Switching from Kerosene to LP Gas :Switching from Kerosene to LP Gas :Lessons from Indonesia

February 2010February 2010Marketing & Trading DirectorateMarketing & Trading DirectoratePT. Pertamina (PT. Pertamina (PerseroPersero))

WHAT THE PEOPLE FEEL …

“I can cook faster now, especially in the afternoon when I have to work. I have to go as 5.30 A.M. Previously, I never have time to prepare breakfast for my kids. But since I can cook faster. I can since I can cook faster. I can serve them breakfast although its just tempe”, said Nining, one of Conversion Package Receiver.

TILL THE END OF 2009, KEROSENE TO LPG CONVERSION PROGRAM HAS BEEN COVERING 15 PROVINCES ALL OVER INDONESIA

Converted in 2007-2008

Converted in 2009

To be converted in 2010

Will not be converted

THE KEY ACHIEVEMENT

# Households & SME Converted

44 out of 54 Millions

Replacement Value :

Kerosene vs. LPG

24,4

54,0

3,9

15,19,3

2007 08 09 2010 Total

Will be Converted

Converted

6.1325.384

2.973

Kerosene

LPG

1 liter Kero replaced by 0.34 kg LPG

8442.098

102

2.973

304

1.76754721

2010 Target08 20102007 09

State’s Gross Subsidy Saving

Up to 2.6 Bio USD

Nett Saving

Conversion Cost

Gross Saving

1 USD = Rp. 9,324

GOVERNMENT SUBSIDY SAVING REACH 1.5 BILLION USD

Remarks 2007 2008 20092010Feb

2010 Target

Achievement

Initial Packages Distributed(Million Packages)

3.976 15.078 24.355 0.526 14.927 43.936

LPG Volume LPG(Million Ton)

0.033 0.592 1.840 0.304 3.018 2.770

Kerosene Withdrawal(Million KL)

0.102 2.098 5.384 0.844 7.334 8.429

Gross Subsidy Saving(Million USD)

64.35 981.34 1,371.89 163.66 815.25 2,581.23

Initial Packages Cost(Million USD)

85.80 388.25 629.78 12.11 343.32 1,115.93

Nett Subsidy Saving(Million USD)

(21.45) 593.09 742.11 151.55 471.93 1,465.30

1 USD = Rp. 9,324, 1 Liter of Kerosene ~ 0.4 Kg LPG

The remaining kerosene volume pushed up the ground work for only about 4.6 million KL is much smaller than 2009 Government target for 5.8 million KL. While the volume of LPG PSO reached 1.7 million MT of the 2009 Government target for 1.6 million MT. So that it can be concluded that the conversion program run faster with a very significant subsidy savings of approximately 2.6 billion USD.

336 335 376

390 410

438 432 441 508

600

700

800

900

1,000

Govt. Regulation

Issued

Kerosene Withdrawal Volume (Thousand KL/month)

Kerosene Sales Volume(Thousand KL/month)

Dry DKI Jakarta

16 May 08

Dry Jabodetabek

17 Aug 08

Dry West Java

30 April 09

KEROSENE SALES VOLUME DROP FROM 830,000 KL/MONTH TO 270,000 KL/MONTH

Initiation Period

Conversion Start

Demonstration arose

everywhere

Dry Jogjakarta

10 Nov 08

837 792

499 496

455 441 421

393 399

390 363 339 323

281

438 432 441 468 492

508 550 561

93 101 99 112 121 131 137

153 163 170 188 181

205

270

-

100

200

300

400

500

No

v-0

6

De

c-06

Jan

-07

Fe

b-0

7

Ma

r-07

Ap

r-07

Ma

y-0

7

Jun

-07

Jul-0

7

Au

g-0

7

Se

p-0

7

Oct-0

7

No

v-0

7

De

c-07

Jan

-08

Fe

b-0

8

Ma

r-08

Ap

r-08

Ma

y-0

8

Jun

-08

Jul-0

8

Au

g-0

8

Se

p-0

8

Oct-0

8

No

v-0

8

De

c-08

Jan

-09

Fe

b-0

9

Ma

r-09

Ap

r-09

Ma

y-0

9

Jun

-09

Jul-0

9

Au

g-0

9

Se

p-0

9

Oct-0

9

No

v-0

9

De

c-09

Volume decrease

5.04 M KL/year

Sales LPG PSO(Thousand MT/month)

Volume LPG

1.76 M MT/year

(Thousand KL/month)

2009

achievement

InfrastructurePre Conversion

< 2007

Conversion Period

2008 - 2010

Storage •On shore tank: 136,000 MT

•Thruput: 3,700 MT/day

•On shore tank: 167,000 MT

•Floating storage: 120,000 MT

•Thruput: 9,000 MT/day

LPG Vessels •6 LPG Pressurized vessels

@1,800 MT

•3 VLGC @ 44,000 MT

•5 LPG semi-refrigerated vessels @ 11,400 MT

•6 LPG Pressurized vessels @ 1,800 MT

Filling Station •66 stations (12 kg)

•Capacity ∼ 6,000 MT

•202 stations already operated

•11 Pertamina LPG Depo

LPG INFRASTRUCTURE GROWTH RAPIDLY DURING CONVERSION PERIOD WITH AVERAGE STOCKPILE ABOVE 15 D AYS

1

2

3•Capacity ∼ 6,000 MT •11 Pertamina LPG Depo

•15 COCO Stations

•176 Private Stations

•499 permits has been issued.

•Capacity ~ 10,080 MT

Skid Tank •5,000 MT/day •9,000 MT/day.4

NOWADAYS CONVERSION PROGRAM DRIVE INVESTMENT UPTO 1 .9 BILLION USD AND ABSORB MORETHAN 28 THOUSAND LABORSIN THE FUTURE IT WILL DRIVE INVESTMENT UPTO 2.7 BILLION USD AND ABSORB MORETHAN 38 THOUSAND LABORS

*) Investment in million USD

1,545.138,206

PresentInvestment

Future Investment

Present Labor

Future Labor

Private Sectors Government

941.3

961.61,184.1

28,176

38,206

THE KEROSENE TO LPG CONVERSION PROGRAM TAKE BENEFIT TO WHOLE NATIONS

State’s GrossSubsidy SavingUp to 2.6 Bio

# New Investor529

Energy Cost Saving)42%

# of Trees saved **)46.6 Mio

Indonesia Government

BusinessEnvironment

End Users

EnvironmentCO2 Reduction

Up to 2.6 Bio USD

Nett Saving1.5 Bio USD

529

Value of Investment

1.9 Bio USD

42%(4 USD/Month)

% of program Supporter *)

94.1 %

46.6 Mio

# of Cars taken Equivalent **)

2.8 Mio

*) Based on Internal Survey. November 2009**) Modified from GreenworksAsia Report on Emission Reduction from Conversion Program, November 2008

KEY SUCCESS FACTORS

1. Strong Government Policy

2. Strong & Effective Implementation

3. Readiness of Logistic & Infrastructures

LPG Producers

Terminal LPG Refrigerated• Land

Terminal (Tg Uban)

• Floating Storage Offloading (FSO)

LPG Pressurized Depot

Filling Station

AgentSub Agent

Retailer

End User

RetesterWorkshop

LPG Bottle Producers

IMPACT CONVERSION TO THE LPG DEMAND-SUPPLY

Demand - Supply Real 2009 2010 2011

A Demand

PSO (3 kg) 1,839,617 3,001,528 3,484,159

non PSO 1,135,991 1,267,435 1,305,424

Total Demand 2,975,608 4,268,963 4,789,584

(MT)

B Supply

Pertamina’s Refinery 770,713 957,040 907,024

Pertamina’s Upstream 51,093 47,000 47,000

Other Domestic Producers 1,213,179 1,255.680 1,292,085

Import *) 1,091,483 2,009,243 2,543,474

Total Supply 3,126,468 4,268,963 4,789,584

*) Import volume will decrease as production from domestic producers increase.

LPG BUSINESS GROWTH VS INFRASTRUCTURE

InfrastructureInfrastructurePre ConversionPre Conversion(Before 2007)(Before 2007)

Conversion PeriodeConversion Periode(2007(2007--2010)2010)

Post ConversionPost Conversion(After 2010)(After 2010)

Conversion Periode

/hari

2007 2008 2009

Pre Conversion

PostConversion

Storage * 136,000 Mton 267,000 Mton 345,000 Mton

Vessel6 Vessels

Pressurized @ 1,800 Mton

5 VesselsSemiref @ 10,000 MT

6 VesselsPressurized @ 1,800 Mton

3 FSO VesselsRefrigerated @ 45.000 MT

6-8 VesselsSemiref @ 10,000 MT

10 VesselsPressurized @ 1,800 Mton

1 FSO VesselsRefrigerated @ 45,000 MT

Filling Station Filling Capacity

5,000 Mton/day 9,000 Mton/day 17,000 Mton/day

Skid Tank Transport Capacity

5,000 Mton 9,000 Mton/day 17,000 Mton/day

1

2

3

4

* As per Government’s Requirement : LPG Stockpile 7.5 days for NPSO. 11 days for PSO

#3. REAL BENEFIT FOR END USERS *)

*) Based on Internal Survey. November 2009

THANK YOUTHANK YOUTerima Kasih

HOUSEHOLD COOKING COST SAVING

Product Unit PriceConsumption

volume for 8 days

Consumption cost for 8 days

Consumption Cost for 1 month

(30 days)

Kerosene27 Cent

USD/Liter8 Liter 2.15 USD 8.04 USD

LPG 3 Kg46 Cents USD/Kg

3 Kg 1.37 USD 5.13 USDUSD/Kg

Saving 78 Cents USD 2.92 USD

Notes :o 1 USD = Rp. 9,324o 1 Liter of Kerosene ~ 0.4 Kg LPG

GOVERNMENT SUBSIDY SAVING

Remark 2007 2008 20092010Feb

2010 Target

Total Achievement

Initial Packages Distributed(Million Packages)

3.976 15.078 24.355 0.526 14.927 43.936

LPG Volume LPG(Million Ton)

0.033 0.592 1.840 0.304 3.018 2.770

Kerosene Withdrawal(Million KL)

0.102 2.098 5.384 0.844 7.334 8.429 (Million KL)

0.102 2.098 5.384 0.844 7.334 8.429

Gross Subsidy Saving(Million USD)

64.35 981.34 1,371.89 163.66 815.25 2,581.23

Initial Packages Cost(Million USD)

85.80 388.25 629.78 12.11 343.32 1,115.93

Nett Subsidy Saving(Million USD)

(21.45) 593.09 742.11 151.55 471.93 1,465.30

Notes :o 1 USD = Rp. 9,324o 1 Liter of Kerosene ~ 0.4 Kg LPG