MedcoEnergi

Capex

Future Plans

The main drivers behind MedcoEnergi’s future development and growth rest upon the completion, within the next 3-5 years, of seven key development projects in its current portfolio. The seven key development projects include three gas monetization projects, one in Block A in Aceh Province, one in Lematang in South Sumatra and one in the Senoro-Toili blocks in Central Sulawesi, an Enhanced Oil Recovery (EOR) project in the Rimau block in South Sumatra, the development of oil and associated gas in Block 47 in Libya, the construction of the Sarulla geothermal project in North Sumatra and the operation of an ethanol plant in Lampung.

In 2008, MedcoEnergi intends to complete a number of asset optimization programs. These programs involve the sale of a number domestic E&P interests, a strategic minority divestment in Medco Power Indonesia, a minority and/or full divestment in Apexindo, a strategic minority divestment in Medco Ethanol and a minority divestment in MedcoEnergi Global.

MedcoEnergi believes these programs will strengthen the Company’s financial position and operations and improve its risk profile and corporate governance in 2008 and beyond. The detailed objectives of these programs are outlined in the Corporate Growth section and in the respective section on each of its business units.

MedcoEnergi’s strategy to utilize limited or non-recourse financing at the project level and limit corporate borrowing coupled with proceeds
from the asset optimization programs should favorably impact financing needs and costs in 2008 and beyond.

The asset optimization programs will also allow key human resources to be redeployed to the Company’s seven key development projects which underpin its future growth.

MedcoEnergi has seven key development projects which will further develop the Company and create substantial shareholder value over the next 5 years. These are Senoro LNG, Rimau EOR, Block A and, Lematang gas, Sarulla geothermal, Block 47 in Libya and ethanol in Lampung.

In 2008, the Company plans to achieve the following milestones related to these seven key development projects:

• finalize a Gas Sales Agreement and award the Engineering, Procurement and Construction Contract on the Senoro LNG project which will allow the recognition of significant gas reserves;
• finalize the PSC extension for Block A gas development which will allow the recognition of significant gas reserves;
• complete the Rimau EOR pilot project which will provide a further basis to determine the additional reserves which could be recovered;
• execute the Lematang gas project development to ensure first semester 2009 operation;
• reach a final investment decision for the Sarulla geothermal project which will provide certainty to investors on value;
• advance the Libya discovery to a stage which will provide a clear picture to investors as to the size of reserves associated with this discovery and future cashflows; and
• complete construction and commercially operate the Company’s ethanol plant by second semester 2008.

Production

The Company’s average lifting rate for 2007 was 70.5 MBOEPD (2006: 78.1 MBOEPD). Average realized prices of USD 72.5 per barrel for oil and USD 3.2 per MMBTU for gas were achieved over the year (2006: USD 64.0 per barrel for oil and USD 2.8 per MMBTU for gas).

In the first nine months of 2006, Medco's oil and gas production had reached 78,170 barrels of oil equivalent per day - this figure is expected to edge up 78,200 by the end of 2006. In 2005, the company produced 81,860 barrels of oil equivalent per day.

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