Pertamina Energy Outlook 2015

Building world-class refining capacity

for Indonesias energy needs

By :
Iriawan Yulianto
SVP Business Development
PT Pertamina (Persero)

Jakarta, 3-4 December 2014

PT Pertamina (Persero)
Jln. Medan Merdeka Timur No.1A Jakarta 10110
CONFIDENTIAL AND PROPRIETARY Telp (62-21) 381 5111 Fax (62-21) 384 6865
Any use of this material without specific permission of Pertamina is strictly prohibited http://www.pertamina.com
Contents

Strategic Challenges

Refinery Development Master Plan (RDMP)

Grass Root Refinery (GRR)

PERTAMINA | 1
STRATEGIC CHALLENGES
Pertamina Refining face both external and internal challenges to achieve
its strategic aspiration
External challenges
Domestic crude availability will decrease and only able to cover less than 50% of
Feedstock Pertaminas total refining capacity
supply Domestic crude production is projected to decline by ~27% between 2012 and 2020
In 2020 domestic crudes total entitlement volume is only 449 MBD, which is less than 50%
of total refining capacity
Pertamina will increasingly import crudes that are more sour, driving the need to release
sulfur constraints to maintain competitiveness
In 2020 sour crudes will account for ~77% of the total production capacity for import crudes
Sour crudes are cheaper than sweet crudes, therefore driving Pertaminas need to release
sulfur constraints to maintain competitiveness
Indonesias demand for gasoline and diesel will continue to grow significantly
Gasoline demand will grow by about 8% per year from 2012 to 2025
Refining market Diesel demand will grow by about 5% per year from 2012 to 2025
Product quality specifications will become more stringent in the next 5-10 years1
Indonesia and ASEAN will be short in gasoline and diesel2, hence potentially requiring
Security Indonesia to import from sources outside ASEAN
of energy supply Indonesia will continue to have growing gasoline and diesel deficit
ASEAN will also be in deficit for gasoline and diesel
There is government support for increasing domestic production of gasoline and diesel
to limit dependency on imports
Going forward refineries will have to increase its complexity and sulfur handling capacity
Refinery to become more competitive
configuration

Internal challenges SWOT analysis reveal various opportunities for GRM improvement
There is a need to increase GRM across most RU
Each RU has different key focus based on their SWOT

1 Based on UNEP, FACTS and McKinsey analysis 2 Not including new refineries and RDMP initiatives

PERTAMINA | 2
 1 Indonesias domestic fuel product coverage is low, posing risks in
security of energy supply
Domestic fuel product coverage1
Percent

2013 262 Full

181 194
103 121 109 coverage
48 58 44 71

PTT/SA2 RAPID3
coverage coverage
118
2025 87 224 Full
185 206
125 coverage
93 112
38 37 63 60

IDN AUS VNM MYS CHN THA JPN TWN SGP KOR

Indonesias domestic product coverage is substantially low compared to other

neighboring countries and can potentially pose a threat in security of fuel products
Increasing the domestic production will increase the domestic fuel product coverage
1 Production [gasoline, diesel, gasoil] / Demand [gasoline, diesel, gasoil]
2 Assumed 400 KBD refinery at 95% utilization; 50% of the production will be gasoline, diesel and gasoil
3 Assumed 300 KBD refinery at 95% utilization, 67% of production for petroleum products, and 67% of this will be gasoline, diesel and gasoil

SOURCE: ICIS Supply & Demand Database; Pertamina M&T (only for Indonesia 2030); Team analysis PERTAMINA | 3
 2 By 2025, Indonesia faces a significant shortage in refining capacity,
equivalent to ~5-8 refineries High case Additional supply from RU IV RFCC
Base case Existing supply
Low case

Indonesia refinery product supply and demand 1 Scenarios

KBD CAGR
Fuel Substitution of
2,250 6.0%2 GDP subsidy gas/bio-fuel
growth reduction based vehicles
1,948 High 6% No None
4.9% change
1,681
Equivalent Base 5% 50% B10
to ~4-8 3.7% reduction
world-
class Low 4% 100% B10 and NGV
1,050
refineries3 reduction

541 541
12 12 Estimated shortage by 2025
is between 4 and 8 refineries
529 529 529 0.1% High case: ~1,700 KBD
Base case: ~1,400 KBD
2012-13 2020 2025
Low case: ~1,100 KBD

1 Includes gasoline, gas oil and diesel 2 Based on base case demand scenario per Pertamina M&T
3 Assumed each refinery produce 200 KBD of fuel products

SOURCE: Pertamina M&T, team analysis PERTAMINA | 4

 2 Pertamina is implementing two programs: Supply Demand
RDMP and GRR to close the deficit
Refining Development Master Plan (RDMP) Grass Root Refinery (GRR)

Upgrading 5 existing refineries to increase Des- Building 2 new refineries to meet west and
Description the capacity and competitiveness cription east Indonesias growing demand

1,273
KBD 1,136
1,393 946 190
West2
Fuel KBD
product X2.5 1,136
demand1
and supply 529
after RDMP

Supply in 2013 Supply in 2025

675
East3 637
Current After RDMP 38
KBD 447 190
Complexity
NCI4 637
5 9

BPP
104 94 After GRR5 Total Demand
% MOPS
RDMP supply in 20251
1 Base case 2 Region I to IV 3 Region V to VIII 4 Nelson Complexity Index
5 Assumed utilization rate of 95% 6 May be pushed to second phase

SOURCE: Team analysis PERTAMINA | 5

Contents

Strategic Challenges

Refinery Development Master Plan (RDMP)

Grass Root Refinery (GRR)

PERTAMINA | 6
Pertaminas Refining Development Master Plan (RDMP) will transform
its refining business by upgrading up to 5 major refineries PRELIMINARY

Dumai refinery

Balikpapan refinery
Plaju refinery

Balongan refinery

Cilacap refinery

Crude flexibility Complexity Product quality Crude quantity

~2% S 8-9 EURO IV x2

of crude flexibility NCI up from EURO II increased capacity

Sulfur handling limit from Complexity improved Gasoline from 500 to <50 ppm S From 820,000 BPD
0.4% to ~2% S from 5 to 8-9 Diesel from 3,500 to <50 ppm S to 1,610,000 BPD

SOURCE: Pertamina PERTAMINA | 7

RDMP strategic partner selection process in currently in progress;
Pertamina would like to sign MOU with strategic partner(s) on Dec 10

Mar, 2014 Jun, 2014 Aug, 2014 Nov, 2014

MoU sign
on Dec 10 Phase 1
(~2021):
Balikpapan
~400 Balongan
com- Cilacap
panies Phase 2
(by 2025):
Dumai
Plaju

30 companies 13 companies 6 companies 4 companies

Preliminary RFI1 RFI response

Criteria Due diligence
screening acceptance and roadshow

1 Request for information

SOURCE: Pertamina PERTAMINA | 8

 XXX RDMP
The RDMP landscape across Indonesia would have
XXX GRR
different regions in the accelerated scenario
Sumatra Kalimantan and Sulawesi

Dumai

Balikpapan
Plaju

Balongan Cilacap Tuban

West and East Java and

Central Java NTT and NTB

SOURCE: Team analysis PERTAMINA | 9

Pertamina would like to sign an MOU with strategic partner(s) by our
anniversary (Dec 10)
2014
Activity May Jun Jul Aug Sep Oct Nov Dec

Market sounding Jun 13th: expression of interest required

Site visits Jul 25th: site visits finalized

Clarification stage Jul 25th: response to RFI required

Oct 30th: due
Due diligence diligence finalized

Partnership decision

Signed MOU Dec 10th

BFS and partner Heads of BED / FEED Final EPC Contractor EPC
selection Agreement (Q2 2015- Q4 2016) Investment Selection
JV Establishment Decision
(2013-2014) (Q1 2015) (Q2 2015- Q4 2016) (Q1 2017) (Q2-Q4 2017) (2018-2021)

SOURCE: Pertamina PERTAMINA | 10

Contents

Strategic Challenges

Refinery Development Master Plan (RDMP)

Grass Root Refinery (GRR)

PERTAMINA | 11
4 5 key success factors for a world-class refinery in Indonesia

Description Suggested guideline

Scale and
Fully leverage economies Minimum 300 KBD
A
complexity
of scale to be competitive against Minimum complexity of 10
imports

Close to demand center; minimal West Indonesia: Tuban

B Location exposure to earthquakes East Indonesia: TBD

Minimum size of land to build an Minimum 500 hectare

C Land integrated world-class refinery with Government land acquisition
petchem complex and/or reclamation

Balance between security of supply ~60% through long-term

and uncertainty on market price contract at international
D Feedstock
Flexibility to review the terms of market price and ~40% at
long-term contract spot

Petrochemical complex integrated Integrated petrochemical

E Petchem with GRR to boost economics complex with GRR with
aromatic and olefin

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 4 MoU with Saudi Aramco on Tuban refinery in West Indonesia Highly attractive

while location is being scouted for East Indonesia Opportunity exist

Supply and base case demand of products1 at 2025 after RDMP, in KBD Not attractive

Region VI : Kalimantan Demand Supply

Region I: North Sumatra Region VII: Sulawesi

312 Region VIII: Papua

316 263 273
+39
RU II Dumai -53
32 0
Region II: South -32
Sumatra

279 East: currently

200 RU VII Kasim
+79 scouting for
locations in East
RU V Indonesia
Balikpapan
Region III: West Java RU III Plaju
West: MoU with
504
Aramco on Tuban
2682 -236 RU VI Balongan refinery

Region V: East Java, Bali,

NTB & NTT
Region IV: Central Java
RU IV Cilacap
371
-116 1363 -235
252
1363

West Indonesia East Indonesia

1 Includes gasoline and diesel 2 Assumed Region III supplied by Balongan 3 Assumed Region IV and V supplied by Cilacap

SOURCE: Interim RDMP BFS result, Pertamina, team analysis PERTAMINA | 13

Grass Root Refinery (GRR)
Building World-Class Refining Capacity for Indonesias Energy Needs.
New Grass Root
Refinery in Bontang
with PPP scheme
(Government plan)

Bontang refinery

Tuban refinery

New Grass Root Refinery in

Tuban B to B scheme with
Aramco

Crude flexibility Complexity Product quality Crude quantity

~2% S 10-12 EURO IV - V 300,000

of crude flexibility NCI BPD

Sulfur handling limit up to World class Complexity Gasoline 10 - 50 ppm S Can be increased to
~2% S Diesel 10 - 50 ppm S 400,000 BPD

SOURCE: Pertamina PERTAMINA |

GRR progress and lessons learned
Progress to date Additional challenges

Constraints Difficulties in
attracting investment
Land access for private refinery
Iran 2008 2010 High crude price Since 1990,
(Banten) MOU BFS Investment
signed completed Coordination
Land access Board has
2010 2011 2012 2013 2014 Limited government issued +20 initial
MOU Risk BFS and Market Fiscal incentives investment
Kuwait signed assess- cost & study study licenses
(Balon-
gan)
ment benefit com- com- No further
study study pleted pleted actions to
com- com- pursue the
pleted pleted investment due
to the marginal
Iraq 2014 Varying expectation return without
LoI issued on investment government
incentives
Land access
2012 2013 2014
Saudi MOU Market & Confi-
Arabia signed location guration
(E. Java) study study
completed com-
pleted
Regulation update
PPP 2013 2014 Refining as an
refinery infrastructure
Location and
(Bon- project for PPP
configuration
tang)
study SoE as project
owner of PPP

SOURCE: Pertamina PERTAMINA | 15

Conclusion

1 By 2030, Indonesia will need 3-6 new refinery equivalents and Pertamina is
implementing 2 programs to close the gap
RDMP: Upgrading up to 5 existing refineries, equivalent to 2 new refineries
GRR: Building 2 new refineries in Indonesia
2 RDMP
World-class strategic partners selected based on rigorous roadshow and due
diligence, signing of MoUs with Aramco, JX, PTT and Sinopec on Dec 10
Phase 1 commissioning in 2020-2021 for Balongan, Cilacap, and Balikpapan;
Phase 2 commissioning by 2025 for Dumai and Plaju
3 GRR
5 key success factors for world-class GRR: Scale & complexity, location, land,
feedstock, and integration with petchem complex
2 new refineries pursued in parallel: in West Indonesia, Tuban Refinery with
Aramco; East Indonesian refinery location scouting in progress

PERTAMINA | 16
 Thank You
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