Documentation Required

F.1. Plan of Development (“POD”) (Articles 90-98 of GR35/2004)

A Plan of Development (“POD”) (also known as a field development plan) represents development planning on one or more oil and gas fields in an integrated and optimal plan for the production of hydrocarbon reserves considering technical, economical and environmental aspects.

Prior to Law No. 22/2001, an initial POD only needed Pertamina Director approval. After Law No. 22/2001, an initial POD in a development area needs both BP Migas and the Minister of Energy and Mineral Resources approval. Subsequent POD’s in the same development area only need BP Migas approval. Generally the time needed for POD approval is around 10 weeks although the process can take in excess of one year for very large projects.

A POD is typically a complex document that outlines the proposed development of a particular commercial discovery. The scope and scale of PODs will vary enormously depending on the size of the project but it will typically cover the following information: a. Executive summary b. Geological findings c. Development incentives d. Reservoir description e. EOR incentives

f. Field development scenarios g. Drilling results

h. Field development facilities i. Project schedule

j. Production results

k. HSE & community development l. Abandonment

m. Project economics n. Conclusion

PODs that are presented to the Minister (and therefore those that are for the development of oil or gas discoveries in the first field, as opposed to subsequent fields) must contain:

a. supporting data and evaluation of Exploration; b. evaluation of the reserves;

c. methods for drilling development wells;

d. number and location of production and/or injection wells; e. production testing/well testing;

f. pattern of extraction; g. estimated production;

h. methods for lifting the production; i. production facilities;

j. plans for use of the Oil and Gas;

k. plans following operations, economics and state and regional revenues. A POD revision could be performed in the following conditions:

a. changes in the development scenario;

b. significant changes to the oil and gas reserves compared to the initial POD submitted; and

c. changes in the investment cost. F.2. Authorisation for Expenditure (“AFE”)

As part of the BP Migas supervision and control over the execution of the PSCs each of the projects in an exploration and development phase should prepare an Authorisation for Expenditure (“AFE”) for BP Migas approval. For other projects BP Migas approval is required if budgeted expenditure is equal or greater than US$ 500,000.

An AFE should include the following Information:

a. project information in sufficient detail to allow for BP Migas analysis and evaluation;

b. total budgeted costs; and

c. total costs that have been incurred.

The time required for AFE approval, AFE revision and AFE close out is around 10- 15 days although the process is considerably longer for complex and large project AFEs.

An AFE can be revised:

a. twice before the project commences or before the tender has been awarded.

10% or more and/or the individual AFE cost component is projected to be over/under-run more than 30%.

A sample AFE is provided at Appendix J “Documentation”. F.3. Work Program and Budget (“WP&B”)

The work Program and Budget (“WP&B”) is the proposal of a detailed action plan and annual budget in consideration of the condition, commitment, effectiveness and efficiency of the contractor’s operations in a contract area. The WP&B covers the following:

a. exploration (seismic & geological survey, drilling and G&G study), lead & prospect, exploration commitment;

b. production and an effort to maintain its continuity: 1. plan of development;

2. intermittent drilling;

3. production operations and work-overs; 4. maintaining production; and

5. EOR projects (Secondary Recovery & Tertiary Recovery).

c. The costs allocated for those programs are as: 1. exploration;

2. development drilling & production facilities; 3. production and operations; and

4. general administration, exploration administration & overheads

d. An estimation of:

1. entitlement share;

2. Gross Revenue, Oil & Gas Price, Cost Recovery, Indonesia Share, Contractor Share;

3. Unit cost (US$/Bbl); 4. Direct Production Cost; 5. Total Production Cost; 6. Cost Recovery; and 7. Status of unrecovered cost. WP&B generally includes the following schedules:

a. Financial Status Report; b. Key Operating Statistic;

d. Exploration & Development Summary; e. Exploratory Drilling Expenditures; f. Development Drilling Expenditures; g. Miscellaneous Capital Expenditures; h. Production Expenses Summary;

i. Production Facilities Capital Expenditures; j. Miscellaneous Production Capital Expenditures; k. Administration Expenses Summary;

l. Administration Capital Expenditures; m. Capital Assets P.I.S. Old/New; n. Depreciation Old/New;

o. Detailed Program Support Listing; p. Production/Lifting Forecast; and q. Budget Year Expenditures.

The WP&B proposal should be submitted to BP Migas for approval three months before the start of each calendar year. Before BP Migas grants approval some changes to the WP&B proposal may be requested. In granting approval for WP&Bs, BP Migas follows GR 25/2004 Article 98 guidance which lists certain mandatory considerations such as: long-term plans; success in achieving activity targets; efforts to increase oil and gas reserves and production; technical activities and the viability of cost units; efficiency; field development plans previously approved; and manpower and environmental management.

Once approved, the contractor may revise the WP&B provided there is reasonable cause such as:

a. the annual work plan turns out to be unrealistic; or b. the estimated cost departs enormously from the budget.

The proposed WP&B revision must be accompanied with the reason for the change. For urgent changes to an original annual WP&B revisions may be submitted to BP Migas before June.

Generally the WP&B approval process takes around 22 working days although the process is considerably longer for complex and large WP&B.

A typical front page summary of WP&B is provided at Appendix J “Documentation”

F.4. Financial Quarterly Report (“FQR”)

On a quarterly basis an operator of a PSC area should submit its Financial Quarterly Report (“FQR”) to BP Migas. The FQR primarily consists of a comparison between budgeted and actual revenue and expenditures. The FQR should be submitted to BP Migas within a month of the end of the relevant quarter. A typical FQR consists of a summary front page with supporting schedules attached. An example of the FQR summary page is provided at Appendix J "Documentation".

F.5. Foreign Currency Report (“FCR”)

Based on Bank Indonesia Regulation No 4/2/PBI/2002 and subsequent revisions including the latest revisions in Stipulation Letter No 5/24/DSM dated October 3, 2003, non-financial institution companies (including oil and gas companies) with minimum assets of Rp.100 billion or annual gross sales greater than Rp. 100 billion are required to report to the Bank of Indonesia (“BI”) their foreign currency transactions made with:

a. overseas banks or overseas financial organisations; and/or

b. other companies or offices domiciled outside of Indonesia. Companies that have overseas financial assets and liabilities are also required to produce BI reports.

The BI report consists of:

a. a monthly foreign exchange transaction report for all the company’s financial assets and/or liabilities in foreign currency (to be submitted within a month following the month in which the transaction occurs); and

b. a half yearly report of the foreign currency financial assets and/or liabilities position for the period ended.

The BI reports are used by the Government to prepare the Payment Statistic Balance Sheet and Indonesia’s International Investment Position.

The Government also recently issued decision letter KEP-0066/BP00000/2008/ S0 (“KEP 0066”) which requires PSC contractors to use a state-owned bank for both the vendor and payer’s accounts with respect to payments for goods and services. Please see Section III.B.4a above for further details.

to sour ce : Sant os Indonesia [Sant os (Sam pang) Pt y.Ltd.]

This section covers the following topics:

A. the key regulations applicable to the downstream sector; B. accounting issues in the downstream sector;

C. the taxation and customs issues for the downstream sector; and D. commercial and tax considerations.