CAPITAL: JAKARTA
MONETARY UNIT: RUPIAH
REFINING CAPACITY: 992,745 B/CD
OIL PRODUCTION: 1,298,800 B/D
OIL RESERVES: 4.97 BILLION BBL
GAS RESERVES: 72.2 TCF
Indonesian President Abdurrahman Wahid installed a board of commissioners to oversee the restructuring of state oil company Pertamina, including the appointment of a president and board of directors.
Pertamina Pres. Martiono Hadianto noted his replacement would have to prepare Pertamina for free trade in Southeast Asia, to be implemented by the Association of Southeast Asian Nations (ASEAN) in 2003.
Abdurrahman made several major changes among top executives of state-owned enterprises in an effort to improve their financial performance and cleanse the firms of allegations of corruption, collusion, and nepotism associated with the regime of former Indonesian President Suharto, who resigned in May 1998.
Meanwhile, Indonesian Energy and Mines Minister Kuntoro Mangkusubroto was named president of the state electricity company, PLN, in a bid to resolve issues such as the government's dispute with independent power producers (IPPs). Kuntoro said all existing contracts would be honored. His biggest challenge was expected to be renegotiating contract terms with the IPPs.
He replaced Adhi Satriya, who resigned in 2000 in protest over President Wahid's decision to drop a case against PT Paiton Energy, a US-based IPP.
Indonesia had to scramble to import gasoline and kerosine after some refinery shutdowns. The shortage resulted from problems at the Balongan refinery, which supplied 80% of Jakarta's demand. The refinery in West Java was undergoing major repairs.
About the same time, an explosion at Indonesia's 240,000 b/d Balikpapan refinery further tightened fuel supplies. The blast damaged the refinery's catalytic reformer and LPG facilities.
The explosion came just days after a Pertamina storage facility in the northern Sumatra port of Belawan was damaged.
Gas hopes
Indonesia's gas reserves potentially are much larger than its oil reserves, and gas will have an increasing role in exports as well as in domestic consumption.
Problems affecting gas development were separatist movements in the resource-rich provinces, the unclear fate of the new oil and gas law, and petroleum product price subsidies.
There were secession movements in the provinces of Aceh, Riau, East Kalimantan, and Papua (formerly Irian Jaya). All LNG supplies came from Aceh and East Kalimantan. And, in addition to producing almost half of Indonesia's crude, Riau includes the Natuna Islands, which have the largest gas reserves in the country. Papua had the recently discovered Tangguh gas field. Combined, all four provinces contain more than 80% of the country's gas reserves.
The national government offered the Riau government a participation in the development of the Pakanbaru oil field after expiration in 2001 of the production-sharing contract held by Caltex Petroleum Corp.
One of the major hindrances to the use of gas in the domestic market was the extremely low price of petroleum products, most notably middle distillates. The government had not raised prices, as planned, due to political opposition and public demonstrations.
Following the suggestions of the Indonesian Petroleum Association, the government agreed to lower its royalties on gas while maintaining the net take of production-sharing contractors. Consequently, the price of gas to domestic consumers was expected to drop by as much as 59¢/MMbtu.
Exploration
The Indonesian government was preparing to issue a tender for 21 exploration blocks.
Pertamina had issued concessions in the past, but the government assumed that function in 2000.
The Energy and Mineral Resources Ministry said it would work with Pertamina in calling the tenders, which would be similar to those handled by the state agency since the 1960s.
The government planned to offer six blocks in the Arafura Sea, six in the Makassar Straits, two in the Natuna Sea, two in the Seram Sea, two in East Kalimantan, two in South Sulawesi, and one in central Kalimantan on Borneo Island.
Earlier, Indonesia signed exploration and production contracts (PSCs) with seven firms. Pertamina signed a PSC with Australia's Energy Equity Pty. Ltd. for a block in Sulawesi's offshore Bone Bay. Kalrez Petroleum of Australia signed a PSC for Bula block in the Maluku Sea. And Kuwait's Kufpec Indonesia Ltd. was awarded the Seram block in the same area.
Pertamina also awarded a technical assistance contract (TAC) to Energy Equity for Gajah Besar field in South Sumatra. Meanwhile, local firm PT Indama Putera Kayapratama was awarded South Sumatera Kaya field under a TAC, while PT Binatek Reka Kruh was granted South Sumatra's Kruh field. PT Wahana Sad Karya and its Taiwanese partner, First Union Resources, received Jatirarangon field in West Java.
TACs are technology-driven contracts designed to revive production in aging fields.
Discoveries
Premier Oil PLC and partners had an oil discovery on Northwest Natuna Block 1 in the Natuna Sea off Indonesia.
The Ande Ande Lumut-1 was drilled to 4,186 ft. It logged oil pay and recovered oil samples from four sands of the Gabus formation, one of the main producing zones in the West Natuna basin.
The well was in the Northwest Natuna Block 1 PSC, 60 km north of partner Gulf Resources Ltd.'s Kakap PSC production facilities. It was the first well drilled on the block and the first of seven oil exploration prospects drilled.
Working interests in the Block 1 PSC were operator Premier, 50%; Gulf Resources, 30%; and Dana Petroleum PLC, 20%. Gulf Canada Resources Ltd., Calgary, held a 72% interest in Jakarta-based Gulf Resources.
Unocal Corp. had two deepwater gas discoveries in its Ganal PSC off East Kalimantan. The company said its Gula and Gada discoveries could hold up to 2-3 tcf of gas but more drilling was needed.
About 35 miles north of the Gendalo discovery, Gula No. 1 was drilled to 16,182 ft in 6,051 ft of water. It was 8 miles north of the Gada discovery, where Gada No. 2 was drilled to a depth of 15,223 ft in 6,224 ft of water. The well encountered 70 ft of net gas pay.
Unocal said the discoveries confirmed that the Central Delta play "contains world-class gas resources." The company had drilled four straight discoveries in the Central Delta trend, with several large prospects remaining undrilled.
Unocal held a 100% working interests in East Kalimantan PSC; 80% in the Ganal and Sesulu PSCs, where Lasmo PLC held 20%; 60% in the Rapak PSC, where ExxonMobil Corp. held 30% and Lasmo 10%; and 50% in the Makassar Strait PSC, where ExxonMobil held 50%. Through various subsidiaries, Unocal was operator of all of them.
Gulf Indonesia Resources Ltd. reported its Suban-4 delineation well tested at the highest flow it had gauged in Indonesia, 80 MMcfd of gas and 420 b/d of condensate.
Production was from limestone, sandstone, and pre-Tertiary granite zones through a 1.5-in. choke with tubing pressure of 2,000 psi. Suban is on the Corridor Block PSA in South Sumatra.
Gulf Indonesia said the gas contained 5.5% carbon dioxide and would require very little processing. Development costs could be $1/boe or lower.
About 1.1 tcf of gas from Suban field would be dedicated to the Caltex II gas sales contract.
The company held a 54% working interest in the Corridor Block PSC and was contract operator for Pertamina. Partners were Talisman (Corridor) Ltd., with 36%, and Pertamina, with 10%.
Mahoni, Peciko fields
Unocal began producing 4,700 b/d of crude from Mahoni field off Borneo Island. Production started from a single well in Balikpapan Bay, off East Kalimantan. Unocal planned to bring three more wells on stream.
Unocal was developing the field under Indonesia's incentive program for the development of marginal fields.
Total Indonesia completed Phase 1 of the giant Peciko gas field development off East Kalimantan. It said the project was the first of its kind to develop an infrastructure for a large-scale, integrated field development project that covers the production chain from wellhead to processing units and then to an LNG plant.
Peciko development warranted an eighth liquefaction train at Indonesia's giant Bontang LNG complex. The eighth train came on stream in November 1999, 1 month before Peciko start-up, to supply LNG contracts with Japan, South Korea, and Taiwan that extend to 2010.
Discovered in 1991, Peciko was launched in 1996 to boost Total Indonesia's gas production capacity to meet LNG contracts. It is in 30-50 m of water in the Makassar Straits 60 km northeast of Balikpapan.
Of all the fields in the Mahakam River delta, Peciko field was the only one with both structural and stratigraphic gas traps. Well productivity averaged 80 MMcfd.
Field development initially involved two offshore platforms from which 16 wells were drilled. Full development would entail ultimately a dozen unmanned platforms.
Gas and condensate were shipped via pipeline to the onshore Senipah Peciko Process Area, integrated with the Senipah oil export terminal.
After processing, the gas is sent through a 42-in., 86-km gas pipeline to the Bontang LNG plant.
The first phase would produce up to 800 MMcfd and 16,000 b/d of condensate. A second development stage, to be completed by yearend 2001, would involve installing a third platform and nine wells, bringing production to 1 bcfd.
Duri flood
Gulf Indonesia Resources Ltd. and partners were to sell additional gas from their Corridor Block PSC in south Sumatra to fuel a steamflood at PT Caltex Pacific Indonesia's Duri field in central Sumatra.
The deal called for 1.1 tcf of gas to be delivered over 20 years and exchanged for Duri oil. Gas deliveries were expected to begin at 90 MMcfd during 2002, rising to 180 MMcfd by mid-2003.
The gas would be delivered after the installation of compression facilities on the existing 544-km Grissik-to-Duri pipeline owned and operated by PT Perusahaan Gas Negara, the state gas distribution and transmission company.
The contract was in addition to the 300 MMcfd being delivered to the project from the Corridor block. Contract quantities under that deal with Caltex would decline to 245 MMcfd in mid-2003. Combined gas deliveries under both contracts were expected to be 425 MMcfd by 2003.
Gulf Indonesia, a 72% subsidiary of Gulf Canada Resources Ltd., held a 54% interest in the Corridor Block PSC and was contract operator for Pertamina. Partners were Talisman (Corridor) Ltd., a wholly owned subsidiary of Talisman Energy Inc., with 36%, and Pertamina with 10%.
LNG
Pertamina reached a deal to supply Indian Oil Co. (IOC) with 1.8 million tonnes/year of LNG from the Bontang LNG complex on the east coast of Borneo.
Gas demand was growing rapidly in India, which imported 70% of the oil it needed and was looking for alternate energy sources.
The IOC-Pertamina deal would be effective by 2002-03, when India was to start operating its large power and industrial plants fueled on gas imported as LNG.
Aiming to exploit Indonesia's estimated 160.8 tcf of potential gas reserves, Pertamina said it also was preparing to bid for the first LNG supply contract to China.
While the Badak plant at Bontang produced nearly 30 million tonnes/year of LNG, Pertamina was planning to develop a third LNG processing center specifically to export LNG to China. This $1.5 billion complex would be built at Tangguh in less-developed Irian Jaya, or at West Papua.
Indonesia's first LNG plant at Arun in northern Sumatra was running out of gas reserves. Options under consideration were to bring gas from southern Sumatra in a pipeline or turn Arun into an LNG storage center.
Indonesia exported 26.35 million tonnes of LNG in 2000 to Japan, South Korea, and Taiwan.
