CAPITAL: Jakarta
MONETARY UNIT: Rupiah
REFINING CAPACITY: 929,745 b/cd
OIL PRODUCTION: 1.289 million b/d
OIL RESERVES: 4.98 billion bbl
GAS RESERVES: 72.3 tcf
The Asian economic crisis forced the resignation of President Suharto on May 21, 1998, pushing the Indonesian oil industry into turmoil.
Several projects were delayed due to economics. Others were examined for possible corruption.
Pertamina, the Indonesian state oil company, canceled the contracts of 152 projects linked to the family and associates of former President Suharto because of alleged corruption.
Pertamina canceled a $500 million contract with Atlantic Richfield Co. and British Gas Plc for a major LNG project in Irian Jaya. The plant, slated for start-up in 2005, would use gas from ARCO`s huge Wiriagar and Vorwata finds. Pertamina said it was let through a bidding process that improperly included a third firm run by an ally of former President Suharto.
The Energy Ministry canceled a contract for a 320-km products pipeline linking Pertamina refineries in western and central Java to major cities on the island. It said the deal was awarded to Trihastrat, a firm controlled by two of Suharto`s children, without a competitive bidding process.
Mines and Energy Minister Kuntoro Mangkusubroto said that the oil company would either renegotiate the contracts in oil refining and exploration or "take other measures" and that Pertamina would continue to investigate other contracts.
Cancellation of the 152 contracts, following an investigation which began in October, would save the oil company about $65 million, the minister said.
In June 1998, Pertamina terminated all oil trading contracts with companies linked to the Suharto family, which had a monopoly on imports of fuel products. In July, it canceled a contract with a company controlled by Suharto`s youngest son.
Privatization
The new government said it would begin removing oil subsidies in 1999 and open the oil and gas industries to full competition, ending state monopolies on distribution in 2003.
Energy Minister Mangkusubroto said Pertamina would be privatized along with state-run Perum Gas Negara so the government could use its investments in other areas.
Mangkusubroto said his goal was an oil industry that was cost-competitive and technically sophisticated. He said that required Indonesia to open downstream oil and gas sectors to full competition and convert Pertamina to a fully commercial enterprise.
Indonesia also planned to begin a phaseout of fuel subsidies to comply with a requirement the International Monetary Fund made as part of a $43 billion aid package.
The country began reducing the subsidies in May 1998. The resulting jump in gasoline prices sparked bloody street protests that brought down Suharto. The government then reinstated the subsidies.
Potential
Although Indonesia was a mature oil and gas province, Wood Mackenzie Consultants Ltd. said there was still significant potential to prove up further reserves.
It said while oil discoveries had been "relatively uninspiring" in recent years, frontier gas finds had boosted Indonesia`s reserves significantly.
From a total of 28 billion boe of reserves in 1990, the analysis showed that reserves had increased by more than 13 billion boe by January 1998.
"Reserves additions have occurred in both liquids and gas, although gas had been dominant in recent years," the consultancy said. "A significant proportion of the reserves discovered were in frontier areas, in particular Irian Jaya."
More than 60% of the increases in gas reserves during 1990-98 was attributed to discoveries vs. only 15% of oil reserves added through exploratory drilling.
"Reserve creep has played a major role in the replacement of liquids reserves over the period. This was mainly due to the success of the steamflood oil recovery project in Duri field. Reserve creep has also contributed to an increase in oil and gas recoverable reserves on the Sanga Sanga and offshore Mahakam production-sharing contracts."
Among key discoveries, Wood Mackenzie cited the 1994 disclosure by ARCO of its Wiriagar Deep find on the Wiriagar block off Irian Jaya.
The discovery had estimated reserves of 5.1 tcf of gas and 20 million bbl of condensate and was being developed to supply Indonesia`s Tangguh LNG export plan.
Another major find was ARCO`s 1997 Vorwata discovery, with estimated gas reserves of 12 tcf, also earmarked for development under the Tangguh LNG project.
Wood Mackenzie said it was unlikely Indonesia could continue replacing oil reserves, but more gas could be found if there were a market to support exploration.
"In the short term, the lack of a market could have a major impact on exploration. However, on a longer-term basis, the potential should be realized, given that gas was underutilized in the domestic market."
Upstream
Unocal Corp. and Mobil Corp. had a discovery off East Kalimantan. The well, drilled in 2,800 ft of water, produced 2,900 b/d of oil and 3.1 million MMcfgd in tests of two zones totaling 172 ft.
The discovery was in the Makassar Strait, 13 miles northeast of an earlier Mobil-Unocal discovery in deep water. Unocal and Mobil each held a 50%. Unocal was operator.
Mobil completed a $600 million, three-well development program in the Pase-A field in northern Sumatra.
The project added reserves to feed an expansion under way at the Arun LNG complex, which exported 12.5 million metric tons/year of LNG to Japan and South Korea. The Arun project, including the development of North Sumatra Offshore A field, was scheduled to come on line in mid-1999.
Gulf Canada started production from two discoveries off Sumatra in the Kakap production-sharing agreement area. The KRA find was due to produce 5,000 b/d and Jangkar field 6,000 b/d.
Unocal Indonesia Ltd.`s West Seno 2 deepwater discovery well in the Kutei basin off Indonesia flowed 10,069 b/d of 39°-gravity oil and 9.5 MMcfd of gas through a 1-1/2-in. choke. The hole was drilled in 2,800 ft of water. Unocal and Mobil both had 50%.
Amoseas Indonesia Inc. was building a cogeneration power plant at Duri field in Sumatra. The plant would produce 305 MW of electricity and steam, which would be used for enhanced oil recovery. Start-up was expected in late 2000.
PGN completed a 540-km, 300 MMcfgd pipeline from the Corridor gas project in South Sumatra to Duri field. The $590 million line would fuel a steamflood project in the 290,000 b/d Duri field, which had been using 48,000 b/d of oil.
Tangguh
BG Exploration & Production Ltd. and ARCO Indonesia Inc. claimed to have more than doubled proven gas reserves earmarked to supply Indonesia`s planned Tangguh LNG project.
The operators said a 13-well, 12-month appraisal drilling program on the offshore Muturi, Berau, and Wiriagar blocks raised estimates of gas reserves to 14.4 tcf proved and 18.3 tcf proved plus probable.
BG said Pertamina planned to build a two-train, 6 million metric ton/year LNG plant in Irian Jaya to supply the traditional LNG markets of Japan, South Korea, and Taiwan as well as emerging markets in the Asia-Pacific region.
It said the reserves would support three trains, each of 3-3.5 million tons/year of LNG, for 25 years. Plans called for first exports in 2003-04.
BG expected Tangguh to cost $3 billion and had spent $87 million for exploration and appraisal of the Vorwata discovery on the Muturi block.
DeGolyer & MacNaughton assessed the reserves as Berau, 10.3 tcf proved and 12.4 tcf proved plus probable; Muturi, 3.1 tcf proved and 3.8 tcf proved plus probable; and Wiriagar, 1 tcf proved and 2.1 tcf proved plus probable.
Berau block partners were operator ARCO 48%, Occidental Berau of Indonesia Inc. 22.856%, Nippon Oil Exploration (Berau) Ltd. 17.144%, and KG Berau Petroleum Ltd. 12%.
The Muturi block was owned 52.63% by operator BG and 47.37% by the Cairn Ltd. unit of Genting Bhd. Wiriagar interest holders were operator ARCO 80% and KG Wiriagar Petroleum Ltd. 20%.
West Natuna
Political and economic disarray in Indonesia was expected to delay the proposed $8 billion West Natuna gas project.
The project involved developing gas fields in the West Natuna Sea off Indonesia, laying a 396-mile gas pipeline to Singapore, and selling 325 MMcfd of gas to Singapore for 22 years beginning in 2001.
Conoco led the field development group, Sembawang the Singapore group.
The Conoco-led group, including Gulf Resources (Kakap) Ltd. (Kakap Block) and Premier Oil Natuna Sea Ltd. (Block A), was preparing for a $1 billion development of gas fields in the West Natuna Sea.
Plans called for laying a 640-km pipeline, including 463 km of 30-in. pipe, 124 km of 24-in. pipe, 50 km of 18-in. pipe, and 11 km of 16-in. pipe.
About 160 km of the pipeline would extend from the West Natuna fields to a central gathering point. A separate 470 km of pipeline would take the gas from there to Singapore`s territorial waters.
Sembgas was responsible for financing an $80 million, 10-km pipeline in Singapore`s waters to move the gas on to Jurong Island to be used as feedstock for the island`s massive petrochemical complex under development.
A pipeline extension would also transport gas to Pulau Sakra in Singapore.
Processing activity
Royal Dutch/Shell said a Dec. 25, 1998, explosion at its Bintulu gas-to-liquids plant in Sarawak was not caused by the plant`s proprietary technology.
Twelve people were hurt, none seriously. The plant, one of only two commercially successful GTL plants in the world, was expected to be down for months.
The explosion occurred in the air separation unit, which supplied oxygen for the production of synthesis gas for the middle distillate synthesis process. The units had been working normally before the explosion.
Shell said the probable cause was an incipient combustion event in the air separation unit.
Japan`s Sumitomo Corp. had decided to delay a 120 billion yen petrochemical plant in West Java 1 year to 2001 because of difficulties in raising financing.
Indonesia`s Salim group had a 40% share of the project to produce 900,000 metric tons/year of ethylene and 250,000 tons/year of polyethylene resin.
British Petroleum Co. Plc had 35%, while the four Japanese firms-Sumitomo, Mitsui & Co Ltd., Nichimen Corp. and Tomen Corp.-had 15%. Indonesian firms held the rest.
