Organisational and regulatory david braithwaite (formatted)
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Transcript of Organisational and regulatory david braithwaite (formatted)
Presented by:
David J. Braithwaite – President Director PT. Q Energy South East Asia
Shangri-La Hotel, Jakarta
21 June 2012
Gas Development Master Plan Organisational and Regulatory Challenges Consensus Building Workshop
2
Overview
• Regulatory developments: recent
• Regulatory developments: likely to occur soon
• Summary of regulatory challenges across gas supply chain
• Organisational complexity
• Examples of how these have constrained gas development
• Conclusions
3
Regulatory Developments: Recent
LAW/REGULATION IMPACT ON GAS DEVELOPMENT
Minister EMR Regulation 5 of 2012 Procedure for Determining and Offering Non-Conventional Oil and Gas Work Areas
Positive: provides regulatory certainty for development of shale gas (as well as CBM)
Presidential Instruction 2 of 2012 National Crude Oil Production Increase
Positive: if new incentives given for gas as well as oil
BP Migas annoucement of increase in PSC gas well-head prices 2012 (Migas regulation to follow soon?)
Positive: for upstream Negative: (short-term) for downstream?
Presidential Regulation 61 of 2011 National Action Plan to Reduce GHG Emissions
Negative (for competing with coal): Energy sector only expected to contribute 4.1% of total reduction and gas to contribute 0.4% through CNG for public transport
Govt. Reg No. 79 of 2010 Cost Recovery and Income Tax in Upstream Business Sector
Negative: may discourage future gas exploration as challenges sanctity of the PSC? (IPA’s petition for judicial review to Supreme Court was denied)
Minister EMR Decree 3 of 2010 Priorities for Domestic Gas Utilisation
Positive: provides clarity on how gas to be used but likely to constrain industry growth
4
LAW/REGULATION IMPACT ON GAS DEVELOPMENT
Minister EMR Regulation 19 of 2010 Utilisation of Natural Gas as Gas Fuel for Transportation Purposes
Positive: should increase likelihood of infrastructure being built and gas supply being made available
Minister EMR Decree 2010 The Indonesia Gas Balance 2010 - 2025
Positive: as provides data on gas supply and demand by region but how up to date is it: 2011 update not yet released
Minister EMR Decree No 0225 of 2010 Master Plan for National Natural Gas Distribution and Transmission Network 2010 - 2025
Positive: if implemented, but lacks detail on assumptions made for defining pipeline routes and distribution areas
Presidential Instruction No 1 of 2010 Execution of National Development Priorities (including gas infrastructure)
Positive: if implemented includes floating LNG regas terminal in W. Java, N. Sumatra and E. Java
Regulatory Developments: Recent
5
Regulatory Developments: Likely to Occur Soon?
LAW/REGULATION IMPACT ON GAS DEVELOPMENT
Revision of 2001 Oil and Gas Law - National Oil Company first right to operate expired PSC’s? - Strengthening the gas DMO?
Negative: creates significant uncertainty
Fiscal incentives to increase oil and gas production (prompted by Presidential Instruction 2 of 2012)
Positive: if incentives extended to gas
New Energy Policy 2011 – 2025 Positive: focus on using gas domestically, though share in energy mix declines to 15% in long term. Energy pricing may include environmental costs.
Acceleration of gas flaring elimination Positive: potentially more gas available for domestic use
#) To follow (reviewing policy still)
6
Summary of Regulatory challenges/ Uncertainties Across Gas Supply Chain
Upstream
(Exploration and Production)
Midstream
(Gas Transmission Pipelines/FSRU’s)
Downstream
(Gas Distribution)
- Domestic gas pricing
- PSC extensions
- Cost recovery
- PSC terms for gas in deepwater/remote
areas
- DMO expectation
- Gas flaring elimination
- Permitting
- Land access
- Pipelines: regulated Rate of Return for
transmission and distribution
- Gas Master Plan: process for updating
- FSRU’s:
- Project implementation uncertainty
- LNG supply
- Gas competing with subsidised oil
products/LPG
- Gas supply
- Delineation of distribution areas in Gas
Master Plan
7
Organisational Complexity Constraining Gas Development
• Many Government institutions influencing gas development
• Some potential institutional overlap in responsibilities (e.g. upstream gas pricing)
• Institutions may have different priorities
• Some institutions announce new policies and targets but these are not always followed by detailed implementation plans
• Apparent lack of one single institution empowered to decide on and implement a fully integrated gas supply chain development plan
8
Key Regulatory Institutions: Gas Supply Chain
UPSTREAM
MIDSTREAM
DOWNSTREAM
MEMR/MIGAS
BPMIGAS
MEMR/MIGAS
BPH MIGAS
MEMR/MIGAS
BPH MIGAS
9
Government Institutions Influencing Gas Supply Chain Development
GAS SUPPLY
CHAIN
MEMR/MIGAS
BPH MIGAS
BP MIGAS
BAPPENASNATIONAL
ENERGY COUNCIL
MINISTRY OF PUBLIC WORKS
MINISTRY OF HOME AFFAIRS
MINISTRY OF TRANSPORTATION
MINISTRY OF AGRICULTURE
MINISTRY OF FORESTRY
MINISTRY OF ENVIRONMENT
MINISTRY OF LAW AND HR
MINISTRY OFSOE'S
CHAIRMAN OFNATIONAL LAND BOARD
GOVERNORS
REGENTS/MAYORS
MINISTRY OF FINANCE
COORD MINISTERECONOMY
MINISTRY OF INDUSTRY
Itemised in
Presidential Instruction No. 2 of 2012
10
Examples of a Lack of Co-ordination In Government Gas Policy Implementation • In 2012 Minister of State-Owned Enterprises announced that the FSRU
dedicated for the new LNG regas plant in Medan should be re-located to Lampung (and Medan’s gas needs would be met by a pipeline from Aceh), despite the FSRU project being itemised in the 2010 Presidential Instruction “execution of national development priorities”
• Issuance in 2010 of a regulation for widespread use of gas for transportation, but subsidy on premium gasoline and diesel oil remains unchanged
• Announcement in 2010 by Minister EMR: gas distribution pipelines to be built to meet household needs in several cities, but LPG for residential used is still subsidised
• 2011 at PLN Muara Tawar Steam Power Plant in Bekasi (1350 MW), only 7 of the 12 gas turbines were able to use gas, as PGN was not able to supply the full volume committed, as government has in turn allocated 100 mmscfd of this gas to another user (to Chevron’s Duri field in Riau)
11
Examples of Pipelines Not Being Built
The following completion dates were set by the Government for gas transmission gas pipeline projects
PROJECT Length (KM)
Capacity (MMSCFD)
Completion
Grissik – W. Java 661 400 2007
Duri – Medan 521 250 2007
E. Kalimantan – C. Java 1,219 1,100 2007/2010
E. Java – W. Java 680 350 2008/2010
To date only the Grissik to West Java pipeline has been completed
12
Examples of Gas Demand Not Being Met Due to Lack of Gas Pipelines
• Forum for Nat Gas User Industries has for a long time highlighted the lack of gas for its member companies. For instance ceramics industries could only produce 5 million m2 per day of their 6.5 million m2 capacity, due to lack of gas supply
• A few days ago PLN issued a warning of possible black-outs occuring in Jakarta to a shortage of gas from the newly-commissioned FSRU in Jakarta
13
Conclusions Several factors appear contribute to the current lack of the gas supply and gas infrastructure
• Regulations not being fully implemented
• Conflicting energy policies being pursued
• Many institutions can have an impact on gas supply development but no single institution is empowered to have final say on defining and implementing an integrated gas supply chain development plan
• Infrastructure project developers need commitments from both gas suppliers and gas users before proceeding, which to date have been very difficult to secure (and pipeline rates of return are regulated)
• Domestic gas prices are increasing significantly which may attract more gas producers to sell into the domestic market but how will domestic users see the long term competitiveness of gas versus coal in the power sector, and versus subsidised oil products, and LPG in the transport and household sectors?