Indonesia LPG Business Acceleration Kerosene to LPG Conversion Effect

WLPGA Sub-Continent Regional Summit “LP Gas: Exceptional Energy for the Sub-Continent” 14 – 15 February 2012 New Delhi, India

Kimball Chen Energy Transport Group

Facts : Background And Solution 1. Huge fuel subsidy (~USD 8.0 billion /year) and ~70% subsidy are for Kerosene. The huge volume of kerosene also affect on environment issue

3. LPG is cheaper and better (Cents USD, 1 USD = Rp. 8,465.87 average on August 2011)

Remarks

2. Kerosene subsidy increases eventhough the government reduce its volume significantly 14 12 10 8 6 4 2 0

12,3 11,7 11,8 11,9 11,4

Conversion start 10,0

9,9

0,8 7,9

Volume (million KL) Subsidy (Billion USD) 1,3

0,7

1,5

1,6

3,8

4,2

1,0

5,0

2,0

0,6 0,4 0,2

Volume based on calorific Value

Kerosene

LPG

1 liter

0.4 kg

Market Price

93

120

Retail Subsidized Price

30

51

Subsidized Price

64

69

Amount of subsidy

64

25

0 2001

02

03

04

05

06

07

2008

Saving per liter SOLUTION : Kerosene to LPG Conversion Program To Convert residential fuel from Kerosene to LPG by Target Converted distributing initial package (3 kg LPG bottle, stove, and regulator set) for free, followed by withdraw Kerosene Potential Subsidy Saving and replaced by LPG (both subsidized)

+

+

38 8,000,000 3.05

Cents USD KL/year Billion USD /year

Indonesia LPG Road Map : Kerosene To LPG Conversion Effect 2007-2011 Kerosene to LPG Conversion Program

.... up to 2007 Kerosene is widely used 9,9

2011 onwards .... LPG will be the main cooking fuel 56,8

48,1 3,9

7,2

5,8 1,1 NPSO

Kero (mio KL)

4,2

0,1

LPG Distribution Subsidy (mio MT) (mio Pcs) Saving (bio USD)

2

Green Area converted in 2009 with total amount of 24,4 million packages.

2,0

2,9 PSO

Non-PSO

1,1 NPSO Kero (mio KL)

LPG Distribution Subsidy (mio MT) (mio Pcs) Saving (bio USD)

Kero (mio KL)

1 USD ~ Rp. 9.000

LPG Distribution Subsidy (mio MT) (mio Pcs) Saving (bio USD)

3 Orange Area targeted to finish in 2010 , for about 9.3 million packages

1 Red Area converted in 2007 and 2008 with total amount of 19 million packages.

3,6 PSO 1,1 NPSO

4 Blue area will be converted in 2011

5 Yellow Area will not be converted, except around the purple area on 2012

Indonesia LPG Business Acceleration

Post Conversion ~17.000 MT/day Conversion Period ~14.000 MT/day +11% +28%

+57%

Pre Conversion ~4.000 MT/day

+42%

PSO NPSO +56%

2005 2006 Jan- Apr- Jul-07 Okt- Des- Jan- Apr- Jul-08 Okt- Des- Jan- Apr- Jul-09 Okt- Des- 2010 2011 2012 2013 2014 2015 07 07 07 07 08 08 08 08 09 09 09 09 3

LPG Infrastructure Growth Rapidly During Conversion Period

Infrastructure

1

2

Pre Conversion (Before 2007)

Conversion Periode (2007-2012)

Post Conversion (After 2012)

Storage *

• On shore tank 136,000 MT • On shore tank 167,000 MT • Thruput 4,000 MT/day • Floating storage 182,000 MT • Thruput 14,000 MT/day

• Total storage 345,000 MT • Thruput 17,000 MT/day

Vessel

• 6 LPG Pressurized vessels 

• 3 VLGC @44,000 MT • 6 LPG semiref vessels @11,400 MT • 9 LPG Pressurized vessels @1,800 MT

• 1 VLGC @44,000 MT • 8 LPG semiref vessels @11,400 MT • 10 LPG Pressurized vessels @1,800 MT

@1,800 MT

3

Filling Station Filling Capacity

• 66 stations (12 kg) • Capacity  6,000 MT

• 360 stations already operated • 11 Pertamina LPG Depo • 4 Private LPG Depo • 22 COCO Stations • 323 Private Stations • Capacity ~ 14,000 MT/day

• Total capacity ~ 21,900 MT/day

4

Skid Tank Capacity

• 4,000 MT/day

• 14,000 MT/day.

• 17,000 Mton/day

* As per Government’s Requirement : LPG

Switching Journey Dry Jabodetabek 17 Aug 08

Conversion Start

1 000 Demonstration arose  Initiation Period everywhere

Govt. Regulation Issued

Dry DKI Jakarta  16 May 08

Dry South Sumatera Nop 09

Dry Jogjakarta 10 Nov 08

Dry Lampung Nop 10

60,00

Dry West Java 30 April 09

Dry Central Java Dec 09

Dry Bali Sep 10

Dry South Sulawesi Feb 11

900

52,86 50,00 48,12

800 43,41

700 338

Initial Package Distribution Cumulative (Million Packages)

40,00

600 567 500

400

300

837

Kerosene PSO Withdrawal Volume (Thousand KL/month)

668

674

30,00

792

Kerosene PSO Sales Volume (Thousand KL/month)

20,00

19,05 251

499 200

210

100

270 LPG PSO Sales Volume (Thousand MT/month)

274

10,00 93

137

141

-

juil. 11 juin 11 mai 11 avr. 11 mars 11 févr. 11 janv. 11 déc. 10 nov. 10 oct. 10 sept. 10 août 10 juil. 10 juin 10 mai 10 avr. 10 mars 10 févr. 10 janv. 10 déc. 09 nov. 09 oct. 09 sept. 09 août 09 juil. 09 juin 09 mai 09 avr. 09 mars 09 févr. 09 janv. 09 déc. 08 nov. 08 oct. 08 sept. 08 août 08 juil. 08 juin 08 mai 08 avr. 08 mars 08 févr. 08 janv. 08 déc. 07 nov. 07 oct. 07 sept. 07 août 07 juil. 07 juin 07 mai 07 avr. 07 mars 07 févr. 07 janv. 07 déc. 06 nov. 06

Until July 2011, initial package already distributed to 52.86 million households and SME’s in 22 provinces

About 674 thousand kilo liters of subsidized kerosene has been withdrawn monthly and replaced by 274 thousand tons of subsidized LPG

The switching of kerosene to LPG from 2007 until July 2011 resulting on saving subsidized for the Government of Indonesia for about 4.74 bio USD

Conversion Impact To The LPG Demand-supply LPG Demand 6 000

Thousand MT

5 000

4 263

4 422

4 770

4 701

4 850

4 936

4 000

PSO

3 000

NPSO

2 000

Total Demand

1 000 2010

2011

2012

2013

2014

2015

Year

LPG Supply 6 000

Thousand MT

5 000

4 685

4 770

4 701

4 850

4 936

4 263

4 000 2 715

3 000 2 000

1 783

1 778

1 846

2010

2011

2012

2 795

2 881

Total Domestik Total Impor Total Supply

1 000 2013

Year

2014

2015

Key Success Factors 1. Strong Government Policy • • •

One Strong Leader : Vice President  Cut the Bureaucracy Effective Ministerial Coordination Who : EMR, Industrial, Internal Affair.

Regulator

2. Strong & Effective Implementation • • • •

Executor

Create Effective Model using Conversion Cycle Ensure the Readiness Logistic & Infrastructures. Strong Financial Capability Who : Pertamina

Object / Target

3. Real Benefit for End Users • • • •

Fulfill their basic needs : cheaper, always available and safe. Quick benefit that they can feel it for instance. They don’t concern about subsidy. Who : Household and SME

Real Benefit For End Users *)

*) Based on Fiscal Policy Office Survey, November 2008

Conclusion  LPG conversion program will dramatically change the energy landscape of Indonesia and will reduce fuel’s subsidy at significant amount.

 To support the LPG conversion, it takes a lot of investment opportunities that will heat up Indonesia LPG industry.

 Indonesia Government plays an important role to secure the implementation of this program, furthermore integrated and sustainable energy policy should be developed to provide better energy for society.

Challenges Worse Perception Numbers of LPG incidents blown up by media caused people worse perception. Intensive and continuous socialization about LPG safety usage will eliminate the perception. Geographic Archipelago LPG infrastructure must be prepared to cover all Indonesia area which consist of so many islands. LPG conversion area spreaded from the crowded city to the villages with small population. From Seaside to Deepforest LPG packages delivered to the fishermen in the seaside and also to the farmer in the deepforest. We must provide the LPG refill nationwide.

THANK YOU SYUKRON TERIMA KASIH