Conclusions

His Excellency, the Minister of Energy and Mineral Resources
Members of Parliament,
Prominent CEOs,
Distinguished Guests,

We have all gathered here, motivated by the common goal, to collaborate in monetizing Indonesia’s vast gas resources, while securing critical energy to fuel economic growth domestically and globally.
It is our intention that based on the input and discussions at this conference, concrete recommendations can be drafted and proposed to the Government.
As we have heard from the Minister of Energy and Mineral Resources, the Government of Indonesia is prioritizing development of our gas industry, in order to augment our gas production for domestic and export gas supply, and support Indonesia's long term energy strategy.
Policies to increase gas utilization will support diversification of energy to reduce our reliance on oil, ease the subsidy burden on the government budget and provide multiplier effects for economic, social and environmental benefits.
The Government’s firm commitment has been echoed throughout the conference and we are encouraged to hear that the Minister is strongly promoting a consultative process between the government and industry stakeholders in developing a balanced gas regime, while keeping its economical attractiveness to investors.
The following fundamental issues were raised at the conference :

The need for

• Clarity on the policy on domestic market obligation
• Convergence of domestic and export gas prices.
• Accelerated development of gas transmission and distribution infrastructure
• Comprehensive domestic gas policy and a long term plan covering upstream, midstream and downstream sectors
• Further facilitation of CBM Development

The investors have acknowledged that Indonesia is very attractive for two reasons -  It has large natural resources and a Government that is very open to dialogue.

From the PSC perspective, the question is how we can, together, bring more direct foreign investments into the country.  There is a need to rectify the misperception that the PCS companies are opposed to supplying the domestic market in favour of the export market.  Clearly, if the domestic market conditions are right, it would be in the best interest of all parties.

Thus the underlying issue is not one of domestic versus export utilization per se but the need for economical development of the resources.  It is encouraging to hear that the Government understands and shares this basic premise.

It was highlighted however, that the increase in investment in upstream activities over the last two years, were to a large extent, catalyzed by the unprecedented high oil prices, which provided much incentive for higher spending to increase production.   With the current low oil price environment, this impetus is no longer there.  Thus the government policy must consider ways to provide more incentives for developers to sustain and grow investments.

It is the priority of Indonesia and other countries to secure more energy supplies.  There can not be sustained investment to support delivery of gas in the long term if the pricing does not enable economic returns for investors. Prices must not only consider the absolute value of gas but also the exposure to fluctuations in oil prices. The government has the ability to directly or indirectly incentivise development.

Where there is a disparity of gas prices, the government has to step in and consider either to subsidize the differential or provide more incentives to promote development of gas resources, which would otherwise remain unexploited.  

In order to meet Indonesia’s long term energy plan, CBM will play a critical role, not only because of its huge resource potential, but also because new conventional natural gas reserves will be increasingly difficult to find and develop.

In the case of CBM, therefore the government’s policy must recognize that the development of CBM is very different from that of conventional gas.  Where conventional gas fields may require 4 – 500 wells, CBM fields will require up to 2000 wells. Thus there is a need for faster approval processes for the plan of development from the Government in order to fast track CBM development.

Learning from countries like the USA, Australia, China and India, where the CBM resources did not get unlocked until substantial changes in fiscal policy were introduced, the Government needs to revisit the fiscal regime, especially in light of the current global economic condition.   A gas scheme which provides incentives to CBM producers in conjunction with incentives and disincentives to the power generation industry, as in the case of Queensland, could be considered. 

The following actions must now be taken:

• Improve fiscal regime by introducing additional incentives, which address the low oil price scenario, increasing cost of production from maturing fields and the specific needs of each project
• Improve coordination among the various Government stakeholders, at the central and provincial levels, in resolving industry issues, especially in accelerating approval processes

• Ensure stability and consistency of regulations
• Develop comprehensive policy and implementing regulations to support the domestic gas utilization, including the optimization of marginal fields
• Tender procedures and development plans approval processes must be streamlined and accelerated

• Develop strategies to improve affordability of gas by domestic users and incentives to promote development of necessary transport infrastructure
• Appropriately match CBM resources to domestic and export markets through low cost business models that can balance CBM’s different risk and reward profile, allow multiple developments to spread risk and limit the payback period.

• Accelerate efforts to address the growing gas demand from the industrial sector by fast tracking plans for the planned LNG receiving terminal in W. Java and the expansion of gas transmission pipeline network from resource centers, including major, marginal and CBM resources.
• Leverage new gas technologies such as CNG, Mini LNG Plant & Receiving terminal, coal gasification and offshore regasification, to help to expand gas supply to difficult and niche markets
• Step up Human Resources development to address shortage in skilled workers

In conclusion, it is clear that we must act promptly and concertedly to move the industry forward. We must learn quickly from the experience of successful projects and adopt new technologies and appropriate regulations and incentives consistent with best international practices.

May I extend our sincere gratitude and appreciation to H.E Dr. Purnomo Yusgiantoro, Minister of Energy and Mineral Resources for his continued support and for his perseverance in tackling the obstacles and paving the way for accelerated development of our gas industry.
I would also like to express my sincere appreciation to you - the Sponsors, Speakers, Delegates, and Exhibitors in contributing to the success of this conference.

Finally, I would like to acknowledge and thank the Organizer, IEEC, for their hard work, professionalism and a job well done.
I look forward to meeting you here again at INDOGAS 2011.

Thank you