Indonesia is the most populous country in Southeast Asia and the fourth most populous in the world. The onetime OPEC member is trying to meet growing domestic energy consumption because of inadequate infrastructure and a complex regulatory environment.
Indonesia’s total primary energy consumption grew by over 50% between 2001 and 2010. Petroleum continues to account for the most significant, though decreasing, share of Indonesia's energy mix.
International oil companies dominate Indonesia upstream. State-owned PT Pertamina, however, must balance its needs as a corporation against its mandate as a national oil company to meet domestic demand. IOCs in Indonesia's upstream oil sector include, Chevron, Total, ConocoPhillips, Exxon, and BP. Other national oil companies such as the China National Offshore Oil Corp. and South Korea’s KNOC also have significant upstream stakes.
Indonesia has 3.9 Bbbl of proven oil reserves as of January 2012. Aging infrastructure and fields suggest the country will struggle to meet production targets in the short term. Total oil production continued to decline from a high of nearly 1.7 MMb/d in 1991 to just under 1.0 MMb/d in 2011.
Despite the numerous industry environment and regulatory changes, investment in the oil and gas industry in Indonesia reached $12.8 billion in 2011. In 2011 more than 30 new oil and gas contracts were entered.
Indonesia is ranked eighth in world gas production, with proven reserves of 108 tcf in 2010. This ranks 11th largest in the world and the largest in the Asia/Pacific region. Indonesia’s gas industry is also being transformed by LNG markets, new pipeline exports, and increasing domestic gas demand.
The government hopes to encourage increased exploration with incentives such as encouragement of 3D seismic surveys focused on developing oil reserves in Indonesia’s frontier and deepwater areas.
Indonesia plans to offer for bids 23 new oil and gas blocks yet this year. Evita Legowo, director-general of oil and gas, Ministry of Energy and Minerals Resources, said some of the blocks will be offered for open bidding and others offered directly. These blocks include offshore Timor Sea and offshore Java island.
Total has signed production sharing contracts with the government covering the Telen and Bengkulu I-Mentawai exploration blocks. Bengkulu I – Mentawai is in the offshore Bengkulu basin of the province of Bengkulu, in southwest of Sumatra. It covers 8,034 sq. km (3,102 sq. mi) with water depths from 400 to 1,000 m (1,312 to 3,281 ft). Telen is in the offshore Kutei basin of the province of East Kalimantan. It covers 2,369 sq. km (915 sq. mi) with water depths of 300 1,000 m (984 to 3,281 ft) and is adjacent to the country’s most prolific gas producing offshore Mahakam block operated by Total. The exploration program envisages, for the first three years, a 3D-seismic study to be carried out on the Bengkulu I - Mentawai block and an exploration well to be drilled on the Telen block.
Blue Sky Langsa Ltd. has acquired the working interest in Langsa field offshore Indonesia held by Blue Dolphin Energy Co. The field is in the North Sumatra basin is about 100 km east of the Arun field in 300 ft. of water. Blue Sky is the lease operator. Blue Sky says studies indicate proved reserves are 4.7 MMbbl and the company plans to drill an additional well, extend a horizontal leg for L1/L2/L4, and return to put well H3 on production. If approved by Pertamina, production will go to the existing FPSO in North Sumatra waters.
Salamander Energy spudded an exploratory well on the South East Sangatta PSC offshore Indonesia using the Ocean General rig. North Kendang-1 will be drilled to TVDSS of about 2,600 m (8,530 ft) in 465 m (1,525 ft) water depth. It targets oil and gas pays in a series of stacked Pliocene/Upper Miocene sandstone reservoirs. The company estimates prospective recoverable resources at 91 MMbbl and 770 bcf (22 bcm). On completion, the rig will return to Salamander’s Bontang PSC to drill the Bedug prospect, 4 km (2.5 mi) east and 500 m (1,640 ft) updip of the recent South Kecapi oil and gas discovery.
Lundin Petroleum says exploration drilling should start on the Baronang block of the Natuna Sea offshore Indonesia. Following a 950-sq km (367-sq mi) 3D seismic acquisition program on the Gurita block last year, an exploration well will be drilled. Elsewhere in this region, Lundin expects to complete a 3D seismic survey over the South Sokang block.
With operators and national oil companies are embarking on their exploration plans, there is also significant field development already underway offshore Indonesia. In August of last year, BP Migas approved 12 development plans that represent $830 million in total investments, according to Dow Jones.
Two of the biggest projects are offshore in Kepodang gas field and Sapi field. Kepodang, in the Muriah block, will see an estimated $545 million of the total and targets 2Q 2015. Peak production is estimated at 116 MMcf/d of gas.
Spending in Sapi will be for Phase 2 of the Chevron-operated field. With spending of $158 million, it is expected online this year. Peak production is estimated at 266 b/d of oil, 7.3 MMcf/d of gas, and 153 MMcf/d of liquefied petroleum gas.
BP Migas, the state upstream oil and gas regulatory agency in Indonesia, is said to be reviewing 22 additional development plans, but with no schedule for the approvals.
Elsewhere in the region, McDermott International has won a contract from Petronas affiliate PC Muriah Ltd. to develop offshore surface facilities and an infield flowline for the Kepodang field off Indonesia. The contract covers the procurement, construction, installation and commissioning of a 5,802-metric ton (6,396-ton) central processing platform and a 2.7-km (1.7-mi), 10-in. diameter flowline, and installation of remote control facilities at the onshore receiving site.
Procurement engineering is underway, McDermott said. Fabrication will take place at the company’s Batam yard in Indonesia. Hookup and commissioning are scheduled to be complete 4Q 2014.
Petronas in 2005 signed a gas sales agreement with Indonesian power company Perusahaan Listrik Negara (PLN) to supply up to 145MMcfd of gas from the Kepodang field in the Petronas-operated Muriah block. Kepodang is in water depths of up to 70 m (230 ft) about 180 km (112 mi) northeast of Semarang, Central Java.
Petronas acquired the Muriah block from BP in 2004 and has reportedly committed $545 million to develop Kepodang.
INPEX has also been active offshore Indonesia, and recently awarded several field development contracts for its Abadi LNG project. The company recently awarded FLNG front-end engineering design contracts to PT JGC Indonesia and to PT Saipem Indonesia.
The two companies will prepare the FEED in parallel under a design competition with the EPC contract likely going to the company with the preferred design. The project schedule and final investment decision will be made based on the FEED results.
Stage 1 of the project calls for liquefaction capacity of 2.5 MM metric tons/year and 8,400 b/d of condensate. Participants in the project are operator INPEX Masela, 60%; Shell Upstream Overseas Services, 30%; and PT EMP Energi Indonesia, 10%.
INPEX has also contracted Wood Group Kenny to perform the front-end engineering and design for the Abadi LNG project offshore Indonesia. The $8.6-million contract covers the major subsea production facilities for the project.
First phase production is set at 2.5 MM metric tons/yr (2.76 MM tons/yr) of LNG produced through an FLNG plant on the field in Masela block, Arafura Sea, Indonesia.
Wood Group Kenny in Indonesia, with support from Perth and Melbourne, Australia, will address the subsea, umbilical, riser, and flowline systems. The FLNG itself will be part of the separate FEED contract (noted above).
Premier Oil is also active offshore Indonesia. Recently it was reported that construction upgrades have begin on the Anoa platform on Natuna Sea block A offshore Indonesia. According to Premier, prefabricated compression modules are currently being installed on the platform. The second phase of offshore construction will take place next summer. The entire project, designed to harness about 200 bcf (5.7 bcm) of undeveloped gas reserves and increase the capacity of the Anoa facility to 200 BBtud, will be completed in the second half of 2013.
Elsewhere in the region, partner and government sanction for the offshore Pelikan and Naga projects came through during the first half of 2012. An engineering, procurement, construction and installation (EPCI) contract was issued in May for two wellhead platforms and connecting pipelines, and detailed engineering and procurement are both under way. Fabrication of the jacket and topsides has started at the SMOE yard in Batam, and tenders are out for a rig to drill three development wells on each of the fields. First gas from Pelikan and Naga, estimated to hold combined reserves of 150 bcf, is targeted for 2014.
Two out of the three exploratory wells Premier drilled earlier this year off Indonesia brought discoveries. The most significant was Anoa Deep well WL-5X, which found gas in a new play beneath the Anoa field, testing at 17 MMcf/d from fractured Lama Formation sandstone reservoirs. Integrated studies are in progress to mature further Lama prospects. The first well is planned for 2Q 2013.
Elsewhere, additional field development is also taking place on the Natuna gas field. Hallin Marine says it has completed a subsea infrastructure, umbilicals, risers, and flowlines installation project at the Natuna gas field offshore Indonesia.
The $3-million project called for deployment of Hallins’ DP-2 vessel Ullswater to lay new underwater umbilicals. The scope extended to replacement and abandonment of existing system components and installation of new infrastructure.
Agip (Italy) discovered the Natuna gas field in the Greater Sarawak basin, about 1,100 km (683 mi) north of Jakarta. It remains the largest gas field discovered to date in Southeast Asia, with recoverable reserves estimated at 46 tcf.
Ullswater is currently sailing to its next offshore project, for another Indonesian oil company. The 78 m (256 ft) long vessel is equipped for wellhead servicing, inspection and construction diving and ROV support. The vessel also includes a 15-man saturation diving system operable in 200 m-plus (656 ft) of water, plus a three-man moonpool-launched diving bell.
On still another front, Husky Energy is moving forward with the development of its Madura Straits block gas finds offshore Indonesia. Tendering of equipment and services for the Madura BD field development has started and first gas production is expected in 2014. The recently drilled MDA-4 exploration well confirmed additional gas resources in the MDA field, testing at an equipment-constrained rate of 18.7 MMcf/d. Husky expects to file a plan of development for the MDA field during 2012.
Drilling and production
As exploration and field development activities ramp up, drilling and production efforts are increasing offshore Indonesia as well. In February, Salamander Energy discovered oil and gas in the North Kutei basin. The semisubmersible Ocean General drilled the South Kecapi-1 DIR/ST exploration well (SK-1) on the Bontang production-sharing contract (PSC). It intersected 40 m (131 ft) of net oil and gas pay in good quality stacked Pliocene channel sandstones.
A drillstem test in a well-developed, Pliocene-age channel sandstone flowed light, sweet 33.4° API oil at around 6,000 b/d (constrained by testing equipment) and 8 MMcf/d (226,535 cm/d) of gas. Pressures were higher than anticipated and numerous gas kicks were encountered throughout the early Pliocene section, which may suggest a highly active hydrocarbon-charging system. Wireline and pressure data confirmed the presence of an oil/water contact within the channel sandstones.
Salamander plans to drill another well to examine updip potential in the Bedug structure, 4 km (2.5 mi) east and 500 m (1,640 ft) updip of SK-1.
MEO Australia may have discovered gas with the Gurame SE-1XST well offshore North Sumatra, Indonesia. The well is being drilled in the Seruway PSC. Wireline logging has been completed over the Baong sands. A 7-in. liner was run and cemented to 2,961 m (9,714 ft) MDRT. Logging results and gas shows while drilling suggest that the Baong sands are gas saturated. Image logs show the Baong sands to be finely laminated with significant fracturing. A dual packer MDT was run, confirming that the reservoir has matrix permeability.
MEO has secured $10 million in funding to production test the Baong sands in order to determine gas composition and reservoir productivity. Prior to starting this program, the rig will drill the second target, the Belumai sands.
In November 2012, first gas and condensate flowed from the South Mahakam project, two months ahead of schedule. The program has been implemented to offset declining output from the Mahakam PSC, which Total E&P Indonesie operates in partnership with Inpex.
The project calls for a phased development of the Stupa, West Stupa, and East Mandu gas condensate fields, and the Jempang and Metulang gas fields. Locations are 35 km (21.7 mi) southeast of Balikpapan and 58 km (36 mi) south of the Peciko field, in water depths ranging from 45-60 m (147-197 ft). First-phase work involves installation of three platforms and drilling of 19 wells.
Production should build to an average flow rate of 69,000 boe/d, including 18,000 boe/d of condensates by the end of 2013. Gas and liquids will be exported through a new pipeline from the Stupa platform to the Senipah onshore terminal operated by Total. Some of the gas will then be sent to the Bontang plant for liquefaction, with the remainder supply domestic customers.