Far East: Indonesia

FAR EAST

Tony Sitathan, Contributing Editor, Singapore (Indonesia, Malaysia, Thailand, Viet Nam, Myanmar, Brunei, Cambodia and MTJDA)

Indonesia

Despite all the negativity surrounding Indonesia vis-á-vis its disruptive political policies and economic meltdown under the regime of Abdurrahman Wahid, who was replaced in July, it still ranks highly as a favorable location for oil / gas activities. The Minister of Energy and Mineral Natural Resources now will be responsible for awarding / supervising production sharing contracts (PSCs) with foreign oil companies, instead of Pertamina.

Licensing / Exploration. Indonesia currently produces around 1.46 MMbopd and is the world’s largest LNG exporter. To meet its goal of increasing production, it has stepped up efforts to sign new oil exploration contracts. Seven new PSCs were awarded in May 2000, up from only four in the 1999 bidding round.

The government announced 21 blocks available for exploration as PSCs. Out of these, nine have been made public. They include Bawean I and II, Dongala, Jangeru, Tatalang, Popodi, Tanjung Aru, Taritip blocks and the Nila block in Natuna Sea.

   Gulf Indonesia discovered a second offshore oil block in its Ketapung PSC in East Java, with an estimated 4,450 bopd in Bukit Tua 1. Gulf has a 50% interest in the block and operates for Pertamina as well. Its exploration program has added some 1.1 Tcf gas reserves in the last four years. Chevron and Texaco recently signed a PSC with Pertamina for Kisaran block, north of the operating areas of Caltex Pacific Indonesia in Riau province, Sumatra. The companies expect to mobilize a 3-D seismic crew by August 2001, with exploration drilling to commence in early 2002.

   Unocal Rapak, Pertamina’s business partner, discovered gas and oil at the southern part of its concession in Rapak in East Kalimantan; drilling commenced in March 2001. The Ranggas 1 was drilled to 11,845 ft in 5,300-ft water, encountering 250 ft of gas and 40 ft of oil pay. Gulf Indonesia Resources announced an aggressive, $150 million program; one-third directed at exploration, the rest to development. Of $75 million for oil, 50% will be spent on South Sumatra E&D, 40% on offshore.

   Premier Oil discovered a 250-ft oil reservoir in Pangkah block, East Java. Sidayu 1 in the Kujung Unit 1 limestone, adjacent to Premier’s Ujung Pangkah discovery, is the third exploration well in Pangkah PSC; there are plans for an appraisal, Sidayu 2, in 2001. Pertamina discovered oil / gas fields in West and East Java. A well in Indramayu, West Java, produces about 1,760 bopd and 13.7 MMcfd gas. In East Java, a well in Biora produces close to 8.4 MMcfd gas. It has also discovered hydrocarbons in Tambun B exploration well in Bekasi district, West Java, producing 2,600 bpd crude and 8.59 MMcfd gas. The well is the fourth in the Java region. An oil discovery, Ketapang Barat, in Muara Jambi is estimated to exceed 44,000 bpd.

   Beyond Petroleum (BP) intends to conduct seismic on its East and West Arguni blocks in Irian Jaya in July / August 2001. This will support development of the LNG project in Tangguh, to be onstream 2005 – 2006. ExxonMobil recently announced that its affiliate Mobil Cepu made a major discovery with the Banyu Urip 3. The well is part of the onshore Cepu TAC in Central and East Java provinces, and could produce 30,000 bpd by 2003, increasing to 100,000 bpd thereafter.

Drilling / Development. Unocal intends to drill 8 – 10 wells in a deepwater area in East Kalimantan in West Seno field, which could produce 60,000 bopd and 150 MMcfd gas by 2004. The operator also announced another deepwater discovery in Ranggas 1 in Rapak PSC block; this would be Indonesia’s first deepwater development. PT Caltex Indonesia was forced to pare down its oil production in Riau from 750,000 bopd to 670,000 bpd after it met with some security problems due to village strikes that immobilized its operations in Bekasap region.

   ExxonMobil in March closed several gas fields in Aceh, forcing temporary closure of the PT Arun LNG plant. Before it shut down, it was producing 1.6 Bcfd. Although it is threatened by a rebel group known as the Free Aceh Rebels, or GAM, the company said it would resume at least 25% of operations by end-June.

The deepwater West Seno field in East Kalimantan, in the Makassar Strait, could come on by fourth-quarter 2001. So far, Unocal and ExxonMobil have invested over $700 million, estimating production of oil to peak at 60,000 bopd and 150 MMcfd gas. Also, Belanak field in the West Natuna Sea is being developed by Conoco. It intends to export 250 MMcfd gas to Malaysia through a submarine pipeline. These fields are expected to produce over 160,000 bopd over the next year.

Australian Santos (Sampang), operator of the Sampang PSC offshore in East Java, had a gas blowout on Anggur 1 exploration well. It has P&A’d the well and will assess future drilling on the PSC, located offshore in the Madura Straits, 22 mi east of Surabaya. Kuwait Foreign Petroleum Exploration Co. (Kufpec) has signed a $62 million agreement to design / operate an oil field in eastern Seram Island. Production is expected to commence in first-quarter 2002, at 12,000 to 18,000 bopd.

   Carmanah Resources, a Canadian-based oil / gas concern, has sold its subsidiary GFB Resources (Natuna) that has a 90% interest in the NE Natuna PSC. Beyond Petroleum (BP) intends to build eight liquefaction plants in cooperation with Pertamina in Tangguh gas field in Irian Jaya.

   Gulf Canada Resources has successfully drilled in the South Sumatra region with its Suban 1 well, for a record flowrate of 80 MMcfd, producing 420 bpd condensate.

Production. Foreign oil / gas companies intend to spend $5 billion on E&P for 2001, a rise from $785 million last year. Pertamina forecasts a 10% decline in crude oil production in 2001, to 1.27 MMbpd. The main reason cited is that new-well production has not come onstream. Only 63 exploratory wells were drilled in 2000, compared to the earlier target of 136, due to the conflicts with local communities in the drilling areas. Gas production is also expected to slip in 2001, from 9.3 Bcfd in 2000.

During the first nine months of 2000, Indonesian crude oil production averaged about 1.29 MMbpd. Besides crude, it also produces about 180,000 bpd NGLs and condensate, not part of the OPEC quota, bringing total oil production to around 1.46 MMbpd. The current OPEC quota is 1.385 MMbpd.

   ExxonMobil intends to bring Cepu field onstream by 2003, with six wells producing 23,000 bopd. Production will increase above 100,000 bpd by 2003. Gulf Indonesia doubled production in 1999, reflecting the first full year output from the Corridor Gas Project. Full-year sales volumes averages 47,600 bpd, and 161 MMcfd. Gas production should double in the next three to four years.

   Caltex is undertaking a steam injection project at Duri field in Sumatra. Gulf and Talisman intend to supply an extra 1.1 Tcf/yr to the Duri steam flood, for 19 years, starting mid-2002. The gas from Corridor Block will be delivered through a 340-mi-long pipeline from Grissik. Caltex expects oil production to average 700,000 bpd in 2000. Pertamina signed an agreement with Saudi Arabian company Hi Tech International Group (HTIG) to build an oil refinery in Tuban, East Java. PT Medco Energi International is planning to increase production 20% to 80,000 bopd this year as a result of an increase in Kaji / Semoga field in Rimau block in South Sumatra.

Most of the country’s 100+ Tcf gas reserves are located near Arun field in North Sumatra, around Badak field in East Kalimantan, in smaller fields offshore Java, Kangean block offshore East Java, a number of blocks in Irian Jaya, and the Natuna D-Alpha field (the largest in Southeast Asia). With Malaysian Petronas, Pertamina signed a $6.2 billion gas deal for a 20-year contractual period. Conoco is involved with Sembawang Gas, together with Premier Oil and Gulf Resources. Conoco will supply the gas from Block B, which is also known as Belanak, to the Duyong gas offshore facilities. Block B is owned by Conoco, in partnership with Inpex and Texaco.

   Conoco and partners will spend $3.9 billion to develop Block B in line with the contracts with Petronas and Sembawang. The development includes major production platforms, a 60-mi-long subsea pipeline, an FPSO and an LPG facility. Also this year, Pertamina has an agreement to sell 2.27 Tcf gas to Singapore Power from three PSCs in Sumatra, Jabung Block, the Corridor Block and the South Jambi Block B.

There are 14 additional blocks for Conoco Indonesia. Premier Oil has also been involved in oil / gas exploration in the Natuna Sea. Premier has acquired a majority interest in Natuna Sea Block A PSC, made up of Anoa oil field and gas reserves. In January 1999, SembGas of Singapore signed a contract to purchase 325 MMcfd from the West Natuna Gas Consortium, a JV of Pertamina, Conoco, Premier Oil and Gulf. Conoco further reported a new gas discovery at West Natuna, which raised reserves by about 1 Tcf.

Another major project in the planning stages in BP’s (formerly ARCO’s) Tangguh LNG project in Irian Jaya that has 14 Tcf proven reserves onshore / offshore its Wiriagar and Derau blocks. The project would involve two trains with a combined capacity of 6 MMt/yr. The project is considered risky due to an active separatist movement in Irian Jaya.