INDONESIA - Reserves.

There have been varied estimates of proven oil reserves in Indonesia. According to Oil & Gas Journal (OGJ) of the US, which is generally a reliable source on world oil and natural gas reserves, Indonesia had 4.3 bn barrels of proven oil reserves as of January 2007, down from 4.4 bn barrels at end-2003, about 5.2 bn barrels at end-1993 and 10.1 bn barrels at end-1983. OGJ put Indonesia's natural gas reserves at 97.8 TCF as of January 2007.

Indonesian crude oils vary widely in quality, with most streams having gravities in the 22[degrees] to 37[degrees] API range. Indonesia's two main export crudes are Sumatra Light, or Minas, with a 35[degrees] API gravity, and the heavier, 22[degrees] API Duri crude.

A study released in August 2002 by Indonesia's E&P regulator, the Energy Ministry's Directorate General of Oil and Gas (BP Migas) shows that oil reserves in the Cepu block alone, located in Central/East Java, are close to 600m barrels - with about half considered recoverable.

Sizable, but as of yet unproven, oil reserves may lie in the numerous, geologically complex, pre-tertiary basins located in eastern Indonesia. These regions are much more remote and the terrain more difficult to explore than areas of western and central Indonesia.

The new finds exclude the one in the Jeruk field, where Australia-based oil and gas company Santos found a huge reserve. Kardaya Warnika, now head of BP Migas, in 2005 said Santos was then verifying the finds to determine the exact amount of oil and gas reserves in the field. The three largest natural gas fields in Indonesia are Arun in Aceh, Bontang in East Kalimantan and Tangguh in Papua (see background in Vol. 60, Gas Market Trends No. 9 & gmt9IndnsGeoFeb28-05).

Exploration & Background: This year, the government will offer 20 more oil and gas E&P blocks through an open tender. But the oil and gas E&P regime in Indonesia remains vague and less generous in term of incentives than E&P terms on offer in fellow ASEAN member-countries. Concerned by the resultant lack of E&P investment in his country, Indonesian President Susilo Bambang Yudhoyono in early 2007 said Jakarta was to improve the E&P regime in order for a balance to be maintained between rapidly rising domestic petroleum consumption and declining exports.

Oil exploration in this archipelago began in the 19th century. Crude oil had been produced since 1893, when the islands were ruled by the Dutch. An independent republic of Indonesia was first proclaimed in 1945 and the war for independence ended in 1949, when Indonesia finally assumed control over vast resources.

Pertamina, the state concern set up after the war, took over all the fields and in the 1960s began making its own discoveries. It offered many of its marginal fields to foreign companies and some local firms for EOR operations and further development. It also offered large unexplored areas to foreign oil companies.

Caltex (now Chevron) was one of the foreign companies which had explored for oil in Central Sumatra before independence. It discovered the Duri giant in 1941 and Minas, a bigger giant, in 1944. Now Caltex accounts for more than half of Indonesia's oil production. Mobil was the first US major to explore for gas in this country and in 1971 found a super-giant, Arun, in Northern Sumatra which became the source for the world's second largest LNG complex. Two years later Agip found another gas super-giant in the Natuna Sea, but the Italian company later relinquished that acreage.

Many major oil and gas finds were made in the 1970s and 1980s by foreign companies. Total found the Bekapai oil and gas field in East Kalimantan in 1972 and in 1974 it found the Handil oil and gas field. Since then it has made impressive discoveries and now it is one of the largest oil and gas producers in Indonesia. Producing about 500,000 b/d of oil equivalent of crude oil and natural gas, Total in early 2007 announced that it was spending another $6 bn in Indonesia (see profiles of fields and operators in next week's Review).

Indonesia enjoyed one of the world's highest success rates in exploration drilling in the 1960s and 1970s, not only in the number of finds but also in the volumes added per wildcat. But the success rates for oil since then have not been as high and exploration slackened, because E&P terms were no longer attractive.

More than 19,000 wells have been drilled in Indonesia in more than 180 valid permits. More than 1,600 surveys have been made. Norway-based Petroleum Geo-Services in 2000 presented a multi-client 3D seismic survey over the southern part of the Kutei Basin in the Mahakam Delta, where oil has been produced since the late 19th century. The survey included the 1,600 sq km Tanjung Aru Block and large parts of Makassar Block B. Interpretation of data over Tanjung Aru showed the presence of several structural traps related to compression anticlines in the upper slope setting, with the largest prospect probably containing in-place reserves of 1.5-2 bn barrels of oil equivalent (see background in Vol. 60, No. 9).

Pertamina is formally known as PT Pertamina (Persero). Enactment of Oil and Gas Law No. 22/2001 in November 2001 and Government Regulation No. 31/2003 has changed its legal status from a special enterprise to a limited liability company. The law opens up opportunities and challenges for Pertamina as the industry becomes more competitive. Pertamina has an integrated system from upstream to downstream. As a profit-oriented firm, now it focuses on value creation. It has a number of units, including Pertamina Energy Trading Ltd (Petra), PT Elnusa Harapan/marketing and trading, PT Pelita Air Service/airline service, PT Perta Medika/hospital, etc.