining rate of oil production

o Demand-dependant for gas sales

o Expensive fit-for-purpose technology

Long Term

Medium Term

2018 – 2022 2023 - 2031

Challenges

Sustainable Growth Challenges

Short Term

<Quick Wins>

2016 - 2017

CLEAN

COMPETITIVE

CONFIDENT

CUSTOMER-FOCUSED

COMMERCIAL

CAPABLE

Corporate Core Values

CLEAN Professionally managed, avoiding conflict of interest, no tolerance to bribery,

uphold trust and integrity - in accordance to good corporate governance practices

Transparency & CPI Index 2016

Transparency International (TI) defines corruption as the abuse of entrusted power for private gain. This definition encompasses corrupt practices in both the public and private sectors. The Corruption Perceptions Index (CPI) ranks countries according to perception of corruption in the public sector. The CPI is an aggregate indicator that combines different sources of information about corruption, making it possible to compare countries.

Source: Transparency International

The Position of Indonesia In Asia

SPEED

COMPLI

ANCE

SPEED

COMPLI

ANCE ETHICS

& INTEGRITY

Supply Chain is frequently required to entertain urgent needs or quick action,

where at the same time compliance to applicable rules and regulations must also

be met...

Supply chain costs typically represent at least ~70%-80% to overall company budget

ETHICS • Right or Wrong • Dynamic • Society • Subjective

LAW • Legal or Illegal • Static • Government • Objective

Integrity • Consistently comply with

company regulation, policy and procedure, conducts, morale and norms

• Is doing the right thing even when nobody is watching

(C S Lewis)

Ethics • Character, norms, morals &

ideals prevailing in a group, society

• They give an idea of what is right or wrong, true or false, fair or unfair, just or unjust, fairness, respect

The Nature of Ethics

PHE WMO’s Integrity Leadership Policy and Activities

PHE WMO Code of Conduct (Employees) PHE WMO Code of Conduct (Business Partners) Laporan Harta Kekayaan Penyelenggara Negara Roadshows / Town halls on Integrity Awareness Policy Guidelines on Gifts and Entertainment

during festive seasons (Hari Raya Lebaran, Hari Natal & Tahun Baru, etc.)

“No PO No Delivery”, “No PO No Pay” Policy PHE Whistleblowing System Internal Audits

Ethics and Integrity Leadership in PHE WMO

• PHE WMO is a company that conducts its business in an ethical and

responsible way, meets its environmental obligations and strives to contribute

to the community

• PHE WMO sets high standards for our people and our vendors/contractors, in

line with our commitment to perform as a role model company

What are Company looking for:

Best value of money (does not automatically means the

lowest price)

Whole of life costs (performance, maintenance and

disposal), quality, reliability and timeliness

Source, wherever reasonably commercially feasible,

energy efficient equipment, products containing recycled

materials and environmentally friendly.

Become a company with high standard of QHSSE

• HSE as part of the work culture

• Employee equality and professionalism

• Equal opportunity in the matters of work and employment

• Work environment of mutual respect, harmony, and free from violations and harrassment

• No drugs, alcohol or gambling in the work place

• Employee data security and confidentiality

• Ethical standard in dealing with business partners

• Comply with prevailing regulations, policies and procedures

• Act ethically, fairly and honestly

• Declare conflict of interests as soon as become aware of them

• Provide accurate information

• Healthy business competition

• Prevention of confidential information disclosure

• Ethical standard in dealing with government, public and mass-media

• Bribery and corruption

• Political activities

• Community and media relations

• Government relations

• Data, asset, financial integrity, and digital system

• Data, records and reporting

• Asset monitoring and securing

• Intellectual property right

• Digital system utilization and security

• Committee of Ethics

In PHE WMO, we instill an environment and commitment to

uphold highest standard of ethics and behavior

15

Procurement Do’s and Don’ts

o Do not provide false or give

misleading information

o Do not alter documents in any way

o Do not use side letters: written or

oral assurances regarding

discounts, credits, returns, contract

terms

o Do not bypass procurement

procedures

o Do not subdivide contracts or split

Purchase Orders to avoid review

based on established authority

levels

o Do not backdate documents

o Do not falsify records to support

fictitious transactions

o Do not manipulate input for

approval

o Do not forge signatures

o Do understand and follow the Code of

Conduct and Procurement Policy

o Do ensure that we challenge our Clients to

use appropriate Procurement Process

o Do understand the contents of contract

o Do ensure contracts are signed and dated

by parties

o Do review each page of the contract for

alterations

o Do keep your manager informed of contract

compliance issues

o Do ensure that exceptions require

proper/highest approval

o Do engage Contract Management or Legal

on any modification prior to acceptance of

contract

o Do ask for guidance and/or help whenever

you’re uncertain

o Do understand and adhere to the policies

for confidential information

o Do treat suppliers with the highest level of

professionalism and respect at all times

o Do treat all suppliers fairly

Transparency

Accountability

Independency

Responsibility

Fairness

Pertamina’s

GCG Principles

No Bribery

No Kick Back

No Luxurious

Hospitality

No Gifts

No Conflict of

Interests

No Confidential

Information

Sharing

No Favoritism

*) Decision Documentation Is Critical

What Is Required

What Is Best for Company

Laws, Regulations & Corporate Policies Legal Requirements

Integrity & Ethical Behavior Code of Conduct Policy

Business Controls

Analysis and Decisions Based on Facts and Good Business Sense

Decision* =

Requirements + Judgment

Commitment to GCG and Code of Conduct

Bribery and Corruption: When buyer and seller collude to ensure that the seller wins a contract, the buyer in return receiving a reward.

LEADERS TOP 20%

LAGGARDS BOTTOM 20%

Based on PwC’s Global Supply Chain Survey 2013 in determining Laggards & Leaders of the Industry

Suppliers of Choice

Customers of Choice

Highly Ethical HSE Standards Best Service Quality Products On-time Delivery Reasonable Price

Highly Ethical Fair Treatment Transparent

On-time Payment No Conflict of Interest Accurate Information

High Performers and Suppliers of Choice are Expected

True leaders ought not worry greatly about occasional mistakes,

but they must vigilantly guard against those things that will make

them feel ashamed.

Surround yourself with

associates who have the

courage to say no.

Many leaders only want

to hear the positive. It is

dangerous to be

employed by such

people.

WINNERS NEVER CHEAT