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January 2012 4thEdition

Indonesia Stock Exchange Building, Tower II, 20thFloor (Suite 2001), Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, IndonesiaT. +62 21 515-5959, Fx. +62 21 5140-2545/6

Highlights Features

Foreword from the IPA Board

40th Annual General Meeting

35th IPA Convention & Exhibition

Committee Highlights

Company ProfileTalisman Energy

CSRStatoils CSR:

Leaving Sustainable Footprints

News Flash

Professional Division Section

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Elisabeth ProustIPA OfficerTOTAL E&P INDONESIE

Dear IPA Members...

On this special occasion, I would like to wish you a veryHappy New Year on behalf of the IPA Board of Directors.For all our members and their families, I wish health,prosperity and a lot of pleasure at work.

May also this year be a year of positive growth and

development for the oil and gas industry in Indonesiaand a year of hope and success to us all.

As you may see in this edition of IPA newsletter, the IPAhas been conducting many activities and new initiativesin 2011. The IPA organized the biggest IPA AnnualConvention and Exhibition ever held in 2011 and tookstrategic steps to convey industrys key messages andconcerns for the development of oil and gas industry inIndonesia.

In this 4th edition of IPA newsletter, you may find aspecial section on the Professional Division Activitieswhich promote and facilitate the transfer of technicalinformation and advancing new technologies toindividuals and companies working in the upstream oiland gas industry in Indonesia

In 2011, the IPA Board and Committees have conductednumerous meetings and have initiated advocacy efforts

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with Government Authorities and the DPR to try toresolve industrys issues and challenges. We have madethe government aware of the challenges facing theindustry as well as the challenges and expectations ofboth domestic and foreign investors.

We believe that the Industry is now in urgent need forthe government of Indonesia to create the positiveinvestment climate that is needed to increaseinvestment and production, and the IPA is well placedto work collaboratively with the government to meet thechallenges ahead for the benefit of Indonesia, its peopleand all industry stakeholders.

We hope for the best in 2012. The government is tryingto implement policies that foster Indonesias economicgrowth and because oil and gas investment, from initialinvestment to production, can take a significant numberof years, it is important for the right policies to be put in

place now in order to secure Indonesias future energysecurity.

As the primary source of credible information and therepresentative association for the industry in Indonesia,the IPA is ready to work closely with respectivegovernment institutions to achieve our mutualobjectives, we need to bring valuable information to allthe stakeholders and act as problem solver.

I am confident that with the same solidarity amongthe members we had in 2011, constructive debatesand positive behaviours, we can impact favourably ourenvironment and make 2012 a successful year.

I wish you an informative and enjoyable reading of thisnewsletter and look forward to seeing you at the 36thIPA Convention and Exhibition on 23rd - 25th May 2012 atthe JCC and at various other IPA events and gatheringsduring 2012!

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The 40th IPA Annual General Meeting

On December 7, 2011 the IPA held its 40th Annual Gen-eral Meeting (AGM) at the Dharmawangsa Hotel to de-liver the IPA Presidents Report, the Financial Reportand the IPA Committee representatives reports on thevarious activities undertaken during the year as well asthe plan for future activities to the IPA members.

The event was attended by 110 industry representativesfrom the IPA Company Members and Associate Mem-bers groups.

In his Presidents Report, Jim Taylor highlighted that in2011 Indonesia has shown strong economic growth ofaround 6.5% which is expected to continue in future andthat the country needs energy to fuel this future growth.A sustainable, growing energy supply is a prerequisiteto achieving the sustained economic growth that is tar-geted by the government.

Jim added that to secure Indonesias future energy sup-ply, aggressive efforts, major new exploration and in-

frastructure investment and a supportive regulatoryenvironment are essential. Without further significantinvestment, exploration activity will continue to declineand Indonesias oil and gas potential will not bring anyadditional value and benefits to the State and its people.Jim also highlighted other key issues that are currentlybeing faced by the industry in Indonesia and that are be-ing addressed by the IPA, including Government Regula-tion No 79/2010, Revisions to the Oil and Gas Law, GasPrice competitiveness, PSC Licence extension policy andthe new Bank Indonesia regulation of Foreign Exchangeproceeds.

The IPAs summary view is that the Governments priori-ties and concerns should be moved from managing costrecovery to the managing and creation of new supplies

of oil and gas to benefit Indonesian economic growth for

the people of Indonesia.

2011 has also been a very busy year for most of the IPACommittees, with attention being focused on the newlyissued Government Regulations No. 79/2010 on Cost Re-covery, the planned revision of the Oil and Gas Law andother regulations that have created uncertainty amongstinvestors. Numerous meetings, lobbying activities andongoing negotiations with the respective governmentinstitutions have been conducted by the IPA committeesto deal with these respective industry issues in order tohelp create a positive investment climate within the oiland gas industry and to improve the performance of thisindustry for the benefit of all stakeholders.

In his concluding remarks, Jim Taylor conveyed histhanks and gratitude to the IPA Committees who havecontinued to contribute valuable time and resources tosupport the IPA. In addition, he also mentioned the needto work collaboratively with government to achieve theprinciple objective of promoting the petroleum industryin Indonesia to achieve the essential exploration invest-ment that is so critical to sustaining and growing futureenergy supplies. Collectively, these messages reinforcedthe IPA Mission which is To maximize the hydrocarbon

potential of Indonesia for the benefit of all stakeholders;the contractors, the government and the people of Indo-nesia.

This year AGM was also marked by the organization ofthe first IPA year-end press conference which was at-tended by 25 international and national media represen-tatives. The press conference has generated almost 50items of positive media coverage that conveyed a con-sistent IPA message for the development of oil & gas in-dustry in Indonesia.

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35th Annual IPA Convention andExhibition 2011: The Biggest in ItsHistory

The 35th Annual IPA Convention & Exhibition 2011 whichwas held on May 18-20, 2011 at the Jakarta ConventionCenter with the theme :

Indonesia Energy:

Growth, Security and Sustainability

Our theme was all about the country being poised foreconomic growth; needing energy to fuel this growthwhile also ensuring the security and sustainability offuture energy supply. It was agreed that Indonesia canbe self-sustaining in its energy supply as Indonesia doeshave that potential. Its a question of realizing that po-tential to provide its own energy requirements. And thenit is about policies and regulations to ensure that theenergy supply continues to be secured, which in turn isabout reinvestment, exploring for the future, exploring

to unlock the untapped resources both in conventionaloil and gas, non-conventional gas, CBM, shale gas, newand renewable energy. It is also about the proper useand the efficient use of that energy.

The 35th IPA Convention and Exhibition (Convex) wasthe biggest IPA Convention & Exhibition ever held in its34 years of history. It was officially opened by H.E. VicePresident Boediono for the second consecutive yearsand has set several records as follows:

150 companies exhibiting in 4,200 square meters of

space compared to 120 companies in 3,300 sqm lastyear. The visitors this year also doubled to 7,000 people

compared to 4,000 people last year.

The new feature in the IPA Convex which is the Ener-gy Edutainment Corner also recorded an additional1,420 visitors to the event.

The large numbers of visitors in this year IPA Convex hasreflected the strong enthusiasm and hope from withinthe industry for the development of the oil and gas in-dustry in Indonesia.

In their Opening Addresses, H.E. Vice PresidentBoediono and the then Minister of Energy and MineralResources, Darwin Z. Saleh, conveyed the followingmessages:

Government has a clear understanding of the needto attract investment into the energy sector and theirdetermination to support industry in addressing anyissues causing concern.

With regard to regulations, the government be-lieves that issues raised last year on cost recoveryand income tax and cabotage have been adequatelyaddressed. However, there is recognition that otherareas have not improved perceptibly, notably theprocess of approval of a variety of implementationpermits involving both central and local institutions.

A recognition that gas is the energy resource ofthe future a step change in exploration activity isneeded to unlock untapped reserves and gas infra-structure development is also a priority, includinggas pipelines on Java and additional Floating Stor-age and Regasifications Units in several locations inJava and Sumatra to supply gas for power genera-tion, manufacturing activities, transportation anddomestic use. In addition, pricing of the gas must bemarket driven to attract investors.

Government also acknowledged that it needs to de-velop unconventional gas and renewable energy, ifnecessary under terms appropriate to the nature of

the resources to achieve energy self-sustainability. HE the Vice President also expressed a measure of

disappointment that oil targets were not being metbut reiterated that he is certain that all of us, indus-try and government alike, will do everything possibleto redress that situation.

In his Opening Address, the then President of IPA RonAston emphasized that :

Indonesia is poised for strong economic growth andneeds energy to fuel it. It also needs to secure en-

ergy supplies for the future and to do so in a sustain-able manner.

The country has huge natural resources and can beself sustaining in its energy requirements by un-

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locking them. Focus needs to move from mature oil

production to realising the potential of gas reserves,both conventional and unconventional and otherforms of energy and renewables.

Industry needs to explore for, develop and producegas in increasingly difficult frontier areas in orderto meet domestic needs and still generate valuableexport revenues. To achieve this, will require a stepchange in exploration activity and huge additionalinvestment. Policies should be aimed at encourag-ing this and the IPAs principal role is to coordinatewith the government to ensure it happens.

The oil and gas sector is the true enabler of theeconomy, the key to future economic growth andsuccess as it makes an enormous contribution tothe economic wellbeing of the country; it accountsfor 7% of Indonesias GDP and contributes over 25%to state budget revenues. The sector also providesdirect employment for over 300,000 Indonesianworkers and indirect employment for the countlessmore. It contributes almost US$19 billion in directinvestment.

Whats needed to secure energy supply: Gas: represents the future focus in Indonesia, but

brings with it more complexity and a need for fargreater financing particularly when the gas is foundin remote and very challenging areas. To supply do-mestic requirement, it needs domestic infrastruc-ture- transmission pipelines, liquefaction plants,receiveing terminals all of which must be under-pinned by long term supply agreements to securethe necessary financing. The principal driver will beprice the gas price must be market driven and notlimited by producers providing indirect subsidies toend users.

Exploration: is the key to future production and it is

essential to encourage as much activity as possible.Exploration terms offered should be competitive toattract investment in an increasingly challengingand competitive global environment.Industry must also be encouraged to explore for anddevelop the extensive Unconventional Gas Resourcethat Indonesia possesses. In doing so, it need to besupported by appropriate regulations, incentivesand partnerships to ensure that the necessary in-vestment is forthcoming.

The Policies Needed to Boost Investment :

In order to obtain the level of funding needed to secureIndonesias future energy requirements (US$ 23 billionper annum from 2020 onwards Source:BCG), it is es-

sential to keep the investment climate positive.

GR 79 on Cost Recovery: strong cooperation be-tween the Government and industry is required infinalizing the implementing guidelines to the GRwhich continues to concern the industry.

Fiscal Regime: that is tailored to a maturing oil sec-tor whilst incentivizing gas development and explo-ration activity.

Regulatory regime that facilitates approvals inspeedy fashion the IPA strongly believes thiswould have the greatest impact on increasing cur-rent production.

PSC Extensions: a clear and transparent processfor extending the Production Sharing Contractshould be established. The absence of a transparentprocess will lead to a slowdown of investment in thefinal years of the PSC and a consequent decelerationof production.

Early engagement: as a partner of the Government,the IPA welcomes early engagement in energy policyformulation and ongoing collaboration in the regu-latory process.

The three (3) Plenary Sessions were very well attend-ed and achieved their objective of providing a forum

for distinguished speakers and guests to have an openexchange views and opinions on industry 3 (three) keyissues. A brief summary of the Presentations and keydiscussion points is shown below:

Plenary Session 1 - How Can Indonesia Re-EstablishEnergy Independence in a Growing Economy:

There is a change of paradigm in the role of oil andgas: from merely being a source of State Revenue tobecoming the driver of economic growth as indus-trial feedstock, domestic fuel and in generating a

multiplier effect. For Indonesia to reach energy Independence, thecountry has to : increase exploration and production activities to

improve oil and gas reserves develop oil and gas infrastructure develop unconventional oil and gas have a reliable and affordable oil and gas price

and ensure oil and gas conservation establish effective management of oil and gas

development based on the principles of sustain-ability.

In order to grow and be independent, the countryMUST attract significant investment, not only in oiland gas, but in all forms of energy.

In conclusion, the Government should ensure that

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the energy must become available, accessible and

affordable

As endorsed by the independent view from the BostonConsulting Group during this plenary session, the largeinvestment that is needed in Indonesia demands 4 MustHaves :

Proven material and accessible resources Clear and consistent regulation A stable judicial and political environment Competitive economics.

These key areas are becoming more and more criti-cal as companies focus on return over growth and allof the distinguished speakers endorsed the view thatthrough cooperation and collaboration, these goals canbe achieved.

Then in the afternoon session, the Plenary Session 2discussed the Role of Gas in Meeting Indonesias Eco-nomic Growth Potential.

As Pak Priyono outlined in his speech, with a view thatwas endorsed by the distinguished speakers from theParliament, PLN, PGN and industry stakeholders;

Domestic demand for Gas is increasing at a project-ed 24% per year

Remaining large gas reserves to be discovered arelikely to be located in eastern areas within Indone-sia, often in deepwater locations that are technicallychallenging and expensive to develop

there is a clear requirement for an integrated Na-tional Gas Policy in Indonesia encompassing sup-ply management, transportation management anddemand management, including domestic pricingpolicy, to support the huge investment that is need-

ed to produce the estimated 400 MMscf per day ofadditional production that is required to fulfill thisdemand.

And finally at the Plenary Session 3 in the discussion on:The Role of Unconventional and Renewable Resourcesto Indonesias future Energy Security and Sustainabil-ity, we heard a stimulating discussion and numerousquestions on how to turn the Unconventionals of todayinto the Conventionals of tomorrow. It was remarkedthat;

Indonesia has proven, world-class potential in re-newable and unconventional resources but theyneed to be developed in conjunction with conven-tional resources within an overall Energy Policy and

also by learning from the experiences of other coun-

tries Again, we heard of the need for Government and In-

dustry stakeholders to work in strong partnershipand create the demand for Renewables in order tostimulate Supply and Infrastructure developmentfor the benefit of all stakeholders

And finally, a recognition that the time to act is NOWto establish the regulatory framework and pricingpolicies that will encourage investment in thesetechnically challenging areas so that renewableand unconventional resources can take their placealongside conventional resources in Indonesias fu-

ture energy mix.

The Energy Edutainment Corner (EEC) was also achievedits goal as to advocate the public, specifically the younggenerations, with regard to the history and developmentof oil and gas industry in Indonesia. EEC has attractedmore than 1,400 visitors, of which 60 percent were stu-dents from 22 schools and universities. As a follow upinitiative, the movie shown at the EEC was donated tothe Indonesian Oil & Gas Museum Graha Widya Patraat Taman Mini Indonesia Indah. This is inline with IPAsmission which is to promote education and knowledgetransfer to the public.

Furthermore, as part of IPAs commitment to promotehigher education for underprivileged students, at theClosing Ceremony of the IPA Convex, the IPA awardedscholarships worth 100 million rupiah to the selectedunder-privileged high-school students in Jakarta areasin cooperation with YKAI (Yayasan Kesejahteraan AnakIndonesia).

AWARDS PRESENTATION at THE CLOSING OF 35th IPACONVEX :TECHNICAL PROGRAM

BEST PRESENTATION AWARDS:

1. Category of Engineering and Formation Evaluation:Successful application of combined impact ham-mer and hydraulic shifting tool run on coil tubing forSSD manipulation in highly deviated wells A casehistory from Offshore North West Java presentedby Hermawan Susanto (Pertamina Hulu Energi,ONWJ).

2. Category of HSE, Community Development, Busi-ness, and Commercial: Managing overlapping landusage presented by Surya Safari (VICO).

3. Category of Geology: A sequence stratigraphicframe work of the Sunda region based on integra-

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tion of bio-stratigraphic lithological and seismic

data from Namconson basin, Vietnam presented byRobert J Morley (Palynova Limited).

4. Category of Geophysics: Filling the inversion gapwithout well data : Multi-level sources and stream-ers help improve inversion presented by MartinBayly (WesternGeco, Schlumberger).

5. Best Award of Overall (Professional): Early carbon-ate growth in the East Java basin Indonesia : A casestudy from the Jimbaran field presented by StefanVan Simaeys (ExxonMobil Exploration company).

6. Category of Poster (Professional): True amplitudepreserved multi-azimuth pre-stack deth migrationfor structural and reservoir characterization (SisiNubi field, Indonesia) presented by M. Baturin(Total E &P Indonesie).

7. Category of Student (oral): 3D modeling of Kerek

turbidite sand bodies based on out crop studies inKedung Jati area, Central Java : An analogue forsandy miocene formation in Western Kendeng Zonepresented by Fery Andika Cahyo (UPN Veteran,Yogyakarta).

8. Category of Student (poster): Hydrocarbon produc-tion during underbalance drilling A mathemati-cal model to predict well productivity presented bySamuel Zulkhifly Sinaga (ITB, Bandung).

EXHIBITION:BEST BOOTH AWARDBest Booth 50 sqm or larger: INPEXBest Booth 18 sqm-50 sqm: ELNUSABest Booth for smaller size 9 sqm: SCOMIMost Favourite Booth by Public Votes: MEDCO

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Communications Committee

For the second semester of 2011 the committee has setthree main focuses of activities as follows:

1. Stakeholder Awareness and Reputation Management Building public awareness on the IPA

organization Enhancing IPA reputation as the reliable partner

of the Government of Indonesia

2. External communication activities to achieve IPAsVision and Objectives Building trust and understanding between the

IPA, Government and Media as well as otherstrategic stakeholders

Supporting key-issues advocacy Outreaching through community engagement

programs

3. Internal Communication activities Feeding the Board with industry news and media

briefing materials Leveraging expertise within the IPA to provide

knowledge contribution to universities, mediaand other stakeholders

Assisting in databank improvement, IPA websitecontent and communication to members

Data Management Committee

1. Continue as liaison to Government and industry forData Management issues Involve in IPA Exploration Committee. Start collaboration work in addressing data

management challenge to improve oil and gasindustry climate investment.

2. Work with IPA Members and Patra Nusa Data on

Data Disaster Recovery Plan Review PND services, including possibility forPND to also manage closed and hardcopy data.

3. Start discussion on the possibility of returning open

area data that still kept by IPA members

Environment & Safety Committee

During 2011, periodic dialogue and developingpartnerships have been done with related stakeholdersthrough courtesy visits and formal or informalmeetings. These sessions have been conducted with

several regulatory bodies such as KNLH, MIGAS,Sea Communication Transportation, BPMIGAS andprofessional institution IAKKI/ISPA (Indonesian SafetyProfessional Association), IATMI (Indonesian PetroleumEngineers Association), Society of Petroleum Engineer

(SPE) and Global Methane initiatives, Global Initiativesin Oil Spill Response Management. The IPA ESC is alsorepresented in the ICCOSH- Institute Certifications ofCompetence of Occupation safety and Health and hasbecome a member of the Board. Meetings have beenheld periodically to discuss many issues and to socializestandards of competence.

The IPA ESC was chosen as an important partner to beconsulted by the KNLH office relating to the development

of environmental implementing regulations. High levelpositions i.e. Deputy of Ministry, have attended in the IPAESC session discussions or workshops.

Currently the committee have been deeply involved infour (4) drafts of Implementing regulations as follows: Environmental Impact Assessment and Environment

Permit Air Pollution Controlling Management Water Pollution Controlling Management Hazardous Material, Hazardous Waste and Dumping

Related to these draft regulations, one of the committeespriorities will focus on the mechanism of dumping ofDrilling Cutting or waste for offshore operations.

On top of the four draft implementing regulations, theCommittee has also identified some concerns regardingTier 3 Response for Oil Spill Response Management,specifically regarding the support from GOI to establishan effective international assistance mechanism. TheCommittee has completed a White paper on Oil SpillResponse. This paper is intended to provide the currentupdate or information on the existing related regulatoryissues on oil spill response management, together withthe existing Practice and Challenges.

Following several fatality accidents in 2011, thecommittee also has an initiative to cooperate with theIndonesian Safety Professional Association (ISPA/IAKKI)

to organize a periodic safety discussion forum, identifylessons learnt and directly listen to details concerningthese incidents from affected parties, discuss root causesand develop proposed actions to avoid recurrence.

The discussion forum was established with a nonblaming culture and was well facilitated to create valuesof sharing information among professionals, industriesand the regulator, with the collective aim to lead theindustry towards a world class safety culture.

Exploration Committee

The Exploration Committee is charged with providingrecommendations to the IPA Board of Directors topromote increasing the level of exploration investmentand also improving the efficiency of exploration activities.Three sub-committees have been established in order to

Commitee Highlights

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focus on particular aspects of exploration activities:

Regulatory procedures and management of PSCactivities, WP&B, AFEs

Data access and management Exploration investment climate, bid rounds, fiscal

regimeThe goal for the sub-committees is to seek constructivedialog on various aspects affecting explorationinvestment and efficiency in order to be able torecommend and implement measures which will resultin an increase in exploration activity and ultimately lead todiscovery of new hydrocarbon resources and provinces.This is particularly important to address given the poorindustry response to recent bid rounds and the decade-

long downward trend in new field wildcat explorationdrilling activity in Indonesia.

Finance & Tax Committee

1. Supporting the IPA Board of Director in engagingvarious stakeholders of oil and gas industry toimprove the understanding on cost recovery, theimportance of cost recovery, and the impact ofchanges in cost recovery mechanism to the industry.

2. Continuously working with BPMIGAS, MIGAS andDGT to ensure the principal of PSC income tax

calculation is following the current tax principalunder the existing PSCs.3. Continuously engage and collaborate with BPMIGAS,

BKF and other stakeholders:a. to immediately issue the implementing

procedure for tax borne by Government onParent Company Charges and other chargescoming from head office and the amendment/revision of PMK 73/2010 (with the involvementof DG of State Budget and DGT).

b. to maintain the current tax treatment on costsharing/cost allocation inter and intra PSCcompanies and on drilling services; and toobtain clarification on transfer pricing reporting

requirements for oil and gas industry.

4. To engage IPA Board of Director to provide inputfor BPMIGAS Management for the improvement ofWork Program & Budget process, which should bemore focus on the strategic issues with a longerterm vision.

5. Continue to proactively engage and conduct dialoguewith the DGT to share the progress on industrycost recovery issues and progress on BPKP auditexceptions; and to coordinate and advocate auditissues raised by BPK, BPKP and BPMIGAS auditorsfor appropriate attention and resolution.

6. To conduct regular meeting and/or teleconferencewith Finance and Tax Committee (core) team toshare knowledge, to discuss issues and agree onthe strategic action point to progress/resolve theindustry issues and to conduct a wider industry

Finance and Tax Committee information meeting

during the year..

Human Resources Committee

1. Provided advocacy on GR 79/2010 related to HRitems to BPMIGAS and other department. We raisedin issue that remuneration both expat and nationalshould not be capped, but based on competitivemarkets. Also, Pension and other employee benefitsshould honor existing Collective Labor Agreementof respective companies. We met also with APINDOchairman on this subject.

2. Provided inputs and subject matter experts on draftof BPMIGAS PTK-018 revision. We suggested theguidelines should be more strategic and not to givemore burden administrative to PSC.

3. Continued to provide inputs to BPMIGAS regardingimplementation of the extension of employment fornational employees after regular retirement age of56 years. As each PSC may have different operationalneeds, PSC should be given flexibility on the timingand transition for smooth implementation of eachPSC.

4. Provided inputs to both BPMIGAS and MIGAS onRPTK/IMTA process. We expect an integrated review,

coordination, and consistency between BPMIGAS/MIGAS. Objective is to have more efficient process,such that there will be no business impact, cost andimpromptu/sudden personnel mobilizations.

5. Supported people development program suchas global HR certification. Facilitated knowledgesharing among PSCs on HR related issues; industrialhygiene program, medical evacuation, industrialrelation, fresh graduate program, mentoringprogram, etc

6. Participated in Human Resources Annual Forumwith participants consisting of HR professionals andmanagement from BPMIGAS, PSC, and Services

Company on October, 26-28, 2011 discussingvarious HR issues in the oil and gas sector includingCDM Award, Lecturer, Sharing Best Practice fromvarious industries, and HR service provider booths.

7. Strengthen the co-ordination between HR IPAcommittee with sub working groups to ensurealignment for inputs to BPMIGAS and support thesub working group program.

8. Established relations with new appointed officialboth MIGAS and BPMIGAS

LNG & Gas Committee

1. Interaction with the Indonesian Gas Association(IGA) and National Economy Commission (KEN)

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KEN is a commission which reports directly to

the President of Indonesia and works with theCoordinating Minister of Economy to provide analysisand input on global and domestic issues relatedto the economy. Following the INDOGAS 2011,KEN asked IGA for inputs on efforts to acceleratedevelopment of gas fields and infrastructure. IPA,via the LNG and Gas Committee, was later includedin the process to formulate the final input.

Following the meeting in September 2011 with theleaders of KEN, IPA and IGA formulated the top 3issues of the oil and gas industry and the proposedsolutions and the benefits to Indonesia to beforwarded to the President by Chairman of KEN:

Government Regulations 79/201 Streamlining Regulators Roles &Responsibilities and their approval process

Challenges in fulfilling domestic gas demand

The draft paper was presented to the IPA Board inOctober and comments are being incorporated tobe forwarded to the IGA for final submission to KENbefore the end of 2011.

2. Independent consultant study on Indonesian GasPolicy and Investment Climate

The idea to engage a consultant was initiallysuggested by KEN to provide independency,

credibility and quantitative support on IPAs positionon the LNG and gas business climate in Indonesia.Several consultants were contacted and WoodMackenzie is considered the right entity to do thistype of work. The proposed scope of works includes:

How current regulatory affect gas investment inIndonesia

Assessment of gas commerciality fromupstream development and overall Indonesiagas market

The proposed scope and estimated costs have beenpresented to the IPA Board of Directors in Octoberand comments are being incorporated for final

scope to be sent to Wood Mackenzie. The Board alsosuggested that the report be also used for otherpurposes besides as input to KEN.

3. Review of the possibility of gas/LNG equity lifting inIndonesia

This idea was initially asked by MIGAS as a way for GOIto take its in-kind gas entitlement to meet domesticdemand. The Committee compared the practicesin other countries with the PSC fiscal regime inIndonesia and noted that the implementation offull equity gas lifting is probably not practical inIndonesia, nevertheless the committee will continueto look into the possibility of applying equity lifting

for a portion of a PSCs production. The findingswere presented to the IPA Board of Directors inOctober.

4. Interaction with Regulatory Affairs Committee

The LNG and Gas Committee has nominated arepresentative and alternate to coordinate with theRegulatory Affairs Committee on the impacts of theproposed revision of the Oil and Gas Law and theLaw on Currency to the gas business.

Professional Division Committee

The Professional Division has continued to successfullycarry out its mission during 2011. Eight (8) luncheon talkswere held during the year, with attendance exceeding780 professionals in Jakarta. In addition, eighteen (18)

short courses were held on diverse technical topicsthroughout the year and all were well received andattended. The short courses presented in 2011 drew atotal of 306 attendees, which is a significant increaseover last year. The demand for educational servicesremains strong, and the excellent work of short courseorganizers and instructors, has resulted in a healthysurplus for the IPA. In addition, five (5) educationalfieldtrips were successfully completed during 2011,which is one more than the previous year.

The 2011 IPA Membership Directory was published anddistributed to members, as were two (2) informativenewsletters, which now can be accessed exclusivelythrough the IPA website.

The Publications group continues with distribution of theIPA Proceedings volumes in digital format, both via anonline website and on CD. This service can be accessedvia the AAPG data pages, which is a highly efficientand cost effective method of disseminating technicalinformation.

Regulatory Affairs Committee

1. Regulation on Cost Recovery and Taxation

A petition for Judicial Review on GR 79 on cost

recovery and Income Tax Treatment in Upstream Oiland Gas Activities was filed by the IPA on 16 June2011 after consultation with the GOI. The petitionemphasizes the key arguments that the GR shouldbe revoked since it violates higher laws and/or itsformation does not comply with applicable laws.

The IPA conducted an extensive media campaignin conjunction with the filing of the petition to seekto educate the public on the reasons for filing thepetition.

RAC sought to discuss and resolve ongoingimplementation issues associated with the GRincluding those relating to WP&B pending the

Supreme Court decision.On 18 October 2011 the petition was denied by theSupreme Court. The basis of the denial is not yetknown as the judgment is not expected for another

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one to three months. There are no rights of appeal

from the decision of the Supreme Court. Individualcontractors can avail themselves of the rightsthey have under their respective existing PSCs inresponse to GR 79. Despite this disappointing newsRAC will continue to assist the IPA in its endeavoursto seek the revocation of the GR.

2. Oil and Gas Law Bill

On April 29, pursuant to an invitation from theParliament (DPR), the IPA attended a Parliamentary-initiated session to discuss the terms of a draft of anew Oil and Gas Law.

With the assistance of RAC, the IPA advised the DPR

about potential unfavorable impacts on investmentdue to the introduction of an entirely new law.

The IPA formed a Task Force, on which the RAC isrepresented, to primarily advise the IPA Board onhow best to proceed. The IPA continues to seek aconfirmed version of the draft Bill to improve IPAsability to influence and continues to correspond withGOI stakeholders advocating the primary messagethat substantive change is not required and will actas a disincentive to investment in the future.

The DPR has not as yet distributed any official draftBill for comment to the IPA despite requests.

3. Explosive Permitting

IPA through the RAC is a primary participant inan Explosives Permitting Task Force, togetherwith 19 PSCs, service companies and BPMIGAS.The Task Force is seeking to address the lackof transparency in procedure and costs relatingto obtaining explosives permits and handlingexplosives to mitigate compliance risks. The TaskForce is working with relevant government offices(Police Dept, BPMIGAS, MIGAS, Ministry of Finance,UKP4) to establish an appropriate legal instrumentthat will address concerns while complying withadministrative laws.

In the interim short term solutions have beenproposed, (i) BPMIGAS to obtain the permits andservices on behalf of the PSC pursuant to SectionV of the PSC; (ii) BPMIGAS to elevate efforts toresolve permitting problems in each PSC to UKP4;and (iii) BPMIGAS to enter into an agreement withvarious Provincial Police Offices. Option (iii) is beingprogressed, BPMIGAS is to arrange a meetingwith the Police Headquarters and explore whetheroption (iii) is at all possible. The meeting with PoliceHeadquarters is expected to take place in December2011.

4. Procurement of Good and Services

BPMIGAS is considering further revisions toBPMIGAS PTK 007-RevI-II/2011. To facilitate thisexercise, BPMIGAS invited a number of PSCs to ameeting in Bandung to discuss and identify issues

arising from BPMIGAS PTK 007-RevI-II/2011. The

matter of domestic content dominates the list ofissues. Other issues identified during the meetingare advance payment, bidder/contractor security(e.g. bid bond, performance bond, parent companyguarantee), and processes during commercialnegotiation (e.g. processes related to ownersestimate). RAC is seeking to ventilate industryconcerns through this process.

5. Repatriation of Export Proceeds

Bank Indonesia (BI) recently issued a regulationconcerning export sales proceeds (BI RegulationNo. 13/20, PBI 13). It seeks to capture exportproceeds in domestic bank accounts. It appears

that BI wishes to strengthen Indonesias domesticliquidity of foreign currency by requiring Indonesiassizeable export proceeds to be brought into thedomestic banking system. PBI 13 contains noexemption to any industry including Oil and Gas. Itis intended to be applicable for any export proceeds.

The RAC worked together with the F&T Committeeto define IPAs position with regard to the PBI 13which has been formally conveyed to BI. In essence,the IPA believes that the PSC Contractors shouldnot be subject to the PBI 13 for several reasons butmainly because the PSC expressly provides a rightto Contractors to retain Petroleum proceeds abroad.

6. Cabotage

The RAC together with the CommunicationCommittee were actively involved in a task forceinitiated by BPMIGAS to secure an exemption fromthe cabotage requirement for vessels used in the oiland gas industry. Through active participation andeffective lobbying, the task force was successful insecuring the exemption prior to May 7th, therebyavoiding any disruption to oil and gas operations.

The Government issued Government Regulation No.22 of 2011 (GR 20) on 4 April 2011 which sets out thelist of vessels (that are mostly used in the oil andgas industry) that are exempted from the cabotage

requirement. The Ministry of Transportationsubsequently issued an implementing regulation tothe GR 20 on 18 April 2011 in the form of a MinisterialTransportation Regulation No. 48 of 2011 thatfurther sets out the procedure to obtain a permit forforeign flag vessels operating in Indonesia.

7. Regulated Increases in Production

RAC was closely involved in consultations on theimplementation of Ministerial Regulation on Oil andgas Production Increase (the MR) early in 2010.The MR requires non-producing fields and wells tobe inventoried and new discoveries to be notifiedand seeks to impose an accelerated program for

development inconsistent with prevailing law,applicable PSCs, and industry capability.

Following consultations on the MR, in which RAC

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was involved, BPMIGAS acknowledged that there

were challenges in complying with the MR andsome uncertainly in its application and sought inputon the same.

In an effort to ensure implementation of the MR,during the first quarter and third quarter this year,BPMIGAS sent letters to a number of PSCs remindingthe PSCs of the requirements of the MR. In January2011, BPMIGAS reminded PSCs to put together aninventory of idle and or non-producing fields and inAugust 2011, BPMIGAS instructed a number of PSCsto re-activate (mengaktivasikan kembali) idlefields and idle wells located in the work area of therespective PSCs. Despite uncertainties arising fromthe requirements of the MR, to date BPMIGAS has

not issued any clarification and or implementationdirectives or guidelines on the provisions of the MR.

8. Regulations On Put on Production and theEstablishment of Work Area for Non-ConventionalOil and Gas

On August 23, MIGAS invited a number of partiesincluding the IPA to a socialization of the followingdraft Ministerial Regulations (MR):a. Draft MR on Put on Production for Oil and Gas,

andb. Draft MR on Procedures for the Establishment

and Offer of Work Area for Non-Conventional Oiland Gas Resources.

IPAs Unconventional Gas Committee is preparingfeedback, RAC is committed to provide the necessarysupport to the Unconventional Gas Committee.

3. Implementing Regulations for the 2009Environmental Law

The Government is drafting implementationregulations for the 2009 Environmental Law. IPARAC continues to monitor the development ofthese regulations and is committed to help preparefeedback to the Government.

Supply Chain Management ImprovementCommittee

1. Workshop Procurement Strategy & SCM Forumwith BPMIGAS. Preparation for attending Workshop on

Procurement Strategy held by BPMIGAS inBandung on 31st January to 1st February 2011.

The main purpose of workshop was to seepossible for making joint contract of somecommodities amongst the PSCs.

While the SCM forum was organized byBPMIGAS and conducted in Batam on 9th - 11thFebruary 2011.

2. Procurement Guideline (PTK-007 Revision 2). Has been issued by BPMIGAS on 9th May 2011

and in force starting 1st May 2011.

There are some concerns from PSCs, mainly on:

Procurement process lead time related tolocal content. Advance payment. Pre-qualification procedure, etc.

Feedbacks have been given by PSCs toBPMIGAS.

Some clarifications have also been issued byBPMIGAS.

3. Cabotage issue. Discussion on the implementation of cabotage

law for specific vessels used in oil and gasupstream activities.

Participation with other committees of IPA andrelated Government Institutions to find the

solution.

4. GR No.79/2010. SIC concerns about article 13 point q, r and t

concerning procurement that exceed 10%of AFE value, surplus of material stock andprocurement without open tender.

Waiting the result of Judicial Review proposedby IPA.

5. PTK-007 third book (Asset Management). Our concern is about surplus material in stock

with potential of non cost recoverable if itexceeds a certain limit.

Other concern is related to Minister of Finance

Decree No.165/2010 particularly about engineexchange activity that approval is needed up toBPMIGAS level only.

6. Local Content achievement monitoring. Discussion about its implementation (refer to

PTK-007). SIC has invited PT.Surveyor Indonesia to give

presentation on Local Content monitoring on16th March 2011.

Some PSCs has now the contract withauthorized surveyor for doing the Local Contentachievement monitoring.

7. Establishment of Team for Increasing Utilization of

Local Products by Minister of EMR. Minister of EMR issued a decision letter on

1st April 2011 for establishment a team forincreasing the utilization of local products.

Chairman of IPA Supply Chain Committee wasassigned as a member amongst the otherrepresentatives from Ministry of EMR, Migas,Ministry of Industry, Ministry of Research andTechnology, BPMIGAS and Guspen Migas.

1st meeting in August 2011 was cancelled at thelast minute.

8. Importation of goods using Master List mechanism(tax exemption). Discussion of the implementation problem

due to different method of calculation of LocalContent (price based vs. cost based) duringtender and importation.

CBM PSC still cannot use the Master List

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mechanism to get exemption from import duty

and taxes.9. BPMIGAS Procurement Online Information System.

BPMIGAS has established an Integrated OnlineInformation System for Procurement and AssetsManagement called as PMA Dashboard.

All supply chain activity reports from PSCs toBPMIGAS are now to be uploaded through thissystem.

10. Explosive. Discussion on explosive handling issues. Letter has been sent by IPA to BPMIGAS on

7th February 2011 asking for simplification ofexplosive permitting processes.

Coordination meeting between BPMIGAS andPSCs has also been conducted on 10th and 24thAugust 2011.

11. Protection &Indemnity (P&I) Club. BPMIGAS requested PSCs to use Indonesian

P&I Club Promindo for all vessels operatedby PSCs (letter Deputy of Operation dated 4February 2011).

There are some concerns from PSCs regardingthis issue.

12. Minister of Industry regulation No.15/2011. Issued in February 2011. It regulates the use of

local products.

A new inventory list of local products is nowavailable in the web of Ministry of Industrycomplete with its percentage local content andperiod of validity.

APDN book issued by Migas book is still to beused as reference for oil and gas sector.

13. Key Performance Indicator (KPI) for PSC SupplyChain Activities. BPMIGAS is now implementing KPI to measure

the performance of PSCs in doing the supplychain activities.

6 monthly review is done by BPMIGAS with eachPSC.

14. Currency Law. SIC concern on Currency Law no.7/2011 dated

28th June 2011, particularly article 21 whichrequires that all transactions made in Indonesiaterritory should be made in Indonesian rupiahcurrency.

Waiting further guideline from BPMIGAS.

15. Cabotage follow up : Participation from of SIC members in various

meetings with BPMIGAS, Migas, Ministry ofTransportation, Directorate General of SeaTransportation and INSA in obtaining solutionon implementation cabotage law for specificvessels used in oil and gas industry.

Finally GoI issued the new GovernmentRegulation No.22/2011 (revision of GRNo.20/2010) on 4th April 2011 and Minister ofTransportation Regulation No.48/2011 on 18th

April 2011 which gives the exemption for specific

vessels (category C) with foreign flag used in oil& gas upstream activities as long as the vesselswith Indonesian flag is still not available in themarket.

To get the dispensation to use vessel withforeign flag, PSC has to prove with at least1 (one) tender fail for obtaining vessel withIndonesian flag.

So far, there is no problem in obtaining permitfor these specific vessels.

Unconventional Gas Committee

1. Through previous engagement the Pre-PODGas Sales issue has been incorporated by thegovernment in new awarded CBM PSC contractswhich is also applicable to the existing contracts.The inclusion of this clause in the PSC contractprovides assurance on the mechanism of CBM gassales during dewatering and early developmentwhich is not applicable to conventional gas business.

2. IPA sent letters to propose fiscal incentives throughDirector General Oil and Gas. Presentations toMinistry of Finance (BKF) have been made with theproposal a combination of:a. FTP holidayb. Tax Holiday 10 years after POD approved

c. 50% investment creditThe discussion was around the format of the fiscalincentives which can be managed outside of thePSC contract.

3. Both in the letter and during the discussion wecontinuously mention the important of PSC contractextension for CBM due to the nature of CBMproduction. Since the CBM PSC contract is governedunder the Oil and Gas Law it might be difficult toget assurance on contract extension at early years.However, there have been some precedents inconventional business that Government grantscontract extension.

4. Sustaining engagement with BPMIGAS needs to bebuilt to ensure streamlining approval processes forCBM projects. In the past IPA has addressed thisconcern through formal letter and presentationduring CBM workshop organized by BPMIGAS in2011.

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Talisman Energy Inc. established in 1992, is anindependent oil and gas exploration and productioncompany with the purpose of safe, profitable growth.Headquartered in Calgary, Canada, our main operatingareas are North America, the North Sea and Southeast

Asia. In addition, we are pursuing a number ofinternational exploration opportunities.

We are building an international exploration portfoliothat will contribute to our renewal through discoveryof significant new hydrocarbon resources. In Peru andColombia, we are building an oil-focused core region.We are also looking for exploration opportunities tosustain North Sea production. In addition we are alsopursuing material growth opportunities in Poland and inthe Kurdistan region of northern Iraq.

In South East Asia, we are exploring prospects offshoreIndonesia, Malaysia and Vietnam and onshore PNG.Current production from the region is predominantlyoil and liquids or natural gas linked to oil prices. OurSoutheast Asia operations are expected to continueas a growth area, with new projects coming on streamover the medium term and with significant explorationupside.

Indonesia

Talisman has been operating in Indonesia since 1994and, in the past 8 years, Talisman has built up its portfolio

in Indonesia.As of mid 2011, we have 12 blocks across the country spreading from the northern tip of Sumatra to the

southern part of the island, then West Java offshore, to

Makassar Straits and West Papua. Our gross productioncurrently reaches approximately 76,400 boe/day and isexpected to constantly grow in the coming years to setnew records. Around 81 percent of our gas productionis contracted for domestic usage, supporting Indonesianeconomic development.

Talisman has strong commitment to position itsinternational exploration portfolio for continualrenewal, Talisman has been awarded by the Indonesiangovernment the highly prospective deepwater acreagesin Indonesias challenging frontier zones: the 8,517 sq

km Andaman III block in the North Sumatera Basin andthe 3,878 sq km Sageri block in the Makassar Straits.We believe that the South Makassar Basin has all theattributes of a characteristically prolific basin. In ourview, the Sageri Block has significant prospectiveresources, a diversity of play types and indications ofa working petroleum system. Following the recentcompletion of our seismic activities, the first drilling atthe Sageri block commenced in July 2011.

Together with state-owned oil and gas companyPertamina, Talisman is the assistant operator in theJambi Merang JOB onshore South Sumatra with an

indirect 25% interest and in the nearby Ogan KomeringJOB with a 50% interest. Jambi Merang marked its firstgas production in March 2011 and started its commercialsales in the following month. The initial production of 60mmscf/day will be ramped up to reach the maximumcapacity of 120 mmscf/day by year end. With a totalproduction of 2.6 million barrels of oil equivalent in 2010,Ogan Komering is set to achieve 6,000 boe/day in 2011.

Company Profile

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Bunga Orchid Field in Malaysia

JOB Pertamina - Talisman Jambi MerangSungai Kerawang Central Gas Plant

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CSRStatoils CSR: Leaving Sustainable Footprints

Statoil regarded Corporate Social Responsibility (CSR)as an effort in managing risk and being also embed-ded certain procedure in a way reputation risk does notsuffer.

Statoil, established its office in Indonesia, back in 2007after they acquired two exploration license; Karama andKuma. Approximately three years prior to its drilling op-erations, they initiate their so-called Integrated Com-munity Development (ICD) Program as part of theircorporate social responsibility project in the West Su-lawesi region, where their operations are located.

The aim of this program is for Statoil to be able to leave asignificant, useful and sustainable community develop-ment project and sustainable enough for the well-beingof the people of West Sulawesi. Statoil contribute to sus-tainable development based on its core activities in thecountries where we work.

Statoil is committed to make choices based on how they

affect our interests and the interests of the societiesaround us, and by practising corporate responsibility weensure transparency, anti-corruption and respect forhuman rights and labour standards and generate posi-tive spin-offs from our core activities.

Focusing on four main key issues; health, education,community empowerment and public facilities, StatoilIndonesias integrated community development pro-gram hopes to build good relations with both stakehold-ers and local people, to support its operations within theadjacent off-shore area.

Adjacent from the two blocks in West Sulawesi, Statoilcarries several corporate social responsibility projects.To name a few, school renovation projects in several vil-lages, small scale local business assistance and mobilecommunity health services.

To contribute to local economic development in the WestSulawesi region, a micro-financing project has been es-tablished between Statoil and local NGO, to provide sup-port for housewives who want to start their own busi-nesses in running the coconut oil and sea-weed homeindustry. Statoil also contributes to these housewives in

training the micro-financing program.

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Statoil is an international energy company, headquar-

tered in Norway, with operations in 34 countries. Build-ing on 40 years of experience from oil and gas productionon the Norwegian continental shelf, Statoil is committedto accommodating the worlds energy needs in a respon-sible manner, applying technology and creating innova-tive business solutions. Statoil has 20,000 employeesworldwide, and is listed on the New York and Oslo stockexchanges.

In Indonesia, Statoil is the operator of the deep-waterKarama production sharing contract (PSC) and Halma-hera-2 PSC, as well as a partner in the Kuma PSC, West

Papua IV PSC, Halmahera-Kofiau PSC, North MakassarStrait PSC, North Ganal PSC and Obi PSC.

For Statoil-operated block Karama, the expected first-spud is in January 2012. Statoil is committed to drillthree exploration wells at the Karama block. The drillingoperations are expected to complete by early 2013.

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15

Inquiries, Responses and Contributions to our

Newsletter are welcome at [email protected]

News FlashIPA Scholarship 2011

In 2011, the Indonesian Petroleum Association (IPA)has provided scholarships amounting to nearly 100million rupiah to 25 disadvantaged high school studentsmajoring in science in the Jakarta area through its

association with the YKAI (Indonesian Child WelfareFoundation). Each scholarship recipient is entitled totuition fees for 1 (one) year and textbooks.

The final 25 students were selected from an originalgroup of 46 students who applied for a scholarship,with the primary selection criteria being eveidence ofacademic ability and low economic status.

The IPA President at the time, Ron Aston, symbolicallyawarded the IPA scholarships to the Executive Director ofYKAI, Winarti Sukaesih and 5 students as a representativegroup of scholarship recipients at the closing of the 35thIPA Convention & Exhibition in May 20, 2011.

From the subsequent interviews with the recipients andtheir parents, they expressed their gratitude and thanksto the IPA and YKAI for the scholarship as it will helpthem a lot to ensure the further continuation of theirchildrens education.

Here are the names of the IPA scholarships Recepients :

No Name School Avg. Grade

1 Inas Nabilah SMAN 52 86, 04

2 Lisa Ariska Ulfah SMAN 52 86,46

3 Puspita Dewi SMAN 23 77,42

4 Rizkyani SMAN 23 76,98

5 Komariah SMAN 40 80,406 Fitri Rahmayani SMAN 40 80,30

7 Farhah MA Al-Falah 82,50

8 Haidar SMAN 8 83,27

9 Agung Jakaria SMAN 29 78

10 Mira Nurfitriyani SMAN 97 84

11 Ika Pratiwi SMAN 97 75,5

12 Riskha Indah Pratiwi SMAN 49 81,15

13 Dedi Kurniawan SMAN 49 82,25

14 Juliana Bakti Pertiwi SMAN 12 81,71

15 Gilang Ramadhan Kotta SMAN 72 73

16 Dimas Prabowo SMAN 4 76,6917 Achmad Fauzi SMAN 91 76,54

18 Mega Lialita Maharani SMAN 91 82,36

19 Faralita Faisal SMAN 68 88,83

20 Yudha Prabowo SMAN 68 84

21 Hendra Dainanto Prakoso SMAN 68 85

22 Chaerul Umam SMAN 1 88

23 Elvina SMAN 1 85,5

24 Diana SMAN 45 85

25 Abu Bakar SMA IT 74,2Al Quraniyah

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SPECIAL SECTION:PROFESSIONAL DIVISION

Editors Note

Stephen ScottEditorIPA Professional DivisionGenting Oil (Kasuri) Pte. Ltd.stephen.scott [at] gentingenergy.com

I have been asked to write the Editors Note for thispublication and I am happy to do so although I willtake a different approach and offer the reader somesingle paragraph short stories based on my 30 plusyears experience as a practicing geophysicist andexplorationist. If nothing else perhaps these will be foodfor thought.

Story 1:

In 1980 when I was working in Alaska exploring theNorth Slope there was a legal requirement to destroy allof the seismic data that had been capitalized against ablock that was subsequently written off for tax purposes.I was standing at the shredder one day destroyingseismic lines and my boss, the District Geophysicist,walked down the hall with the V.P. Exploration, who didnot know me well since I had only been in the district ashort time. They stopped momentarily and looked intothe room where all the shredder noise was coming from

and the VP asked the District Geophysicist Isnt he oneof our geophysicists, to which the District Geophysicistrelied Yes. The VP then said, I dont ever want to seeone of our professional G&G staff standing at a shredderdoing that kind of work again. These people are far toovaluable to have them using their time doing that whenwe have tech aides who can do it. I think the moral ofthe story here is that we must utilize our limited humanresources in the most efficient manner possible andmake sure people are working on projects aligned withtheir expertise. But times have changed.

Story 2:

Society and the business world tend to force us intoconformity and consensus which in many cases is

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warranted, but sometimes individual expression is farmore valuable. And it can take an astute manager toknow when that is the case. Working in the Gulf of Mexicoduring the first all blocks open bid round in 1983, mygeologist partner and I proposed several blocks to bid onand when presented for management consideration we

suggested that there was already sufficient seismic datato drill if we were awarded the blocks. We were awardedthe blocks and started preparations. I was asked by theteam leader to lay out 3 west-east and 3 north-southseismic lines over the block. But I argued that we hadalready told upper management additional seismic wasnot necessary and I believed that was still the case.None the less I was told this is standard practice soplease lay out the seismic lines. A few weeks later I hadto present the proposal and defend it although I did notbelieve in it. Upon being questioned I kept replying Wefeel this is important for this or that reason. Finally, the

VP Exploration turned his head as if contemplating whatI had been saying and said to me You keep saying we.I dont care what we think is best, I want to know whatyou think is best. To that I responded, I dont think weneed these extra seismic data and the VP Explorationresponded, Thats exactly what I thought, I dont thinkso either. We did not acquire those seismic data. Ithink the moral of the story here is that conformity andconsensus does not always give the best answer andthat we sometimes need to have the courage to statewhat we, as individuals, believe when asked and not takethe easy way out by following the crowd.

Story 3:

We all have a right place to be in our professionalG&G careers and it sometimes takes a while for all theconditions to come to fruition to propel us to that place.You might remember a time back in the 80s when it wasfashionable for oil and gas companies to diversity intomining, solar, shale oil and so on. In the late 80s whileworking in California I befriended a fellow geophysicistin the company I worked for who had been pulled into theoil and gas company when the mining company withinthe corporation was sold. This fellow was educated and

trained in mining geophysics and electro-magneticswas his specialty. Now, to remain employed he wasforced to interpret seismic data and construct maps todevelop prospects and search for oil and gas. But this

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area of endeavor was just not aligned with the type of

geophysics that he loved. I remember him saying to meIm just not worth a rats butt in this. Still he struggledon, trying to become what was expected of him, but itwas all for naught as he was eventually surplused.He eventually landed on his feet and took a consultingjob back in mining geophysics and as I understand thecompany he was initially working for did not pay himproperly so he left and went to work for another smallcompany where he was partly paid in shares of stock.And with that he was in the right place to be. My friendand colleague went on to be the principle geophysicistmostly responsible for the discovery of one of the mostsubstantial mineral deposits to be found in Canada inthe last 50 years. That is the Voiseys Bay Ni-Cu-Codeposit in Labrador discovered in the mid-90s. Thesmall company my friend worked for was bought by alarger company as usually happens and my friend wasfortunate indeed to own many shares of stock in thatsmall company. Surplused turned to Success!

Story 4:

I am an explorationist at heart, so this next story is aboutbeing an explorationist, pure and simple. In the late

90s the company I had worked at for just over 20 yearswas bought out by a larger major oil and gas company.These things happen, right, and we should be prepared.I did work for the purchasing company for 8 months tocomplete a deepwater block 3D seismic interpretationproject and then moved on to work for a very large andsuccessful company in India. However, this company wasrelatively new to oil and gas exploration and had soughtout a few staff having world-wide experience. As anadvisor to the companys exploration management andprogram I also had the responsibility of helping to traintheir newly hired G&G staff. The staff was very bright

and eager to learn although most were sorely deficientin practical matters regarding oil and gas exploration aswould be most newly hired G&G staff. I was working ona rotation basis spending a few weeks in Mumbai andthen a few weeks back in Dallas in the small office thiscompany had set up for the staff they had hired from theU.S. On one visit to our Mumbai office I found a numberof the G&G staff gathered around in deep discussion.I went over and joined the discussion about variousexploration and G&G subjects. Then without muchthought I asked one of the staff Why did you come towork today? I received a strange look from him andthe others standing around. So I asked the question

again Why did you come to work today? He thoughtfor a moment and then replied, My boss expects me tocome to work and it is my duty to do so! I looked at him

and said Wrong answer. I asked the question again

and added that the answer should be more about yourwork. He thought again and replied I have to interpretseismic data and make maps that are required by myboss! I again replied Wrong answer. Then he and theothers said, So why? I replied You came to work tofind oil and gas! That should be the whole focus of yourmind throughout the day and you should remember thatyou will need to go through many different processeslike interpreting seismic, making maps, consideringpetroleum systems concepts and so on to find the oiland gas. But if you get caught up in process and defineyour success simply in terms of completing thesevarious work tasks, however interesting and importantthey might be, you will likely not find very much oil andgas. So stay focused on the goal: finding oil and gas.

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Professional Division Chairmans Corner

Ron NobleChairmanIPA Professional DivisionNiko Resources Ltd.rnoble [at] nikoindonesia.com

Professional Division Members and Friends,

If we look around the oil business today in Indonesia,there are many important issues that need to be ad-dressed. The most critical of these, in my opinion, isreserves replacement and reversing the oil productiondecline.

The question that follows is how do we stop the produc-tion decline? The simple answer is to find and developnew oil fields, or get more out of existing fields. As an ex-ploration professional, my focus is on reserves replace-ment through discovery and new field development.

Many experts consider Indonesia a mature oil prov-ince. However, if you look at an exploration map of thisvast archipelago, you will notice many under-exploredsedimentary basins, and a surprising number of totallyun-drilled basins. Look around the world at other ma-ture countries for oil production, and you will find new

plays and new reserves being added on a regular basis.In some cases, like North America, it is the shift to un-conventional resources which has revitalized the indus-try. There are also new countries, not historically knownfor their hydrocarbon potential, that are reporting hugenew discoveries. East Africa (Mozambique) and North-west Africa (Ghana) are a couple that come to mind.

The bottom line, there is still plenty of oil and gas to befound in the world. That certainly is true for Indonesia,perhaps more so than many other countries. We are notrunning out of resources. We just need the confidenceand technical skills to find them. Confidence because ittakes individuals who are prepared to follow their con-victions and tell their companies where and how to in-vest their money. Technical skills, because the easy oilhas been found, and we must now explore for oil in re-mote or hostile locations.

Oil and gas professionals should never become com-placent and rely on what they accomplished yesterday.There are many new things to learn, and many new tech-nologies to apply. I would encourage all professionals to

attend at least one training class a year and actively par-ticipate in technical symposia. You will learn somethingnew which can be applied in your work. This will makea big difference, and with a little luck, it will lead to newdiscoveries and reversal of declining production inIndonesia.

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Professional Division Activities 2012

1. Title : A Brief History of Depth and Time Seismic Imaging

Speaker : Samuel Gray, CGG Veritas, Calgary - CanadaDates : February 8Venue : Le Meridien - JakartaCost : Rp. 325.000 (IPA Member) Rp. 385.000 (Non-IPA Member)

2. Title : A Field Seminar for Non-Geosci- entist from Porong-Pamekasan- Mudu-Sukowati-Ledok-Kuwu- Sangiran

Trip Leader : H.M. Yohannes P. Koesoemo

Sumber Daya Alam Consultant, Cepu, IndonesiaDates : February 19 - 23Cost : US$ 1,300

(includes: airfares Jakarta-Surabaya Solo-Jakarta, airport tax, transportation, board-lodging, refresh- ments and field guide book)

3. Title : The Modern and Ancient MahakamDelta Sedimentology

Trip Leader : Irfan Cibaj Total E&P IndonesieDates : March 23 - 27Cost : US$ 2,700 (IPA Member) US$ 2,800 (Non-IPA Member) (includes: round-trip airfare Jakarta Balikpapan, airport tax, land / sea transportation, meals, Refresh- ments, lodging, and field guide book)

4. Title : Practical Investment Appraisal and

Business Decision Analysis in Pe- troleum Exploration & Production

with special reference to theIndonesian PSC system

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Instructor : Dr. H.L. Ong - ITB & BPMIGAS

Dates : April 9 - 13Venue : Sheraton Bandung Hotel & Towers

Bandung, IndonesiaCost : TBA

5. Title : Corporate Communications inIndonesian Petroleum Industry

Instructor : H. Kiswanto - ConsultantDates : May 1 - 3Venue : Royal Ambarrukmo Hotel, YogyakartaCost : TBA

In conjunction with the:Thirty-Sixth IPA Annual Convention & Exhibition

Jakarta, May 23-25, 2012

IPA will organize 3 or 5 short courses

DETAIL OF THE COURSES WILL BE INFORMED SOON

6. Title : Petroleum System Analysis:

Essential Concepts & Methods forIncreasing Exploration Success andAssessing Risks of Plays &

ProspectsInstructor : Awang Harun Satyana - BPMIGASDates : June 4 - 8Venue : Solo, IndonesiaCost : TBA

7. Title : Applied Subsurface GeologicalMapping

Instructor : Siamak Agah - Subsurface Consul-

tants & Associates, LLC - USADates : June 25 - 29Venue : Sheraton Senggigi Beach Resort

Lombok, IndonesiaCost : TBA

8. Title : Sequence and Seismic Stratigraphy:

Concepts and ApplicationsInstructor : Dr. Henry Posamentier

Sr. Geological Consultant, Chevron Energy Technology Co.

Dates : October or November (tentatively)Venue : BaliCost : TBA

9. Title : Geological Application of Well LogsInstructor : Jenny Garnham

Independent Consultants, UKDates : October 29 - November 2

Venue : Holiday Inn Baruna Resort BaliCost : TBA

10. Title : 3-D Seismic InterpretationTechniques

Instructor : Alistair R. Brown Consulting Reservoir Geophysicist

Dates : November 26 - 30Venue : BaliCost : TBA

11. Title : Carbonate Sedimentation, SequenceStratigraphy & Reservoir

CharacterizationInstructor : Dr. Rick Sarg Subsurface Consultants & Associates, LLC - USADates : December 10-14Venue : BaliCost : TBA

12. Title : Petroleum Geology of Deep-Water(Turbidite) Depositional Systems

Instructor : Dr. Roger Slatt University of Oklahoma, USA

Dates : December 10-14Venue : BaliCost : TBA

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Luncheon Talks 2011The first half of 2011 has been extremely active withexcellent luncheon talks presented in January, February,March, April and June. Kurt Steffen from ExxonMobilpresented a very interesting talk titled Assessmentof Unconventional Resources to a full and attentiveaudience at the Le Meridien Hotel in January. This wasfollowed by a talk at the Four Seasons Hotel in Februarygiven by Dr. Dale Issler, Geological Survey of Canadaand AAPG Distinguished Lecturer titled Integratedthermal history analysis of sedimentary basins usingmulti-kinetic apatite fission track thermochronology:examples from northern Canada. In March, Pak Priyonofrom BPMIGAS presented an eagerly awaited talk titledSummary of 2010 E&P Activities in Indonesia andOutlook for 2011 to over 200 participants at the RitzCarlton Hotel Pacific Place. This was followed in Aprilby Trey Meckel from Tately N. V. with a excellent talkat the Le Meridien Hotel titled Sand-Prone SubmarineMass-Transport Deposits: Reservoir Characteristicsand Classification of an Underappreciated DeepwaterFacies. Rounding out the talks for the first half of theyear was Dr. Henry Posamentier from Chevron EnergyTechnology Company. His talk in June at the Le Meridien

Hotel was titled Deep-water sedimentation; seismicrecognition of sand-prone and mud-prone depositionalelements. If you missed any of these talks then youmissed out on discussions of current and relevant topicsto the E&P industry. Come and enjoy excellent technicalpresentations, a great lunch and network with othersworking in the Indonesia O&G industry!

Assessment of Unconventional Resources

Around 90 participants from the oil and gas industry

attended this event in January. Kurt began his talk bydiscussing how unconventional resources have taken amore prominent position in many countries with shalegas and coal bed methane in particular accountingfor significant amounts of natural gas production. Hementioned that the government of Indonesia has alreadybegun offering CBM PSCs and they have indicated thatthey will begin to open tenders for potential shale gasareas in the near future.

The bulk of the talk was focused on assessingunconventional resources. These tend to be laterallyextensive and over broad areas these accumulations cancontain large in-place and recoverable volumes. But inmany cases a business opportunity will represent only afraction of the total potential resource as there may be

limitations on what areas can be accessed by available

lease blocks, surface constraints, etc. Understandingthe spatial variation in the resource density as early aspossible is crucial and finding the appropriate balance ofvolumetric and performance techniques is essential fora successful project outcome.

Assessing the potential hydrocarbon volumes and wellperformance of an opportunity and understanding thefull range of possible outcomes is critical for a successfulresource assessment. The evaluation process mustalso be scalable to allow the screening of basins, sub-regional plays and detailed lease or pilot project areas.

This talk reviewed the methodology for assessingunconventional resources with specific examples fromExxonMobils work in the Piceance basin in Colorado.Both the assessment of shale gas and coal bed methanewere discussed.

Integrated thermal history analysis of sedimentarybasins using multi-kinetic apatite fission trackthermochronology: examples from northern Canada

At this event in February, Dr. Dale Issler, an AAPG

Distinguished Lecturer for 2011, shared his insights onworking with apatite fission track data. Apatite fissiontrack (AFT) thermochronology is a powerful thermalhistory analysis approach that is well suited to the study ofsedimentary basins. It originated as a geochronologicaldating method in the 1960s but has been continuallyevolving as new insight has been gained concerning thetime-temperature conditions and mineral compositionalfactors influencing the thermal annealing of fissiontracks in apatite. Fission tracks are linear zones ofcrystal damage that result from the spontaneous fissionof 238U. They are revealed by polishing and etching

mounted grains, allowing their orientations and lengthsto be measured.

Annealing occurs within and somewhat below thetemperature range for petroleum generation and canthus be used to constrain petroleum generation historiesthrough numerical modeling.

Dr. Issler has been applying this state-of-the-artmethodology to thermal history studies of northernCanadian basins (Beaufort-Mackenzie and MackenzieValley regions in the Northwest Territories) and muchhas been learned that challenges existing data analysisand modeling approaches. In these regions, he hasfound that mixed AFT compositional populations greatlycomplicate data analysis and thermal modeling.

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Summary of 2010 E&P Activities in Indonesia and

Outlook for 2011

Pak Priyono from BPMIGAS presented to a full house atthis luncheon held in March. The BPMIGAS talk is a yearlyevent and generally draws the largest IPA Luncheon Talkaudience each year.

The talk addressed six major items: oil and gas upstreamperformance in 2010, 2011 oil and gas targets, majorissues affecting the industry, an evaluation of productionin Indonesia, PSC commitment issues and finallyBPMIGAS initiatives.

Oil and gas performance in 2010 was generally good withcrude oil and condensate lifting achieving 99% of the settarget and the targets met for both government revenueand the production decline rate. Both production andrevenue rates have shown an increasing trend over thepast three years. However, the one downside was theincrease in the number of fatality accidents during 2010.

Pak Priyono revealed BPMIGASs targets for 2011 thatinclude oil production of 970 MBOPD, gas lifting of7770 BBTUD and USD 26 billion of government revenuefrom O&G activities. Drilling and well work over targets

include 224 exploration wells, 872 development wellsand 621 well walkovers.

Also outlined were several key issues affecting theindustry including the need of some PSCs to cutproduction to fulfill environmental requirements andthe attempt at requiring Indonesia-flagged vesselsfor offshore O&G activities. Pak Priyono stated thatBPMIGAS and the IPA are both working to resolve thecabotage issue.

A downward trend in total production beginning in August

2010 was discussed with the largest single contributingfactor being the number of unplanned shutdowns. Twolists were presented, one of 2011 production Top 5 ParPerformers and one of Top 5 Below Par Performers.Pak Priyono made some light-hearted comments andencouraged the Below Par performers to do better asthe year progresses. His discussion on PSC commitmentissues was then largely focused on discussing specificclauses in PSC contracts that are targeted at reducingunplanned shutdowns and BPMIGAS initiatives suchas increased field inspections to aid in addressing thisproblem.

This was an excellent summary of the activities andissues in the Indonesia O&G industry. We look forwardto next years talk.

Sand-Prone Submarine Mass-Transport Deposits:

Reservoir Characteristics and Classification of anUnderappreciated Deepwater Facies

Another large audience in April heard Trey Meckel, ChiefGeologist at Tately N.V. in Jakarta talk about sand-pronesubmarine mass-transport deposits. These deposits aredeepwater deposits that have been underappreciatedby geoscientists as reservoirs and as drilling hazards.Recent studies confirm that sand-prone mass-transportdeposits are common in the deepwater stratigraphicrecord and that they act as significant oil and gasreservoirs in major global hydrocarbon provinces suchas the Gulf of Mexico, West Africa, and the North Sea.Furthermore, sand-prone mass-transport depositsfilled with locally over pressured gas or water in theshallow subsurface represent a shallow drilling hazardthat warrants significant consideration in deepwaterdrilling programs.

Mass-transport deposits are defined as sedimentary,stratigraphic successions that were remobilized afterinitial deposition but prior to substantial lithification,and transported downslope by gravitational processesas non-Newtonian rheological units. Individual mass-transport deposits may consist of one or many beds,

and, depending on the pre-existing stratigraphy thathas been remobilized, mass-transport deposits may besand-prone or mud-prone.

Treys presentation utilized personal observations, aswell as published examples from producing fields, theseafloor and shallow subsurface, outcrops, and flumetank experiments to illustrate specific criteria that aid inthe recognition of sand-prone mass-transport depositsin the subsurface. Many of the criteria presented toidentify sand-prone mass-transport deposits areindividually valid for deepwater channels and/or injected

sands. None of the criteria presented are sufficient bythemselves to distinguish between a mass-transportdeposit and a turbidite system. However, in aggregate,the criteria are sufficiently diagnostic to identify mass-transport deposits that are likely to be reservoir-prone,and have a reasonable probability of discriminating themfrom other genetic units.

Treys talk was very well received and a lively questionand answer session followed.

Deep-water sedimentation; seismic recognition of

sand-prone and mud-prone depositional elements

Dr. Henry Posamentiers talk in June drew yet another

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very large audience that were treated to an excellent

review of deep-water depositional deposits.

Deep-water environments are populated by a rangeof depositional elements, some of which are sandprone whereas others are mud prone. Many of theseelements have distinctive seismic expression. Henryspresentation focused on the seismic stratigraphic andseismic geomorphologic expression of these deposits.

Three-dimensional seismic data can provide insight notonly as to lithologic content but also as to the processesresponsible for their formation. Deep-water sand pronesystems commonly are associated with sand-rich shelfedge systems where sands are delivered from hinterlandareas and staged for delivery into deep-water settings onthe slope and basin floor. Sands travel within turbiditycurrents through slope valleys and onward across basinfloors within leveed channels. As levees, which confineand contain turbidity currents, become progressivelylower down-system, leveed channels ultimately giveway to terminal lobes made up of numerous bifurcatingweakly-confined channels.

In contrast with these sand-prone turbidite deposits,mud-prone mass transport deposits (MTDs) are

a common depositional feature in deep-waterenvironments. These commonly originate in the mid toupper slope and can travel great distances across theslope and basin floor, commonly bulking up as they go,by eroding the mud-prone lower slope and basin floor.The seismic expression of these deposits is distinctiveand provides insights as to rheology and genesis.

Another common type of deposit in deep water issediment waves, usually mud-prone. These featurescommonly form on the lower slope to proximal basinfloor and are associated with weak contour currents

or channel overbank flows. These linear waveformsusually are characterized by up-current accretion. Inaddition to the aforementioned depositional elements,the background sedimentation by hemipelagic andpelagic processes commonly is a significant componentof deep-water stratigraphic sections.

This was an excellent talk and a great way to end thefirst half of 2011. The IPA Professional Committee hasa number of excellent speakers lined up for the secondhalf of 2011, so be on the lookout for future IPA Luncheonannouncements.

Please contact the Luncheon Talks Chairman:

Mark A. ThomsenExxonMobil Oil Indonesia

(021) 571-5

IPA.201201_Newsletter_179

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