Gas Pipeline Regulation(BPH Migas)

Gas Pipeline Regulation(BPH Migas)

1BADAN PENGATUR HILIR MINYAK DAN GAS BUMI BADAN PENGATUR HILIR MINYAK DAN GAS BUMI

Borobudur Hotel, Jakarta, IndonesiaOctober 5th, 2011

Borobudur Hotel, Jakarta, IndonesiaOctober 5th, 2011

2(BPH Migas) Key Functions (BPH Migas) Key Functions

ToRegulate,DetermineandSupervisefollowingmatters:

1. NaturalGasPipelineTollFee;

2. PriceofNaturalGasfor householdsandsmall scalecustomers;

3. NaturalGastransmissionanddistribution businesses;

3Pipeline RegulationPipeline Regulation

ThesubjectsareregulatedbyBPHMigas inThePipelineRegulation:

1. SpecialRightAuctionofGasPipeline,regulatedbyBPHMigasRuleNo.12/BPHMigas/II/2008

2. TollFee(Tariff)ofGasPipeline;regulatedbyBPHMigasRule No.16/P/BPHMigas/VII/2008

3. OpenAccessofGasPipeline,regulatedbyBPHMigasRuleNo.15/P/BPHMigas/VII/2008

4SpecialRightAuctionofGasPipelineSpecialRightAuctionofGasPipelineOutlineofthePipelineSpecialRightAuctionRegulation:

1. Biddercompaniesshouldhaveatemporarygastransportationbusinesslicense,issuedbytheminister

2. Providetechnicalandeconomicanalysisofthepipelineproject.

3. Bidamountofpipelinetollfeetobeappliedtothepipelineinquestion

4. Provideabankguaranteewithaminimumvalueof0.1%oftheestimatedinvestmentcosts

5. Provideapromissorynote/collateraltofinancetheprojectissuedbyfinancialinstitutions

6. Bidderswhobidthelowesttollfeeisdeterminedasthewinner

5TollFee(Tariff)ofGasPipelineTollFee(Tariff)ofGasPipelinePrinciplesinDeterminingTollFee:

1. GovernmentRegulationNo36,2004,Article33,requiresthattollfeeforgaspipelinemustconsidertheeconomicsofpipelineowner,andinterestoftheshippersandconsumers

2. ThebasicmethodologyweusetoestablishtollfeebasedonTheeconomicsofpipelineandshippersinterestiscostofserviceratemaking

3. Underthecostofserviceratemaking,tollfeearedesignedbasedonapipeline'scostofprovidingserviceincludinganopportunityforthepipelinetoearnareasonablereturnonitsinvestment.

4. Thesecostsincludeoperatingandmaintenanceexpenses,depreciationexpense,taxesandareasonablereturnonthepipeline'sinvestment.

6TollFee(Tariff)ofGasPipelineTollFee(Tariff)ofGasPipelineCostOfServiceFormula:

Where: COF =CostofserviceFormula O&MExpenses =OperationandMaintenanceExpenses A&GExpenses =AdministrativeandGeneralExpenses DExpenses =DepreciationExpenses IT =IncomeTaxes

7TollFee(Tariff)ofGasPipelineTollFee(Tariff)ofGasPipelinePipelinesAssetBase

GrossPlantistheoriginalcostoftheplant,orfacilities,ownedbythepipeline

ReturnOnCapital(IRR)

ReturnonCapital=AssetBasexWACC

WACC istheweightedaveragecostofcapital

8TollFee(Tariff)ofGasPipelineTollFee(Tariff)ofGasPipeline

OperationandMaintenanceExpenses

AdministrativeandGeneralExpenses

Theseexpensesrepresentthepipeline'scostofoperatingandmaintainingitsutilityplantandequipment,orthecostofrunningthephysicalpipelinesystem.

Theseexpensesincludesalariesandwages,officesupplies,outsideservices,regulatorycommissionexpenses,rentsandgeneralplantmaintenance.

9OpenAccessofGasPipelineRegulationOpenAccessofGasPipelineRegulation1. Pipelineowner(transporters)mustprovideopportunityforany

shipperswithoutdiscriminationtobeableusingthetransporter'spipeline.

2. TransportershallprepareanAccessArrangement,whichisanopenaccessrulesforthepipelineinquestion,thatcontainsthetermsandconditionsthatmustbeobeyedbybothtransporterandshippers.

3. ThemainthingarrangedinanAccessArrangementare:(1)Operatingphilosophyofpipeline,(2)Gasmanagementsystem,(3)Rulesrelatingtothetechnicalaspects,and(4)rulesrelatingtothelegalaspects.

4. InordertoEstablishfairness,beforetheAccessArrangementisapprovedbyBPHMigas,AccessArrangementinquestionmustbediscussedinadvancewithrelevantpartiesforcorrection.

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