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IndonesiaOil & Gas reportOctober 2012
Brought to you by
Brought to you by
4
A c k n o w l e d ge m e n t s
Special thanks to
Dr. Subroto, Mr. Kuntoro Mangkusubroto, Mr. Lobo Balia and
Mrs. Evita Legowo for their contributions,
to
Mr. Pandri Prabono, Mr. Nicolas Cambefort, Mr. Chris Wren, Mr.
Andrew White and Mr. Ananda Idris
for the information and the contacts provided, and to all the companies supporting
the production of this report.
5
This report was prepared by Focus ReportsDirector: Mariuca Georgescu. Journalists: James Waddell and Herbert Mosmuller.Contributors: Marine Neveau, Solene Pignet, Aleksandra Klassen and Nala Nouraoui.Report Publisher: Crystelle Coury and Diana Viola.
CopyrightAll rights reserved. No part of this publication maybe reproduced in any form or by any means, whether electronic, mechanical or otherwise including photocopying, recording or any information storage or retrieval system without prior written consent of Focus Reports.While every attempt is made to ensure the accuracy of the information contained in this report, neither Focus Reports nor the authors accept any liabilities for errors and omissions. Opinions expressed in this report are not necessarily those of the authors.
contents
InteRVIeWs
7 IndonesIa : Re-eneRgIzIng The aRchIpelago.
8 FacIng Up To RealITy
10 someThIng old, someThIng new, someThIng BoosTed, someThIng BlUe
10 easTeRn pRomIse
12 pIckIng The hangIng FRUIT
12 swITchIng To a Balanced dIeT
14 a hoT TopIc
15 gas on a BUdgeT
16 pUTTIng cBm on The FasT TRack To developmenT
17 BUIldIng connecTIons
18 The woRld-class domesTIc pRodUceR
22 a Teenage RevolUTIon
22 allocaTIng ResoURces - a splITTIng headache
24 BeTTIng TheIR BaTam dollaR on gRowTh
27 sUpplIeR maRkeT
28 a TalenT FoR seRvIce
29 FInal peRspecTIves
30 InTeRvIew wITh Evita Legowo, Director General of Oil and Gas, Ministry of Energy and Natural Resources
32 InTeRvIew wITh Dr. Subroto, Chairman of Bimasena Former Secretary General of OPEC and Minister of Energy and Natural Resources of Indonesia
34 InTeRvIew wITh Herry Wibiksana, President and General Manager AWE Indonesia
36 InTeRvIew wITh Kuntoro Mangkusubroto, Head of the Presidential Delivery Unit
38 InTeRvIew wITh Scott Cummins, Senior Vice President & General Manager McDermott Asia Pacific
40 InTeRvIew wITh Elisabeth Proust, President, director & GM TOTAL E&P
42 InTeRvIew wITh Jae Yong Choi, Chief Representative of Jakarta Office, Toyo Engineering
44 InTeRvIew wITh Samir Abbes Country Manager Spie Oil & Gas Services (Indonesia)
6 Chapter titleEXPLORE THE HYDROCARBON
OPPORTUNITIES IN INDONESIA
Oil Potential
Gas Potential
3,534.31 MMSTB
48.74 TSCF
:
:
CBM Potential
Shale Gas Potential
453.30 TCF
334.50 TCF
:
:
MINISTRY OF ENERGY AND MINERAL RESOURCES
REPUBLIC OF INDONESIA
www.migas.esdm.go.id
www.wkmigas.com
For Futher Information, please contact:Oil and Gas Investment Center, Directorate General of Oil and Gas
Plaza Centris 1 Floor, Jl. HR. Rasuna Said Kav. B-5, Jakarta 12910, Indonesia
Phone.+62-21 5268910 ext. 132, 135, 136, Fax. +62-21 5268963
THERE IS A HUGE OPPORTUNITY
FOR HYDROCARBON DEVELOPMENT IN INDONESIA
GOVERNMENT INVITES MULTINATIONAL UPSTREAM
OIL AND GAS COMPANIES WITH INTERNATIONALLY
COMPETITIVE TERMS AND CONDITIONS
EXPLORE THE HYDROCARBON
OPPORTUNITIES IN INDONESIA
Oil Potential
Gas Potential
3,534.31 MMSTB
48.74 TSCF
:
:
CBM Potential
Shale Gas Potential
453.30 TCF
334.50 TCF
:
:
MINISTRY OF ENERGY AND MINERAL RESOURCES
REPUBLIC OF INDONESIA
www.migas.esdm.go.id
www.wkmigas.com
For Futher Information, please contact:Oil and Gas Investment Center, Directorate General of Oil and Gas
Plaza Centris 1 Floor, Jl. HR. Rasuna Said Kav. B-5, Jakarta 12910, Indonesia
Phone.+62-21 5268910 ext. 132, 135, 136, Fax. +62-21 5268963
THERE IS A HUGE OPPORTUNITY
FOR HYDROCARBON DEVELOPMENT IN INDONESIA
GOVERNMENT INVITES MULTINATIONAL UPSTREAM
OIL AND GAS COMPANIES WITH INTERNATIONALLY
COMPETITIVE TERMS AND CONDITIONS
ogfj migas full page indd 1 17/04/2012 09:56
CarMig_OGFJ_1210 1 9/12/12 11:52 AM
This sponsored supplement was produced by Focus Reports. Project Director: Mariuca
Georgescu. Journalists: James Waddell, Herbert Mosmuller. Contributors: Marine Neveu, Solène
Pignet, Aleksandra Klassen, Nala Nouraoui.Report Publishers: Crystelle Coury, Diana Viola. For exclusive interviews and more info, plus log
onto www.energy.focusreports.net or write to [email protected]
Re-eneRgizing the ARchipelAgo
IndonesIa
Wayag Island, a series of uninhabited islands, rises out of the
most biodiverse waters on the planet, Raja Ampat, West Papua, Indonesia.
Courtesy of Niko Resources. Photo credits Agustiar Hamdani
For the first decade of the 21st century, the ques-tion troubling Indonesia's investors was: "Why is the country not growing as fast as the BRICS?"
Yet, as Indonesia accelerated its growth to 6.37 per-cent in Q2 2012, and BRICS nations averaged out at 4.18 , that question has largely been muted. Satisfy-ing the energy demand of this fast growing economy is hot on Indonesia's agenda and the issue facing investors now is how to invest in this complex, often challenging and multifarious energy market.
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 55
advertisement
7
This sponsored supplement was produced by Focus Reports. Project Director: Mariuca
Georgescu. Journalists: James Waddell, Herbert Mosmuller. Contributors: Marine Neveu, Solène
Pignet, Aleksandra Klassen, Nala Nouraoui.Report Publishers: Crystelle Coury, Diana Viola. For exclusive interviews and more info, plus log
onto www.energy.focusreports.net or write to [email protected]
Re-eneRgizing the ARchipelAgo
IndonesIa
Wayag Island, a series of uninhabited islands, rises out of the
most biodiverse waters on the planet, Raja Ampat, West Papua, Indonesia.
Courtesy of Niko Resources. Photo credits Agustiar Hamdani
For the first decade of the 21st century, the ques-tion troubling Indonesia's investors was: "Why is the country not growing as fast as the BRICS?"
Yet, as Indonesia accelerated its growth to 6.37 per-cent in Q2 2012, and BRICS nations averaged out at 4.18 , that question has largely been muted. Satisfy-ing the energy demand of this fast growing economy is hot on Indonesia's agenda and the issue facing investors now is how to invest in this complex, often challenging and multifarious energy market.
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 55
advertisement
8
56 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
Facing Up to Reality An unfavorable portrait of Indonesia’s oil industry
in 2012 would depict reserves falling faster than
in any other Asian country, dropping 1.9 billion
barrels since 1991 to just 3.89 billion barrels. Oil
production would fare no better in this portrait
with the country straining to reach a 900,000 bpd
threshold, down from 1.7 million bpd back in
1980. Last year Indonesia faced a domestic sup-
ply deficit of 78 million barrels which deepened
the country’s reliance on oil imports. With around
60 percent of Indonesia’s energy being govern-
ment subsidized and a global Brent price consis-
tently over USD 100 per barrel, the subsidy bill
soared to USD 28 billion which almost negated
the USD 30 billion Indonesia receives in oil export
revenues; in 2012 the subsidy bill is projected to
climb to USD 32.6 billion.
President Susilo Bambang Yudhoyono cited
the problem directly in March: “The short-term
energy issue which has now become the center
of public attention is the skyrocketing global
crude oil price,” establishing the subsidy issue
as a priority challenge for the government to
address in 2012.
This portrait of an industry in decline clearly
looks out of place next to a mantelpiece
adorned with Indonesia’s historic achievements
in the oil and gas industry. Indeed the discovery
of commercial quantities of crude oil in Sumatra
just over 100 years ago led directly to the forma-
tion of Royal Dutch Petroleum, now Royal Dutch
Shell. Indonesia was the pioneer of the produc-
tion sharing contract (PSC) model in the late
1960s which made the country an instant hit with
the international supermajors.
Moreover, the country pioneered the LNG
export markets only losing its number one posi-
tion in the last five years, and until exiting the
organization in 2009 Indonesia represented the only Southeast Asian mem-
ber of OPEC.
The odd juxtaposition of Indonesia’s past and present states may be com-
prehensible to industry experts given the combination of what went wrong:
a natural oil reserve decline, a lack of exploration activity and slippage in
production schedules; and what went right: rapidly rising energy demand
due to the growing affluence of the world’s fourth largest population and a
6.37 percent growth in Indonesia’s economy.
The trouble is that the new portrait is little understood by the population itself which continues to see
Indonesia as a great world oil power in spite of reality. These persistent notions are politically paralyzing.
In March this year, after the Indonesian government had scheduled to raise prices for subsidized fuel from
USD 50 cents to USD 67 cents starting on 1st April, over 12 thousand citizens and trade union members
preempted the price hike, taking to the streets of Jakarta in protest with a further 81 thousand demon-
strating in the regions. These civil manifestations were sufficient for the government to back down on its
proposed subsidy cuts, though few policy makers doubt the necessity of removing subsidies.
According to Dr. Subroto, a charismatic elder in the Indonesian oil and gas community, former min-
ister of energy of Indonesia (1978-87) as well as being the longest serving secretary general of OPEC
(1988-1994) the people must now be freed from their illusions. He says, “One of the biggest steps
henceforth is to tell the population that Indonesia is not a great oil power anymore. The population is
still under the illusion that Indonesia is oil rich, therefore we need to be more honest with the people.”
The recently deceased minister of energy and mineral resources, Widjajono Partowidagdo, con-
curred that the first step must be for the population to face reality. He saw the removal of subsidies
as the first step in creating a more balanced energy strategy, believing that freeing up subsidy money
would allow investment in more fruitful energy sources and would stop cheap fuel prices constraining
the development of alternative energies.
Prof. Dr. Subroto, chairman BIMASENA
Chal lenge
Courage
Concern
Commitment
w w w . n i k o r e s o u r c e s . c o m
ìWe will conduct our activities in socially, culturally responsible and respectful mannerî
CarNiko_OGFJ_1210 1 9/12/12 11:19 AM
9Chal lenge
Courage
Concern
Commitment
w w w . n i k o r e s o u r c e s . c o m
ìWe will conduct our activities in socially, culturally responsible and respectful mannerî
CarNiko_OGFJ_1210 1 9/12/12 11:19 AM
10
58 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
Something Old, Something New, Something Boosted, Something BlueIn 2011 Indonesia missed its oil production target of 945,000 barrels by
42,000 barrels, on the back of a ten-year decline in oil production. Yanni
Kussuryani , head of Indonesia’s state-owned oil and gas research orga-
nization Lemigas explained:
“There were several technical problems: most
fields are brown fields in which production is
declining, there were project delays resulting
from planned/unplanned shut down as a result
of repairing production facilities and there were
delays in receiving drilling permits… Production
will increase only as a result of intensive explor-
atory drilling activity, simplification of the drilling
permits, speeding up the plan of development (POD) programs, and the
application of enhanced oil recovery (EOR) technology on old wells.”
Bedeviled by technical issues and heavy investment requirements, the
question arises: why should any company choose to settle down with
Indonesia? Since 1965 Lemigas has been answering that question, tak-
ing on the role of matchmaker for the private sector. Lemigas has been
directing these international suitors to explore areas of untapped poten-
tial and assisting companies in their development programs.
Currently 87% of Indonesia’s national oil production comes from
mature fields in the West of the archipelago, and therefore Lemigas has
worked extensively with Chevron Pacific Indonesia, Pertamina EP and
Total in preparing EOR chemical injection plans and feasibility studies.
Kussuryani points out that “Almost 20 percent of current production
comes from EOR Duri steam flooding [Chevron’s EOR program on their
giant field located on Sumatra, West Indonesia].”
Owing to rapid but unsustainable extraction in the past, around 60
percent of Indonesia's oil is still contained in these mature reservoirs,
and there is consequently a great opportunity to boost production from
these reserves. In recognition of this potential, BP MIGAS recently
imposed a mandatory requirement for EOR spending for all PSCs.
However, the main buzz currently surrounding the Indonesian
upstream industry is less connected with oil than with the potential for
giant new offshore gas reserves in the unexplored East of the country.
Roughly 80 percent of new offshore discoveries are gas fields and the
industry has been spurred on by the Abadi field discovery by INPEX on
the Masela block, echoing its giant gas field discovery in adjacent North
West Australian continental shelf – the Ichthys project.
Lemigas is now cooperating with Inpex on the Masela block which
could become the first floating LNG plant in the world. International
companies with substantial means and technological expertise therefore
still have much to gain from Indonesia’s sizeable dowry.
Eastern PromiseAn alternative way of looking on the world’s largest archipelago is to
see it instead as the largest maritime nation and although Indonesia’s
strong agricultural past places a land-centric prism on its industrial
mind-set, a succession of large gas discoveries offshore in the East of
the country is drawing the major oil and gas players seaward. Ministry
of Energy and Mineral Resources (ESDM) director general of oil and
gas, Evita Legowo, outlined the major shifts now occurring in the coun-
try’s upstream industry:
“Oil and gas companies should note that
there are currently three major paradigm shifts
occurring in Indonesia’s oil and gas industry
which present new opportunities. The first is
the movement of production from the West,
where most of Indonesia’s traditional oil and
gas deposits lie, to the East, which is a highly
prospective region for future production. The
second paradigm shift is the movement of production from onshore
to offshore deposits and even deep-water E&P operations. The third
paradigm is the shift from oil production to gas production.”
Offshore production is naturally a high-risk, high-expenditure busi-
Dra. Yanni Kussuryani, head of Lemigas
Safety Begins Here. Courtesy of Niko Resources
Evita Legowo, director general oil and gas Ministry of Energy and Mineral Resources
SSoollarr EEneerrggy
DDiisssttriibbuuttiion
Prodduuccccttiioonn
EExxploration
TTOOOOTAL
TOTAL IN DEVELOPING ENERGY
INDUSTRY FOR INDONESIA.
Equipped with accomplished experience and
high commitment, TOTAL E&P INDONESIE
has been successfully exploring and producing
oil and natural gas in the Mahakam Delta for
Indonesia since 1968.
We provide the technology, fnancial and human
resources to ensure frst-rate management by
putting health and safety work environment frst.
Our innovative technologies have been proven
to increase the effectivity and effciency of our
operations in the Mahakam Delta. Backed by
those strengths, we’re exploring other energy
opportunities in regions all over Indonesia.
Our large range of activities have given
Indonesia more energy access, thanks to the
following 4 axes: taking high risks in exploration,
maximizing production with enhanced
technology in the Mahakam Delta, investing
for the future with high quality gas stations
and promoting solar energy by commercializing
a large range of products in remote area.
We’re committed to continue providing the best
energy management in Indonesia to further
the country’s welfare and prosperity.
Total in Indonesia.
CarTot_OGFJ_1210 1 9/12/12 11:38 AM
11
SSoollarr EEneerrggy
DDiisssttriibbuuttiion
Prodduuccccttiioonn
EExxploration
TTOOOOTAL
TOTAL IN DEVELOPING ENERGY
INDUSTRY FOR INDONESIA.
Equipped with accomplished experience and
high commitment, TOTAL E&P INDONESIE
has been successfully exploring and producing
oil and natural gas in the Mahakam Delta for
Indonesia since 1968.
We provide the technology, fnancial and human
resources to ensure frst-rate management by
putting health and safety work environment frst.
Our innovative technologies have been proven
to increase the effectivity and effciency of our
operations in the Mahakam Delta. Backed by
those strengths, we’re exploring other energy
opportunities in regions all over Indonesia.
Our large range of activities have given
Indonesia more energy access, thanks to the
following 4 axes: taking high risks in exploration,
maximizing production with enhanced
technology in the Mahakam Delta, investing
for the future with high quality gas stations
and promoting solar energy by commercializing
a large range of products in remote area.
We’re committed to continue providing the best
energy management in Indonesia to further
the country’s welfare and prosperity.
Total in Indonesia.
CarTot_OGFJ_1210 1 9/12/12 11:38 AM
12
60 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
Picking the Hanging Fruit Whilst offshore potential draws many of the larger companies, Jossy
Rachmantio, chief executive officer of Mitra Energia, subsidiary of Lon-
don-listed junior, Sound Oil, sees a rich crop of onshore opportunities
emerging from Indonesia's past regulatory deficiencies which resulted
in undercapitalized projects undertaken by often inexperienced E&P
players.
“The key to success in Indonesia is targeting distressed assets and if
you run statistics on the tendering rounds from 2003 up until now you
see a high volume of acquisitions made between 2004 and 2006. In
terms of the quality of investment made during this period you see a lot
of small cap companies with no records and no technical background
acquiring assets.
The Indonesian government was not experienced enough at the time
to configure the bidding strategy to filter companies in terms of qual-
ity. This created a lot of horse-trading with high bids and it became a
numbers game. This created a lot of assets which were over-capitalized
in terms of commitments and on this basis one can calculate how long it
would take for these assets to become distressed”.
He continues explaining that between 2003 and 2007 service costs
quadrupled which meant that many small cap companies were no longer
able to fund their work programs and wells fell victim to underinvest-
ment. In Rachmantio’s eyes these trends have left plenty of hanging fruit
for the picking.
Switching to a Balanced Diet When Jero Wacik, the new minister of energy and mineral resources
(ESDM), was appointed to his position in October 2011 the President
assigned him one straightforward mission: to establish Indonesia’s
energy security. However, such benign simplicity belies the enormity of
the ordeal facing the minister. The behemoth of domestic energy con-
sumption looks set to triple in size by 2030 having grown 11 percent in
2011 alone. Wacik, who recently had to revise down his 2012 oil lifting
target from 930,000 bpd, to just 881,000 bpd has recognized the futility
of satisfying the beast with an oil industry beset by years of declining
production.
However, oil is by far not the only crop on Indonesia’s fertile territory.
The Indonesian archipelago spans the equivalent distance of Florida to
California and sequestered in and amongst its complex of 17,500 islands
ness which limits the number of players who can compete to the
medium and large international oil companies and this limited com-
petition is partly what attracts companies when domestic players are
increasingly favored in land-based tenders.
This is an environment which is also being increasingly incentivized
for investors. Offshore frontier blocks are now offering greater produc-
tion shares for contractors and tax breaks are being incorporated for
offshore construction, further sweetening the deal. MIGAS signed 11
new PSCs in the twilight of 2011 which saw offshore blocks going to
international players like Hess, BP, Inpex, Statoil and Niko Resources.
Of the companies which have been building up their presence in this
sector, Canadian junior, Niko Resources has been the most aggressive
in the Indonesian offshore market currently operating 15 PSCs, own-
ing a working interest in an additional seven non-operated blocks, and
partnering with some of Indonesia’s largest international producers
including Norwegian deepwater specialist, Statoil.
In 2012 Niko Resources is launching what is expected to be Indone-
sia’s largest ever offshore exploration program, having secured a rig
contract from Diamond Offshore for four years, the longest in Indo-
nesia’s history. President director and general manager, Eko Lumadyo
explained the strategy underling these ambitious plans stating that the
focus will be on the East of the country:
“Regarding the transition towards the East,
the majority of our concession areas are located
in Eastern Indonesia and Niko Resources has
certainly been expanding in this region. The
reason for this direction is simply because East-
ern Indonesia basins are under-explored basins
and offer an opportunity for major discoveries.
Across these blocks Niko Resources will pay
particular attention to areas which are geologically analogous to major
field discoveries on the Northwest Shelf of Australia and the nearby
fields in Papua areas”.
However, Lumadyo is under no allusions that the greatest challenge
will come from operating in the East of the country far away from the
current oil and gas support infrastructure and from their offices at the
moment. He stated, “In case of an emergency it is necessary to have
technical support facilities and safety measures in situ. These are the
elements we are working on at the moment.”
Eko Lumadyo, president and general manager Niko Resources
CarPane_OGFJ_1210 1 9/12/12 11:31 AM
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13
CarPane_OGFJ_1210 1 9/12/12 11:31 AM
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62 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
can be found practically every type of hydrocarbon energy resource ever
lifted. Whilst Indonesia’s declining oil reserves now place the country
28th in the world, it is up at 13th place in natural gas reserves - around
48.74tscf - and its unconventional deposits are even more impressive
comprising an additional 453tcf of coal bed methane (CBM) - placing
Indonesia fifth in global rankings - and 334.5tscf of shale gas. Indone-
sia is therefore a rich country in conventional and unconventional gas.
It should not be forgotten that Indonesia is also the world’s top coal
exporter and ranks 4th in terms of global coal reserves.
The country’s energy mix does not even stop with hydrocarbons.
Given Indonesia’s positioning on the world’s most geologically active
zone, “the ring of fire,” Indonesia is also endowed with 40% of the
world’s geothermal energy potential. Indone-
sia also has possibilities in hydroelectricity, bio
fuels, solar energy and even nuclear, albeit
controversial.
That Indonesia thus far has not made full use
of its rich resources is a source of bemusement
to Suryo B. Sulisto, chairman of the Indonesian
Chamber of Commerce (KADIN). He said, “It is
the biggest irony that Indonesia is sitting on top
of some of the most abundant energy resources
in the world and yet cannot provide energy
security to its population.”
In his opening address to the 36th Indo-
nesian Petroleum Association (IPA), Minister
Wacik finally acknowledged the need to think
differently about Indonesia’s diverse sources of
energy. Wacik declared that his target was now not only to increase oil
lifting to over one million bpd by 2014 but that he was shifting the policy
paradigm from “oil lifting” to “energy lifting” thereby bringing other
energy resources within fold of state budget calculations - gas lifting of
1.3bboe will for the first time to be included in the 2013 budget.
Chief advisor to Yudhoyono and secretary general of the National
Energy Council, Lobo Balia, elaborates on how Indonesia’s energy policy
is being redrafted. They are laying out a 2050 roadmap centered on
domestic energy security and diversification out of Indonesia’s tradi-
tional hydrocarbon paradigm. He explained:
“Indonesia needs to improve the efficiency of its energy sector and
diversify our energy sources with new, unconventional and renewable
energy as well as carbon capture storage. The share of coal bed meth-
ane (CBM) and shale gas will increase within the energy matrix. Indone-
sia will dramatically cut its use of diesel power plants. In the longer-term
future we are going to use other resources than fossil fuels. The use
of renewables will increase significantly, especially geothermal, solar,
hydro, and bio fuel.”
The diversity of Indonesia’s energy resources offers a rich smorgas-
bord of feedstock to satisfy the ever deepening hunger for energy in a
country steadfastly growing at over six percent year on year. The switch
in policy focus from feeding external markets to feeding the domes-
tic market also means that the advantages of oil’s exportability have
become less significant. Alternative energy sources within the energy
basket offer a great opportunity to deliver power at a local level.
A Hot TopicUnder Presidential Decree No. 5/2006 and within Indonesia’s 2025
energy diversification strategy five percent of consumption should
be met by geothermal energy. The Ministry of Energy and Mineral
Resources has set a 2015 target of 4,000 megawatt geothermal produc-
tion, up from 1,400 today.
CEO of Australian-based Panax Geothermal, Kerry Parker explains
that the attraction of the Indonesian geothermal sector is not just the
fact that Indonesia has 40 percent of the world’s geothermal potential.
Parker says that, “Indonesia has taken the right approach in that geother-
mal is not an addendum to a clean energy policy or a renewable energy
Searching for alternative energy in North Sumatra. Courtesy of Panax Geothermal
B. Sulisto, Chairman of the Indonesian Chamber of Commerce (KADIN)
Dr. M. Lobo Balia, secretary general of the National Energy Council
15
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 63
tor overheads. In some cases the high cost of developing gas infrastruc-
ture will provide impetus for greater partnerships and tie-ins to exist-
ing infrastructure. Australian junior E&P company, AWE operates three
blocks in Indonesia which are all at the exploration stage, however one of
these blocks, Atlas 1, lies close to an existing gas discovery on the Bulu
Block, with a different operator. President and general manager of AWE,
Herry Wibiksana explains that:
“The distance [from the Atlas 1 block] to the discovery in the Bulu
block is only 25km so we are hoping for a similar find. If there is another
discovery on Atlas 1 then we would propose to develop this prospect
simultaneously with the Bulu block operated by our partner in order to
reduce costs by building a shared pipeline and minimize the risk of the
project.”
As a result of this emphasis on price reduction, Oscar Widiatmoko,
the founder of Surya Manikam the official representatives of German
Netzsch Pumps and American Peerless products saw a growing opportunity in rental markets.
He explained that
policy, but rather geo-
thermal is considered
as a broader energy
security issue”.
Parker explains
that Indonesia is
now looking beyond
the old hydrocarbon paradigm, having real-
ized geothermal’s capacity to provide 28,000
megawatts of power to the domestic market
including the 35 percent of Indonesia’s 245
million-strong population which currently exists
without electricity.
Geothermal energy faces many similar chal-
lenges to oil and gas relating to local authority
permits, land regulations and dealing with land
owners holding often spurious registration
documents. But although these delays have
grown in scope with the decentralization of
governance, Parker found local government to
be supportive of Panax’ Sokoria project recog-
nizing the potential of geothermal energy to
end their power shortages.
Parker also saw the economics improving:
“Many of the earlier geothermal projects had
unfavorable tariffs but this is now improving.
There is a USD 9.7 cents/Kwh minimum price
which may be increased” improving overall
profitability for the sector. Given this greater
profitability, Parker identifies host of opportu-
nities outside of Java and Sulawesi for small
geothermal stations supplying local popula-
tions and industrial projects located far from
existing energy infrastructure.
Gas on a BudgetProviding cheap gas is easier said than done on
the complex archipelago where insufficient gas
transportation infrastructure drives up opera-
Contributing to Indonesiaís growth and prosperity
6 Battery Road #35-05 | Singapore 049909 | Phone: +65 65333210 | Fax: +65 65333211
CarSamu_OGFJ_1210 1 9/12/12 1:38 PM
Kerry Parker, managing director Panax Geothermal
Herry Wibiksana, president and general manager AWE
Oscar Widiatmoko, owner PT Surya Manikam
16
64 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
“Price is our best competitive advantage, we are very flexible on that
aspect because we can adapt to the needs of the companies. We always
try to know what their budget is and we find solutions to accommodate
it, such as finding local suppliers that are less expensive."
Putting CBM on the Fast Track to DevelopmentIndonesia's gas potential has energy leaders like director general of
oil and gas, Evita Legowo seeing it as the main tool for guaranteeing
Indonesia’s energy security. Legowo regards coal bed methane (CBM)
as especially interesting, stating that last year Indonesia launched its first
CBM to power project and that on top of the 39 CBM contracts already
signed and she was looking for 15 more in 2012.
She stated: “The gas pressure for CBM is less than that of conventional
gas but this means that it can produce over a longer stretch of time.
CBM is therefore the best gas for Indonesia’s future power supplies and
it tallies with Indonesia’s present political strategy of using energy in an
efficient and sustainable way.”
However, the CBM industry in Indonesia is young and according to
Sammy Hamzah, CEO of Ephindo, a domestic pioneer of the industry,
it faces the problem of having a larger footprint than oil and gas while
undergoing the same administrative processes. Nonetheless, Hamzah
remained optimistic, saying that on Indonesia’s first CBM to power proj-
ect, local authorities were actually very easy to convince of the value of
CBM given its potential to close the supply gap and end power short-
ages in the city. Hamzah is “confident that the domestic gas market will
grow in its attractiveness for unconventional
plays like CBM.”
Hamzah went on to explain that East Kali-
mantan and South Sumatra were the coal rich
regions of Indonesia holding 60 percent of
Indonesia’s CBM potential and that the interest-
ing feature of the region was its proximity to the
The noT-For-proFIT Gas CompanyAs gas looks set to play an increasing role in Indonesian power
supply, potential investors are weighing up the economics. Soeko-
esen Soemarinda, former senior vice-president of Pertamina, now
the Indonesian general manager of Singapore Petroleum Com-
pany, a part of PetroChina, explained: “Private companies have
always been concerned that domestic gas prices will be too low
to make gas sales attractive. Investors will compare domestic and
export (LNG) gas prices and the price right now for the domestic
market is around 5 USD per unit. However the export price stands
around 9 USD.”
For gas production in East Kalimantan,
close to the Bontang LNG facility the
lure of higher international LNG prices
is prompting many conventional and
unconventional producers to set up shop.
However Soemarinda advises investors
to forget profits and focus on Indonesia's
domestic needs with potential rewards of
gaining greater acreage from the government. In his eyes they
should look to reduce production costs to create profitability.
Soekoesen Soemarinda- general manager SPC Mahakam Hilir Pte.
CarLemi_OGFJ_1210 1 9/12/12 1:46 PM
Sammy Hamzah, president & CEO Ephindo
17
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 65
Bontang LNG facility allowing CBM to be channeled into export markets
in CBM-LNG conversion. He even saw this as an opportunity for Indone-
sia to overtake neighboring Australia in CBM-LNG exports, as Australia
will need several years to construct this infrastructure in Queensland and
is subject to significant environmental issues.
Hamzah said: “With this in mind, Indonesia can be right on top of the
global CBM production list and I believe 2012 will be an important year
for Ephindo and this industry.”
Building ConnectionsThe new paradigm for Indonesia’s energy strategy is to utilize energy to
feed its domestic industries and generate GDP growth rather than to
generate export revenues. Andy Sommeng, Chairman of BPH Migas,
Indonesia’s downstream regulator is therefore planning an extensive
program of downstream infrastructure projects under Indonesia’s Mas-
ter Plan – an economic plan launched by President Susilo Bambang Yud-
hoyono in 2011 for Indonesia’s economic development, fleshing out his
vision to make Indonesia a top ten economy by
2025. Sommeng mentions a couple of projects:
“Indonesia requires better refineries and proj-
ects are underway to construct three new refin-
eries producing 250,000 barrels per day. It is
better than to continue importing fuel because
of the value created by providing employment
and security of supply in Indonesia.
By 2025 Indonesia’s energy matrix will depend not just on oil and gas
but also on nuclear, coal, geothermal, wind, wave, and solar energy.
Indonesia needs as many specialist companies who can provide these
new forms of energy to consumers as possible.”
One of the international downstream players that started to develop
infrastructure projects in Indonesia’s downstream market following the
market liberalization enshrined in the 2001 oil & gas law is Vopak, the
world’s market leader in tank storage. The company has started con-
struction of a fuel terminal in Jakarta and a chemical terminal in Merak.
CarTrip_OGFJ_1210 1 9/12/12 11:53 AM
Andy N. Sommeng, chairman BPH Migas
18
World's largest independent
storage provider for oil, gas and
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Vopak Terminal Jakarta Phone: +62 21 43904002 | www.vopak.com
CarVop_OGFJ_1210 1 9/12/12 1:48 PM
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CarBPH_OGFJ_1210 1 9/12/12 11:12 AM66 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
Its managing director in Indonesia, Mark Noord-
hoek Hegt commented on Vopak’s vision:
“When entering a market it is crucial for
Vopak to understand who will be the players
of the future. In Indonesia both international oil
companies and national oil companies showed
interest, which automatically sparks our interest
in setting up infrastructure.
Indonesia is bringing more fuel into the country. We expect that there
is ample room to improve the supply chain and logistics of the import
and distribution flows in Indonesia. The logistic infrastructure has to
become more efficient to service the downstream fuel market."
The World-Class Domestic ProducerIndonesia’s oil and gas industry has for the past ten years been based on
Law No. 22 of 2001 on Oil and Gas which still serves as the foundation
for the upstream industry. One of the fundamental tenets of this law was
the removal of Pertamina’s responsibility for regulation thereby downsiz-
ing its scope of operations.
This measure was in part designed to make Pertamina more competi-
tive and capable of competition on a global level. Former CEO of Per-
tamina, Ari Soemarno who was behind Pertamina’s strategic vision to
become a world-class oil company by 2023 explained to us that before
his tenure was up he had attempted to negotiate a takeover of Indone-
sia’s second largest domestic producer, Medco, thereby gaining access
to assets in Libya. Although the Medco takeover proved unsuccessful
it was part of a drive to take the company international and to some
extent it has been continued by Soemarno’s successor, who is globally
the first female CEO of an NOC: Karen Agustiawan. In May 2012, Agus-
tiawan was in Kazakhstan negotiating with the Kazakh national oil com-
pany (KNOC) where according to Agustiawan: "Pertamina and KNOC
will study the possibility for exploration, development and production
of hydrocarbons at various locations, domestic and overseas, including
in Kazakhstan.”
Mark Noordhoek Hegt, managing director Vopak Indonesia B.V.
© 2012 McDermott International, Inc. All rights reserved.
In Sync WORLDWIDE with offshore construction needs
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DELIVERING CONVENTIONAL, SURF & FLOATING FACILITIES
We thrive on solving the complex issues and technical challenges that are unique
to every field development project.
For more than four decades, we have delivered certainty in engineering, construction
and installation of bottom-founded platforms, pipelines and subsea infrastructure
across Asia Pacific.
From our Batam Island fabrication facility in Indonesia, we offer direct, unrestricted
access to the open sea, with a 817-meter quayside and a water depth to accept large
transportation barges and ships up to 300,000 DWT. Batam is ideal for fabricating
subsea structures, complex integrated topsides, large jackets and onshore modules,
as well as accommodating deepwater floating hull assembly projects and topsides to
hull integration.
Pushing the boundaries of technology, our capabilities, expertise and resources align
with our customers’ needs, enabling safe and effective offshore production solutions.
CarMcd_OGFJ_1210 1 9/12/12 11:15 AM
19
© 2012 McDermott International, Inc. All rights reserved.
In Sync WORLDWIDE with offshore construction needs
�������������������������������� ������������� ������������������������������������������
DELIVERING CONVENTIONAL, SURF & FLOATING FACILITIES
We thrive on solving the complex issues and technical challenges that are unique
to every field development project.
For more than four decades, we have delivered certainty in engineering, construction
and installation of bottom-founded platforms, pipelines and subsea infrastructure
across Asia Pacific.
From our Batam Island fabrication facility in Indonesia, we offer direct, unrestricted
access to the open sea, with a 817-meter quayside and a water depth to accept large
transportation barges and ships up to 300,000 DWT. Batam is ideal for fabricating
subsea structures, complex integrated topsides, large jackets and onshore modules,
as well as accommodating deepwater floating hull assembly projects and topsides to
hull integration.
Pushing the boundaries of technology, our capabilities, expertise and resources align
with our customers’ needs, enabling safe and effective offshore production solutions.
CarMcd_OGFJ_1210 1 9/12/12 11:15 AM
20
68 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
FIve Ceos GIve TheIr perspeCTIve on buIldInG IndonesIa's enerGy InFrasTruCTure In 2012 around USD 4.7 billion is projected for investment in
energy related construction in Indonesia. Pandri Prabono, chair-
man of Indonesia’s oil and gas construction association said that
he can “see a significant change occurring in 2012 in compari-
son to the last few years. The future of infrastructure projects has
become a lot more concrete and clear-cut. Consequently growth
predictions are high and possibly as much as ten percent”. But
where will this infrastructure investment be directed?
Bambang Gyat, director of Indonesian engineering company
ENERKON, which worked on the South Sumatra-West Java pipe-
line, a jewel in Indonesia’s energy infrastructure, saw that “2012
promises to be a big year for the energy-related construction
industry as all the stakeholders from government to private com-
panies now recognize that energy infrastructure is the key priority
for both the development of Indonesia and increasing produc-
tion. One can observe this push particularly in relation to Indo-
nesian gas infrastructure.” In fact, according to Gyat, 2012 will
offer growth beyond the capacity of local engineering compa-
nies stating that: “Currently local EPC contractors or indeed local
engineering consultants and project management companies
cannot fulfill the new projects being offered by the market.” Gyat
explains that the expansive market eliminates tough competition
among local engineering companies meaning that the main chal-
lenge is simply convincing chief contractors and operators of their
capabilities.
Steven Budisusetija, former president director of Tripatra, one
of Indonesia’s top three EPC companies alongside IKPT and
Rekayasa Industries, concurred that he saw demand increasingly
coming from the downstream sector in the form of FRSUs and
regassification terminals given that the archipelago makes pipe-
line infrastructure mostly uneconomic. His successor Joseph Pan-
galila stated that:
"With more future development in offshore deep-water proj-
ects, downstream projects (LNG and Refineries) and mine and
minerals processing, Tripatra has been preparing itself for these
markets. Tripatra has started bidding for projects in this market
segment with partner(s) in the form of
consortia or joint operations"
The growth in the construction market
has already resulted in a tripling of the
company's backlog between 2010 and
2011. Tripatra was also invited by Exxon-
Mobil to participate on the Banyu Urip
field on Indonesia’s Cepu block. Provid-
ing a degree of local know-how in han-
dling this notoriously challenging project
in regard to permitting issues, Tripatra
has now created a corporate affairs unit
to better support the project in dealing
with the external conditions created by
local government and local communities.
Therefore where the company may require
further development from a technical per-
spective, local knowledge provides them
with an advantage in major projects.
Whilst opportunities are plentiful for
standard EPC contracts, the technical
challenges of new upstream offshore proj-
ects promise what James Tsang, operations manager of Wood
Group Kenny Indonesia, sees as a "strong demand for special-
ized oil and gas engineering, including subsea and pipelines”.
Wood Group Kenny’s presence in Indonesia was first developed
thanks to their breakthrough project for BP’s Tangguh LNG facil-
ity. After being convinced of the value of this market the com-
pany grew roots and expanded rapidly since then to become the
leading subsea engineering company in Indonesia focusing on
special materials. Tsang now sees a second wave in the growth
of the market which was, “kick started by Chevron with Gendalo
Gehem, but there are other deepwater developments coming up
including Inpex’s Abadi Field, ENI Jangkrik and Terang Sirasun”.
Tsang sees growth across the SEA region and highlights Indone-
sia as a center of engineering excellence for other regions.
Pandri Prabono, chairman GAPENRI
Joseph Pangalila, president director PT Tripatra Engineers and Constructors
James Tsang, president director PT Wood Group Kenny
21
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 69
Leaders of Indonesia’s oil and gas industry
recognize this need to go international indeed
R. Priyono, chairman of BP MIGAS, Indonesia’s
upstream regulator said that:
“Pertamina will only improve by becoming
more ambitious. The famous boxer, Muham-
mad Ali, became the greatest boxer and heavy-
weight champion of the world because his sparring partner was always
bigger and stronger than he was. This spirit must be brought to Pertam-
ina, who must look internationally for their sparring partners and look to
aggressively acquire blocks outside of Indonesia.”
However, Priyono insists that this internationalization must come after its
national responsibilities have been met. He stated that “Pertamina will be
the backbone of Indonesia’s future production and carries a great national
responsibility to explore and develop these fields”, but that the company
must become more aggressive in developing their domestic assets.
In 2012 ESDM has much touted the possible revision of the 2001 law.
The Indonesian government has now set a 2025 target of 50 percent
production coming from local companies which apart from domestic
producers, Medco and Energi Mega Persada, essentially means a much
greater responsibility for Pertamina. A redrafted oil and gas law would
therefore likely increase Pertamina’s domestic role, taking it from having
25 percent rights to all new PSCs to having first right of refusal on all
CarSPC_OGFJ_1210 1 9/12/12 11:36 AMCarWoo_OGFJ_1210 1 9/12/12 11:57 AM
R Priyono, chairman BPMIGAS
Discussing deepwater subsea projects in Jakarta - courtesy of Wood Group Indonesia
22
70 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
Suharto’s authoritarian regime Indonesia is now a stable democratic
country. Under Yudhoyono's leadership the country's 33 regional
governors became democratically elected and whilst the fear of bal-
kanization has largely been laid to rest, previous inequities in resource
management meant that a side effect of this democratization pro-
cess has been the decentralization of oil and gas governance. Satya
Yudha, member of Commission VII of Indonesia’s House of Repre-
sentatives stated: “Through the process of Indonesia’s democratiza-
tion new stakeholders have entered the fray, and they are demanding
their fair share of resources, benefits and investments”.
Yudha points out that in the past central
government has not always been the best
arbiter of what is required to meet local energy
needs highlighting that thanks to the central-
ized system areas such as East Kalimantan (an
area around the size of New Mexico) on the
island of Borneo is responsible for 54 percent
of Indonesia’s gas production, and yet the whole region including its
capital city Sangatta suffers from rolling electricity blackouts.
On the other hand, there have been prominent cases of key national
oil and gas projects undermined at the regional level. Indeed, Indo-
nesia’s largest oil discovery of the past decade, the Banyu Urip field
on ExxonMobil’s Cepu block, from which ESDM targets 165,000 bpd
by 2014, was originally due to start production in 2012 but because
of permitting issues at the regional level, was pushed back two years.
Such regional involvement in energy governance inevitably creates
bottlenecking for the producers and the service industry alike with
operators facing a complex web of local stakeholders and suppli-
new blocks prompting the company to take a greater share of domestic
production.
The question is whether Pertamina is ready for such responsibility
in technical capacity terms. Developing the East Natuna block, one of
Indonesia’s most challenging projects with 70 percent CO2 content,
prompted Pertamina to seek international expertise first with Norway’s
Statoil and then with Total.
Pertamina is also locked in extensive negotiations with Total regarding
a potential 51:49 partnership on the Mahakham Block in East Kaliman-
tan, although these are stalling on the fact that Pertamina wants opera-
torship. Indonesia's NOC has a steep learning curve ahead of it in the
domestic market and it has domestic challenges, capacity building and
new responsibilities to attend to before stepping onto the world stage.
A Teenage RevolutionSamudra Energy is one of the runner-ups among
Indonesia’s E&P companies and very close
to the top three, according to its CEO Frank
Inouye. He sees a major role for juniors in actu-
ally driving forward innovation in the industry.
Samudra Energy holds seven assets in Indo-
nesia, out of which it operates five. The majority
of these assets are located in central and south
Sumatra. For the last two years Samudra Energy has been piloting a
chemical enhanced oil recovery scheme, a technique that is just now just
starting to be applied in Indonesia. “Players such as Chevron and Medco
are looking at the technique as well, but I would argue we were the first
to run an in-field pilot study,” Inouye said.
He continued: “A lot of the new ideas on exploration and technol-
ogy, on how to squeeze a little bit of extra oil out of the existing areas,
will come from the smaller players. Historically the majors are the first
to enter new areas, such as deep water and/or adopt new technology
ideas but I believe this is changing and the entrepreneurial spirit of many
smaller companies, such as Samudra, is challenging this tradition.”
Allocating Resources - a Splitting Headache Article 33 of the Indonesian constitution drafted in 1945, states that
Indonesia’s energy must be used for the maximum benefit of the
Indonesian people but who decides this? 14 years after the fall of
Frank Inouye, chief executive officer Samudra Energy
Satya Widya Yudha, member Commission VII DPR- RI
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Drilling
Evaluation
Completion
Production
Intervention
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De
pth
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/m)
Weatherfordís Microflux control system enabled total depth to be reached ahead of schedule.
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Microflux system Conventional
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CarWea_OGFJ_1210 1 9/12/12 11:54 AM
23
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that were once considered undrillable.
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3,000
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13-3/8 in.
20 in.
9-5/8 in.
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De
pth
(ft
/m)
Weatherfordís Microflux control system enabled total depth to be reached ahead of schedule.
Days
Microflux system Conventional
2 Lossesóslow rate of penetration
3 Stuck bottomhole assemblyófishing
4 Lossesóstuck pipe
5 Plugged and abandoned, sidetrack, lose well
1 Wellbore ballooning
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24
72 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
with the regulations of the central government. We have to rectify
this, and today almost 10,000 of those 12,000 regulations have been
resolved,” Mangkusubroto explained.
Betting their Batam dollar on growthWhilst Indonesia’s energy focus will likely be directed inwards for
the coming years, there is at least one region which will keep its
eyes fixed on the horizon. Tucked just below the southern tip of
Singapore lie the Indonesian islands of Batam, Riau and Karimun.
Although Singapore has traditionally held the regional position as a
strategic hub and headquarters for many companies in the marine
construction and engineering industries, the city state suffers from
a fundamental lack of space and human resources, which drives up
operating costs.
madame prousT: In searCh oF exTra TImeBulwark of Indonesia’s national gas production, having occupied the
top spot since it began production in 1968, is French company, Total
E&P Indonésie. Total’s president director and general manager in
Indonesia, Elisabeth Proust, has recently been nominated as head
of the Indonesian Petroleum Association and Focus Reports caught
up with her to discuss the strong yet challenging position of IOCs in
Indonesia.
How do you see the main challenges for an IOC in Indonesian
production today?
Indonesia faces a strong need to accelerate the development of
proven fields not yet in production and exploration to bring new
reserves. In order to achieve this, the uncertainties both in the regu-
latory frameworks, in the stability of the contracts and in the future
pricing mechanisms for gas must be eliminated.
The conditions for performing exploration work-programs must
also be improved with rationalization of the regulations on local con-
tent in order to create a better match between the requirements and
what is actually feasible.
These various issues have had a negative impact on the develop-
ment of oil and gas projects and have slowed down production in
Indonesia. The government must give confidence to the investors
and provide attractive terms to promote the
development of fields and exploration.
In the second half of the decade the
PSCs of several IOCs will expire, includ-
ing Total’s Mahakham Block. In a climate
of Indonesian production being increas-
ingly offered to domestic companies, how
is this affecting your investments on the
block?
The Mahakam block has been the primary reason why Total is
the number one gas producer in Indonesia. As such, the company’s
ongoing priority is to maintain a high production level from this field
and Total still performs exploration and developments to achieve
this. In terms of current activity the company is at the peak of its
operations. Last year, Total drilled 125 wells when we had initially
intended to drill 110 and every year we increase our investment bud-
get – last year it stood at USD 2.3 billion.
Total is investing with the assumption of a positive outcome
beyond 2017. However, soon Total will need to have an indication
of the terms and conditions of its possible participation in the block
after 2017.
Elisabeth Proust, presi-dent director & general manager TOTAL E&P
ers achieving lower than expected financial returns due to project
slippage.
Kuntoro Mangkusobroto, the head of the Presidential Delivery
Unit, the Indonesian equivalent of the White House’s West Wing, is
responsible for overseeing the progress of the countries’ national pri-
orities as implemented by the ministries, resolving bottlenecks and
managing the President’s Situation Room.
“Two things were ignored at the time when
the decision was made to decentralize: the
capacity of the local government to manage
their own region, and how local regulations
would be issued. In the past twelve years
almost 12,000 new local regulations were
issued, and the majority of them are in conflict
Kuntoro Mangkusubroto, head of Presidential Delivery Unit
25
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 73
Like a well rehearsed understudy waiting in the wings, Batam has
always sought to share the limelight. McDermott first pioneered
investment in Batam back in 1970 and Scott Cummins, senior VP &
GM Asia Pacific feels that Batam was instrumental in McDermott’s
expansion in the APAC region which now contributes USD 1.9
billion in revenues, over half of McDermott’s global turnover. He
described the benefits of Batam:
“there are huge logistics savings brought through Indonesia’s
strategic location and proximity to fast growing oil and gas produc-
tion in countries like Australia. The Batam facilities have steadily
expanded through investment over the last 40 years thanks to the
availability of land and labor. This expansion has allowed McDer-
mott to attune to the increasing scale and complexity of projects in
the Asia Pacific (APAC) region.
In 2011, McDermott’s workforce in Batam peaked at 9,000
employees and although the cyclical demands for labor rise and
fall, we have a very strong base level of engi-
neers, 98 percent of whom are Indonesians.
This high level of local participation makes
the operation very competitive at the same
time as providing jobs for Indonesia”.
Even though McDermott has now estab-
lished a new manufacturing base in China,
Batam will continue to represent the regional
CarSPIE_OGFJ_1210 1 9/12/12 1:40 PMCarToyo_OGFJ_1210 1 9/12/12 1:42 PM
Scott V. Cummins, senior vice president & general manager Asia Pacific, McDermott
McDermott's North Ocean 102 is a fast-transit, dynamically positioned subsea construction vessel
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 77
Final PerspectivesThe mood in Indonesia’s oil and gas industry is a little somber given
the lack of major discoveries for over a decade, falling oil produc-
tion levels and troublesome transitions from the domestic takeover
of expiring PSCs to local content clauses. Yet, having placed energy
security as a key focus in Indonesia’s policy framework and in view of
the ravenous domestic market for energy as well as the diversity of
resources in the energy basket, Indonesia offers up an archipelago of
energy opportunities.
Whilst in the past Indonesia might have envied membership of
the so-called BRICS nations, the sight of nearby neighbors India and
China beginning to lose puff might inspire Indonesia to instead iden-
tify more with the MIST nations (Mexico, Indonesia, South Korea and
Turkey) whose steadier movement to the front of the field looks set to
be a feature for the coming years. Indonesia now hopes to keep pace
with more sustainable energy.
“From 2003 to 2007 it was easy to find local
people to work on these projects. Local con-
tent was not a major issue at the time. How-
ever, from 2008 onwards many oil and gas
companies especially from the Middle East
came to Indonesia to recruit Indonesian spe-
cialists to work on their projects in the Middle
East, Malaysia, Singapore, Kazakhstan and even in Europe.”
SPIE, which provides training and expertise services, now sees an
opportunity to establish Indonesia’s largest training facility within the
next five years in order to support Indonesia’s major transitions in
energy projects. Abbes explained that there are a limited number of
training facilities in Indonesia with many of them utilizing obsolete
equipment. SPIE which now has 665 employees doubled its growth
between 2010 and 2011 and through its planned training center
intends to explore the opportunity to provide for Indonesia’s higher
value niche industries such as geothermal and CBM.
CarAlfa_OGFJ_1210 1 9/12/12 11:17 AM
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And Processing Industries
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�
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NETZSCH Pumps
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Komplek Rukan Permata Senayan Blok A/30
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CarSury_OGFJ_1210 1 9/12/12 1:44 PM
Samir Abbes, Spie Oil and Gas
26
74 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
hub for the company. McDermott's Umbilical, Riser, Flowline (URF)
for INPEX-operated Ichthys LNG Project is their largest order inter-
nationally and will see the Batam facilities fabricating 16,000MT of
subsea equipment from early 2013.
Assessing the growth of offshore and subsea projects in APAC
and McDermott's involvement in projects from Inpex's Ichthys URF
and Chevron's Gorgon project in Australia
and Chevron's Gendalo-Gehem and Inpex-
led Masela LNG in Indonesia, Cummins
sees his Batam facilities as "well positioned
to deliver on our client’s needs."
However, the export-led growth model
for Batam is under review. Indonesia’s over-
all economic success is now more predi-
cated on a growing domestic market which
has been sheltering it from the vagaries
of the global slowdown. As an export-ori-
ented region, Batam’s investment growth
has fallen behind the rest of the country.
The region is consequently changing strat-
egy having initiated a 2011-2015 roadmap
designed to develop their activities towards
logistics and transshipment industries.
Asroni Harahap, deputy for supervision
of the Batam Indonesia Free Zone Author-
ity (BIFZA) explained that Indonesia is now
turning towards transshipment. Given that
the country can claim the same strategic
position as Singapore on the major ship-
ping routes between China, India and the
Middle East and go one better on price and
human resources, he sees this direction as
vital for the region's economic future:
“The transshipment port project,
designed to become operational in 2015,
is a key element in our new economic strat-
egy. Lying on the same shipping routes as
Singapore, Batam can become a transship-
ment hub for the region and although geo-
graphically close to Singapore… the limited
land availability in Singapore represents a
limit on capacity and drives up the cost of
transshipment creating opportunities for
Batam”.
A Deceptively Challenging
Asroni Harahap, Deputy Chairman BIFZA
CarBIF_OGFJ_1210 1 9/12/12 4:03 PM
27
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 75
an inevitable back and forth which means that tenders take on aver-
age three to five months longer than before to complete. Weather-
ford’s own success in tenders for completion dropped from 28.8 per-
cent to four percent from 2010 to 2011 simply as a result of changes
in PTK 007.
Harvey said that the Q4 activity spike expected from Niko Resources
and Chevron’s West Seno projects should act as the foundation for a
few relatively strong years, but further down the line the PSC expiry
for Total in 2017, Chevron in 2018 and Conoco Phillips in 2020 will
cause a dip in the market as equity is transferred to new owners.
Asked why Weatherford continued to invest
in the market Harvey replied “the govern-
ment is engaging us to address our concerns,
to shed light on the problems and find solu-
tions… When you consider the opportu-
nity for change in Indonesia, you appreciate
that the country offers vast potential for the
growth of business”.
Many high-quality service and equipment providers to the Indone-
sian oil & gas industry also have to deal with is the slow adoption of
new technology. Swedish Alfa Laval, which develops heat transfer,
separation and fluid handling technologies, knows the issue all too
well. Andre Tjhai Tjin Fung, managing director of Alfa Laval in Indo-
nesia explained that as is the case with the oil & gas industry in many
other countries, it takes the industry in Indonesia time to adopt new
technologies, and this can indeed be a challenge to innovative equip-
Supplier MarketOstensibly the Indonesian service market looks buoyant with projec-
tions of USD 21 billion investment in the oil and gas sector in 2012
driving a significant growth in the services market. Chevron alone will
invest USD 7-8 billion in deepwater fields Gehem and Gendalo, Inpex
is looking to invest USD 4.9 billion in its floating LNG platform on the
Masela block and Total staked out USD 2.3 billion on its Mahakam
block last year. And yet despite this growth opportunity, according
to survey of 502 industry executives quoted by the IPA, Indonesia fell
three places to 114th out of 135 countries in terms of its oil and gas
investment climate.
Robert Harvey, president director of oilfield
services company Weatherford, bemoaned
that in spite of a record turnover for his com-
pany last year their return on investment was
the lowest in the region. The trouble, accord-
ing to Harvey, is that “There are too many
punitive disincentives present in the govern-
ment regulated tendering process. The main problem is that the pro-
cess enables operator supply chains to manipulate the penalties of
sanction points to their advantage. There also exists the operator’s
ability to pass its risks onward.”
Measures such as the procurement regulations PTK007 introduced
over the last five years draw the most fire from service companies.
PTK007 privileges local service companies in contracts with a 35 per-
cent minimum even when that becomes impracticable and results in
McDermott Indonesia's fabrication yard on Batam island
Robert Harvey, president director Weatherford
Andre Tjhai Tjin Fung, managing director Alfa Laval
28
76 energy.focusreports.net October 2012 Oil & Gas Financial Journal • www.ogfj.com
InvesTmenT perspeCTIvesA question to Chris Wren from the British Chamber of Commerce,
Andrew White from the American Chamber of Commerce, Nicolas
Cambefort from International French Chamber of Commerce and
Industry and Ananda Idris, from Intsok Indo-
nesia, on doing business in Indonesia.
Would you give your perspective on the
main opportunity and challenge for compa-
nies from your country operating in Indone-
sia's energy industry?
IFCCI: Advantage: French companies present
in Indonesia are complementary, the big ones
bring the financing and the smaller ones bring
the specified expertise and know-how. Chal-
lenge: the recent regulations encouraging
domestic and national companies over for-
eign ones might have reduced the optimism
to invest in the long-term in Indonesia.”
British Chamber: "The UK is back on the map
as being a provider of quality technology— In
the list of British energy companies growing and investing in Indonesia
I would mention BP and Premier Oil. Regarding smaller players, Busi-
ness is very difficult for foreigners, instead of trying to be completely
autonomous, they need to build and use local networks first.”
American Chamber: “American companies
have the best technology and processes, and
most importantly they do what they say and
stand by their commitments. Clean energy is
one area where there is tremendous oppor-
tunity. However, current regulations make it
difficult to start up a new enterprise to the
detriment of local firms and investors.”
Intsock: “Norwegian companies have com-
petencies that can be of great value here in
Indonesia. They can bring beneficial knowl-
edge and change certain processes such as
in deepwater drilling, in EOR, or creating the
gas value chain. However, their prices and
costs are high. Norwegian companies are
used to operating at very high cost in the Norwegian Sea, but I do
not think that it is realistic to expect to operate at the same costs in
Indonesia."
successful business in Indonesia. This is why last year we achieved a
very important milestone in that regard with the decision to acquire a
major share in a local company called IKPT. We are a global company,
but we like to act local.”
A Talent for ServiceWhere supplier costs are being squeezed, one resource which con-
tinues to carry a high value in the industry is people. On the back of
a decade-long EPC partnership with Total E&P Indonésie in Balikpa-
pan, French company, SPIE Oil and Gas was approached to provide
expertise and staff replacements. SPIE’s director in Indonesia, Samir
Abbes explains that the human resources challenge, was more acute
in Indonesia because of a growing respect for the country’s engi-
neers. Abbes said:
ment providers like Alfa Laval. This situation is mainly due to long
decision making processes that involve comprehensive approval &
licensing. To overcome this challenge, they must involve many parties
to find out when our new technologies can be implemented.
Regulations like PTK007 force international suppliers to engage in
localizing strategies. One of Japan's leading EPC companies, Toyo
Engineering is doing just that. Jae Yong Choi,
Chief Representative of TOYO Engineering in
Jakarta, comments on their recent moves:
“Localizing is one of the priorities of our
strategy. We have built excellent relationships
with local companies over time. We believe
that harmonizing with the local enterprises
is the most significant key factor to conduct
Andrew White, manag-ing director American Chamber of Commerce
Chris P. Wren, chief executive officer, British Chamber of Commerce
Nicolas Cambefort, vice president project construction Total & vice president Indonesian French Chamber of Com-merce and Industry
Ananda Idris, oil and gas advisor Intsok
Jae Yong CHOI, chief representative Toyo Engineering
29
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 77
Final PerspectivesThe mood in Indonesia’s oil and gas industry is a little somber given
the lack of major discoveries for over a decade, falling oil produc-
tion levels and troublesome transitions from the domestic takeover
of expiring PSCs to local content clauses. Yet, having placed energy
security as a key focus in Indonesia’s policy framework and in view of
the ravenous domestic market for energy as well as the diversity of
resources in the energy basket, Indonesia offers up an archipelago of
energy opportunities.
Whilst in the past Indonesia might have envied membership of
the so-called BRICS nations, the sight of nearby neighbors India and
China beginning to lose puff might inspire Indonesia to instead iden-
tify more with the MIST nations (Mexico, Indonesia, South Korea and
Turkey) whose steadier movement to the front of the field looks set to
be a feature for the coming years. Indonesia now hopes to keep pace
with more sustainable energy.
“From 2003 to 2007 it was easy to find local
people to work on these projects. Local con-
tent was not a major issue at the time. How-
ever, from 2008 onwards many oil and gas
companies especially from the Middle East
came to Indonesia to recruit Indonesian spe-
cialists to work on their projects in the Middle
East, Malaysia, Singapore, Kazakhstan and even in Europe.”
SPIE, which provides training and expertise services, now sees an
opportunity to establish Indonesia’s largest training facility within the
next five years in order to support Indonesia’s major transitions in
energy projects. Abbes explained that there are a limited number of
training facilities in Indonesia with many of them utilizing obsolete
equipment. SPIE which now has 665 employees doubled its growth
between 2010 and 2011 and through its planned training center
intends to explore the opportunity to provide for Indonesia’s higher
value niche industries such as geothermal and CBM.
CarAlfa_OGFJ_1210 1 9/12/12 11:17 AM
SOLUTION PROVIDER to the
Oil and Gas produc�on
And Processing Industries
�
�
�
�
Peerless Mfg. Co. Separa�on and Filtra�on Systems
NETZSCH Pumps
Gas Compressor and Pump Rental
Retro�t and Opera�on Maintenance Services
Komplek Rukan Permata Senayan Blok A/30
Jl. Tentara Pelajar Jakarta 12210
Phone : (021) 57 941 180
Fax : (021) 57 941 181
www.suryamanikam.com
CarSury_OGFJ_1210 1 9/12/12 1:44 PM
Samir Abbes, Spie Oil and GasSamir Abbes, Director Indonesia Spie Oil and Gas
www.ogfj.com • Oil & Gas Financial Journal October 2012 energy.focusreports.net 73
Like a well rehearsed understudy waiting in the wings, Batam has
always sought to share the limelight. McDermott first pioneered
investment in Batam back in 1970 and Scott Cummins, senior VP &
GM Asia Pacific feels that Batam was instrumental in McDermott’s
expansion in the APAC region which now contributes USD 1.9
billion in revenues, over half of McDermott’s global turnover. He
described the benefits of Batam:
“there are huge logistics savings brought through Indonesia’s
strategic location and proximity to fast growing oil and gas produc-
tion in countries like Australia. The Batam facilities have steadily
expanded through investment over the last 40 years thanks to the
availability of land and labor. This expansion has allowed McDer-
mott to attune to the increasing scale and complexity of projects in
the Asia Pacific (APAC) region.
In 2011, McDermott’s workforce in Batam peaked at 9,000
employees and although the cyclical demands for labor rise and
fall, we have a very strong base level of engi-
neers, 98 percent of whom are Indonesians.
This high level of local participation makes
the operation very competitive at the same
time as providing jobs for Indonesia”.
Even though McDermott has now estab-
lished a new manufacturing base in China,
Batam will continue to represent the regional
CarSPIE_OGFJ_1210 1 9/12/12 1:40 PMCarToyo_OGFJ_1210 1 9/12/12 1:42 PM
Scott V. Cummins, senior vice president & general manager Asia Pacific, McDermott
McDermott's North Ocean 102 is a fast-transit, dynamically positioned subsea construction vessel
30 Evita Legowo Director General of Oil and Gas Ministry of Energy and Natural Resources
IntervIew wIth:
evita legowo director general of oil and gas ministry of energy and natural Resources
Evita Legowo Director General of Oil and Gas Ministry of Energy and Natural Resources
Focus Reports: What do you see as the major opportunities drawing investment into Indo-nesia’s oil and gas industry? Evita LEgowo The main investment oppor-tunities are connected with the upstream side of the oil and gas sector and the gov-ernment is now very keen to sign new PSCs with industry. In fact, my target for 2012 is to sign a further 30 upstream contracts for oil and gas and a minimum of 15 for unconventional gas, especially coal bed methane (CBM). The government is aiming to attract a lot of upstream investment in Indonesia this year.
Oil and gas companies should note that there are currently three major paradigm shifts occurring in Indonesia’s oil and gas industry, which present new opportunities. The first is the movement of production from the West, where most of Indonesia’s traditional oil and gas deposits lie, to the East, which is a highly prospective region for future production. The second para-digm shift is the movement of production from onshore to offshore deposits and even deep-water E&P operations. The third par-adigm is the shift from oil production to gas production.
FR: With new gas developments taking centre-stage, what potential is left in Indonesia’s oil reserves? Evita LEgowo Although Indonesia is shift-
ing its production paradigms, there are still very large oil deposits in the Western part of Indonesia. The technology used up until now has only produced around 40% of the oil reserves. So far Chevron in central Sumatra has used enhanced oil recovery (EOR) technologies to their full extent and Pertamina just started to use this technol-ogy also. With the oil price standing at over $90 per barrel the potential to apply these technologies to all the remaining fields is huge - 60% of Indonesia’s oil is still in the ground. All that is required now is invest-ment in EOR technology. The government is pushing Pertamina to produce oil using these methods in view of its large mature onshore field portfolio.
Although Indonesia is shifting its production paradigms, there are still very large oil deposits in the Western part of Indonesia.
31
FR: How do you create a good investment cli-mate for the use of these technologies? Evita LEgowo The first step in creating a good investment climate is providing ade-quate data about potential deposits. This is especially true in the case of regular ten-ders because the oil industry has 3 impor-tant characteristics: high-cost, high-risk, high-tech. These three factors all mean that oil companies are cautious by nature when investing in projects and this hesi-tancy can be alleviated if good data is already provided.
Another factor which we need to work on is a better regulatory environment. My contacts in the industry affirm that the most important thing to maintain in Indo-nesia is stable regulation and the sanctity of contracts. There should also be a good relationship between central and regional government with the latter understanding and supporting the oil and gas industry and national policy. The government is aiming to tackle these issues in 2012.
FR: Indonesia’s profile was historically con-nected with energy exports. What is the future of energy in Indonesia? Evita LEgowo There are three different per-spectives: short-term, mid-term and long-term. In the short term Indonesia must guarantee its energy security and provide for its own needs. The fastest way to achieve this is to switch the domestic mar-ket from oil to gas consumption.
The government’s mid-term objective is that by 2025 the domestic market will have security of supply for oil, gas and oil prod-ucts. The greatest challenge is to overcome Indonesia’s dependence on oil products which currently constitute 1/3 of domestic consumption. Importing crude oil is not so problematic especially in cases where Indo-nesia does not have the required crude type. For example, the lubricating oil pro-duced in the Cilacap refinery requires crude with high sulfur content and most of Indo-
nesia’s crude oil is sweet crude with limited levels of sulfur. In this instance it is accept-able to import crude oil. The main concern is therefore overcoming the deficit in oil products and Indonesia must build new refineries so that we can fulfill our domes-tic needs.
The long-term objective is a completely new attitude towards alternative energies within the population. Currently the pop-ulation is even resistant to using gas and therefore the mind-set of the Indonesian population needs to change. The govern-ment needs to prepare the population to adopt other energy resources including unconventional gas. Ultimately, it is about creating a sustainable energy culture.
One aspect which still concerns me is that Indonesians do not yet utilize energy in an efficient fashion. Indonesia’s energy intensity is still above 1 and the target by 2025 is that this figure falls to less than 1. The government is trying to implement a program of converting from kerosene to LPG use in the household and we also started to supply gas to households, espe-cially for villages situated near gas sources. However, the main change must come in the mind-set of the population.
There are three different perspectives: short-term, mid-term and long-term. In the short term Indonesia must guarantee its energy security and provide for its own needs.
32 Dr .Subroto Chairman of Bimasena,Former Secretary General of OPEC and Minister of Energy and Natural Resources of Indonesia
IntervIew wIth:
dr .subroto chairman of Bimasena Former secretary general of opec and minister of energy and natural Resources of Indonesia
Focus Reports: Since the last time we interviewed you, Indonesia has switched from being recog-nized as an international oil exporter to having an energy industry focused on domestic energy security. What is your perspective on the evolu-tion of Indonesia’s energy profile? DR. SubRoto: Indonesia’s energy profile is mov-ing in the wrong direction: energy demand is increasing whilst oil production is in decline. Indonesia is now producing less than 1 mil-lion bpd and out of Indonesia’s oil production, around 300 thousand bpd is exported so only 600 thousand bpd is kept for domestic con-sumption. At the same time, consumption is 1.1 million bpd! In other words, around 500 thousand bpd needs to be imported. This is the figure for crude imports, but of course this needs to be refined and Indonesia’s refining capacity stands at only 1 million bpd meaning that petroleum products need to be imported as well.
If the international price of oil remains stable then there is not a significant problem, but the current volatility of oil prices is prov-ing a significant headache for government. This has been particularly clear in the case of Iran closing the Strait of Hormuz as well as the internal tensions in Nigeria which are causing volatility in oil production and price.
Clearly, Indonesia cannot continue with the status quo and consider itself an oil pro-ducer. One of the biggest steps is to tell the population that Indonesia is not a great oil power anymore. The population is still under the illusion that Indonesia is oil rich, there-fore we need to be more honest with the peo-
ple. Indonesia needs to diversify into new and
renewable energies. The basic strategy of Indonesia is three-
fold: 1 the intensification of exploration; 2 the diversification of resources; and 3 improving conservation of energy.
FR: What should the government do to resolve these issues?DR. SubRoto: The government must recognize that when oil companies explore difficult areas, logically they will want a greater pro-duction share. The 85:15 split of oil share will need to be renegotiated.
Reforming the operational environment requires time and burdensome bureaucracy is difficult to remove. Corruption is also a long-term problem to be solved. However, infra-structure is a space where the government can begin to make a difference right now.
To overcome the issue of overlapping regu-lation there needs to be better communication between the center and the regions
FR: What therefore needs to be done in the second pillar: diversification? DR. SubRoto: Indonesia has oil, gas, coal, and different alternative resources. These alterna-tives are still quite rudimentary in develop-ment and require time, capital, political will and cooperation with the people. Out of this mix of energy sources the most practical step in Indonesia’s diversification is to move to gas. However, the problem is that Indonesia exports most of its gas, partly because of
Dr .Subroto, Chairman of Bimasena,Former Secretary General of OPEC and Minister of Energy and Natural Resources of Indonesia
33
infrastructure but also because of the need of foreign exchange to buy the necessary equip-ment for the country’s development.
A lot of infrastructure is needed in terms of gas stations, pipelines, converters from coal to gas etc. These are the infrastructure proj-ects the government should implement. Right now the government must oblige the people to switch from oil to gas and the government develop the infrastructure in parallel.
FR: Ari Soemarnon, former CEO of Pertamina told us that he wanted Pertamina to become an international leader in 15 years time. Do you see this as feasible? DR. SubRoto: You should always begin with an idea; without an idea you have nothing. Some people could view Ari Soemarno’s plans as a pipedream, but there is a saying: “winners are dreamers who do not give up”.
Of course there are many challenges of implementation but there must always be an initial plan. All of the technical, managerial and financial aspects can be overcome once the initial vision is set.
Domestic banks have until recently been reluctant to finance ambitious domestic proj-ects. Right now banks are starting to appreci-ate local needs and loan to Indonesian com-panies, which is crucial for growth. Another recent bonus is the upgrading of Indonesia’s investment climate by Moody which makes it easier to obtain overseas capital.
You saw Indonesia on the world stage in your role as Secretary General of OPEC. What will put Indonesia back onto the world stage?
Being on the world stage is not all about oil exports or being a member of OPEC. Nat-urally, Indonesia had a certain prestige and political status attached to being the only Southeast Asian member of OPEC. However, there are many things that Indonesia can do to be reckoned with in the global arena. Indo-nesia is already a member of the G20, and Indonesia has moved from a 4% GDP growth to 6.5% in 2012 with 7% or even 8% growth possible in the near future. Indonesia was the
only country in the region during the financial crisis of 2008 which was able to increase its rate of growth. These aspects alone confer prestige on the country and help Indonesia to be recognized on the world stage.
Regarding energy specifically, I do not see Indonesia rejoining OPEC because it is still a net importer. Indonesia could make steps towards reducing consumption and increas-ing production, reducing consumption is how-ever, very difficult because the country is growing.
However, Indonesia can reduce the con-sumption by switching to alternative energy sources.
FR: How would you sum up Indonesia’s future in the global energy picture ?DR. SubRoto: Through a well-devised energy policy, Indonesia will be able to play a substan-tial role in the international context. Indone-sia’s growth is sending a message to the West which has in the past degraded the rest of the world. Western countries created their own label “the West” and the remaining countries subsequently became “the rest”. Now the “West” is resting and the “rest” are growing rapidly. Indonesia will play an important part in the shift of power from West to East.
In Kishore Mahbubani’s book: “Can Asians Think?” he explains that from year 0 to year 1,000 the East, including India and China, was more developed in its thinking and tech-nology, indeed the first university was founded in Cairo. From 1000ad to 1600ad Europe experienced the dark ages but the West began to learn from the Arabs, the Chi-nese and the Indians.
The emerging nations now produce more than the West put together. The West which educated us does not like that the East has become more powerful but must learn to col-laborate with the East for the whole world to benefit. This trend and the revolution in Asian thinking is occurring in Indonesia.
34 Herry Wibiksana President and General Manager AWE Indonesia
IntervIew wIth:
herry wibiksana president and general manager awe Indonesia
Focus Reports: How do you see the transforma-tion in the Indonesian upstream industry in 2012? HERRy wibikSana As everyone knows, Indone-sia’s oil production has been in decline and we are no longer an OPEC member. However, over the same period of time Indonesia total oil and gas production has increased to around 2.6 million boe/d and interest has shifted from oil deposits to gas deposits. There is also a transition in the location of Indonesia’s production, which has tradition-ally been concentrated in the West of Indo-nesia whilst the East has been barely explored. The government is now focusing on encouraging E&P in the East of Indonesia and several companies are moving their oper-ations to this region. These two transitions in Indonesia’s upstream industry are both clear and evident in 2012.
The third transition in Indonesia’s upstream industry is away from onshore and towards offshore production. One of the rea-sons for this is because onshore fields on Java, Sumatra and on West Kalimantan are mostly mature fields. Companies are looking for major new discoveries in unexplored ter-ritories. Although there are still prospects in the East of Kalimantan and Sulawesi, the major finds will henceforth be offshore.
The final point to mention is that with the
transition towards offshore E&P the cost of operations is increasing and smaller players do not have the capabilities to undertake this kind of operation. Deepwater offshore pros-pects will therefore be developed by medium to large E&P companies.
FR: Given the current production cycle, which companies should be participating in the future of exploration and production in Indonesia? HERRy wibikSana: Over the last 5 years the government has sought to provide domestic oil and gas companies with greater opportu-nities to develop.
However, ultimately oil and gas is not like a manufacturing operation, in which you can build a factory and start receiving production
Herry Wibiksana President and General Manager AWE Indonesia
Over the last 5 years the government has sought to provide domestic oil and gas companies with greater opportunities to develop
35
revenues 2 years later. It may take 10 years to process an oil and gas asset from the explo-ration stage to finally putting it on-stream. It is a high-risk, high-cost and long-term business. The government therefore needs to have serious players operating in the country who understand fully the nature of the oil and gas business and who are willing to make a commitment to invest in the country.
Therefore, from one perspective it is good that national oil companies are given an opportunity, but from another, we need to know that national oil companies are serious about developing Indonesia’s assets and have the capabilities to do so. In the meantime, there will remain a place for international companies with experience and technology.
FR: Where do you see the company in 5 years time? HERRy wibikSana: I would like AWE to be seen as one of the key players in Indonesia’s upstream industry and for people to know its name in Indonesia. With our expansion into Ande Ande Lumut production, I see AWE playing an increasingly large role in the coun-try in the near future.
AWE is also diversifying its operations in Indonesia and will soon become involved in unconventional hydrocarbon resources. We have met with Director General Evita Legowo who has awarded the company the permit to carry out joint studies and AWE is actually the first company in Indonesia to perform an unconventional hydrocarbon joint study in an open area, or not belonging to any com-pany. This project is located in central Suma-tra and AWE will be able to use its expertise and experience from the USA in the Sugarloaf shale gas project as well as from the Perth Basin in Australia and apply it to Indonesia. Pertamina is the only company to have com-pleted an unconventional hydrocarbon joint study within their owned block and there are many other companies looking to carry out joint studies in the country.
The future of AWE in Indonesia looks
strong considering our financial position. This will facilitate the expansion of our exploration activities in East Java and in Natuna, the development of the Ande Ande Lumut field and our unconventional studies in Sumatra.
FR: What do you feel that you have been able to bring to AWE’s development in Indonesia as an Indonesian yourself? HERRy wibikSana: I was educated in the United States and have been working for interna-tional oil and gas companies in Indonesia, Canada, USA, and now for an Australian company. Exposure to various corporate cul-tures and leadership opportunities in my car-rier have given me very precious advantages and experience. Being Indonesian I have a natural advantage when it comes to commu-nication and building relationships. Relation-ships are very important all around the world but especially so in Indonesia. It is advisable to start from an informal discussion no mat-ter the size of the issue being discussed. Hav-ing been in the industry for more than 25 years, I have a head start in this. Once par-ticipants are acquainted and informal con-sensus is generated you may begin the pro-cess of creating a formal agreement. Understanding these processes is the main strength I can bring to the business of AWE in Indonesia, however I also bring advantages to the government and local authorities who can speak to me on their own terms.
I would like AWE to be seen as one of the key players in Indonesia’s upstream industry and for people to know its name in Indonesia.
36 Kuntoro Mangkusubroto Head of the Presidential Delivery Unit
IntervIew wIth:
kuntoro mangkusubroto head of the presidential delivery Unit
Kuntoro Mangkusubroto Head of the Presidential Delivery Unit
Focus Reports: After successfully fulfilling cru-cial positions in Indonesia’s government, what made you decide to take on the challenge of lead-ing the Presidential Delivery Unit?kuntoRo MangkuSubRoto: This office is the first of its kind in Indonesia. It is the equiv-alent of the West Wing in the White House, which supports the American president in identifying and solving strategic problems. Here in Indonesia, we monitor and de-bot-tleneck key strategic projects and programs and consult to solve the problems and then let the technical management do the rest. It is a small office consisting of 30 high-calibre people: PhDs and lawyers that combine hands-on experience and intellectual capa-bility to come up with solutions.
My motivation is simple: I have a chance to make a difference for my country and to bring innovation to the government. The Presidential Delivery Unit is a new office, which means that we have a lot of freedom of movement. I know from my experience in leading the reconstruction efforts in Aceh that a lot can be achieved in an efficient manner if we can open up our mind to inno-vation and have the capacity to implement. With the capacity and capability of this office and the support from the president we can get things done.
FR: The current lack of infrastructure is seen as one of the single greatest barriers to achieving greater economic development for Indonesia. What are the key bottlenecks to solving this
problem and how are you contributing to it?kuntoRo MangkuSubRoto: Our economic growth is hampered by poor logistics. Power plants, major logistics, land transport, ports: we understand that our economic growth will linger if we do not solve prob-lems in these areas.
Indonesia has to modernize harbours, make land transport efficient and improve all things related to the transport of goods. The Presidential Delivery Unit monitors progress very closely. We know exactly what is happening today when it comes to major projects such as power plants, harbours, and airports, and we do our best to smoothen processes in order to launch projects quicker.
FR: How will the development of a harmonious regulatory environment benefit Indonesia’s development and what is the way to reach it?kuntoRo MangkuSubRoto: This is one of the excesses that accompanied the introduction of democracy as it is now. When democracy was introduced some 14 years ago, Indonesia simultaneously started a process of decen-tralization in which autonomy was given to the regions and the districts. Outside the areas of defence, fiscal matters, and foreign affairs, everything is in the hands of the local government. Two things were ignored at the time when the decision was made to decentralize: the capacity of the local gov-ernment to manage their own region, and how local regulations would be issued. In the past twelve years almost 14.000 new
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Our economic growth is hampered by poor logistics. Power plants, major logistics, land transport, ports: we understand that our economic growth will linger if we do not solve problems in these areas.
local regulations were issued, and the major-ity of them are in conflict with the regula-tions of the central government.
It is understandable that investors can be confused about the way they should invest in a certain region. It can be unclear who holds authority, whether it is the cen-tral or the local government, the police, or the district attorney. This is the side-effect of decentralization and democracy. Lesson learnt: do not introduce democracy and decentralization at the same time.
How would you assess the openness and atti-tude of the current government towards private sector investment, public – private partner-ships and the role of foreign companies in the energy sector?kuntoRo MangkuSubRoto: The new oil & gas law had a very positive impact from a gov-ernment perspective. Although some mis-takes have to be corrected, I do not believe that it hinders the objective of the new law introduced in 2001.
When it comes to investment coming to Indonesia, things have changed for the bet-ter. Nonetheless, the efficiency of BP MIGAS can be improved. We still see many delays, which represent a high economic cost for the investor and for the Indonesian economy.
The participation of the private sector in Indonesia is going as planned. Pertamina was spoiled by protection during the thirty years of the old regime, which weakened its muscles. Now they have to train their mus-cles and make it strong. But if you want somebody to exercise, then you have to pro-vide the right environment. It is not fair to ask Pertamina to strengthen its muscle without providing the proper environment. This does not mean that we have to protect Pertamina, but it does mean that we have to give more attention to the company to increase its capacity and become a world-class company. The environment that the government creates today is not enough for Pertamina to reach this, the company needs
more time to modernize.
Why don’t we see more successful Indonesian oil & gas companies?kuntoRo MangkuSubRoto: Oil and gas is high risk and high investment, and Indonesian companies cannot cope with the risk. Risk and investment are less on land, but today the potential for finds is offshore, and Indo-nesian companies lack the know-how to go offshore.
We need a solid national program if we want to develop the domestic capacity for the oil & gas sector. Now we have to think very carefully and plan very strategically on how to develop domestic capacity.
How would you sum up the main goal of your current tenure?kuntoRo MangkuSubRoto: Make Indonesia a modern country and manage government in a modern way. Make the government more efficient and transparent and better capable to get things done. I am a proponent of no nonsense: if you have a problem, solve the problem, if you have a goal, achieve the goal. A goal is a political objective, it depends on the President’s vision, and he is the one elected by the people. He has his vision, and based on that vision we set goals and try to achieve it for the benefit of the people. We are here to fight corruption and inefficiency and increase transparency.
38 Scott Cummins - Senior Vice President & General Manager McDermott Asia Pacific
IntervIew wIth:
scott cummins - senior vice president & general manager mcdermott asia pacific
Scott Cummins - Senior Vice President & General Manager McDermott Asia Pacific
Focus Reports: Would you begin by outlining the importance of Batam to McDermott in Asia Pacific over the years? Scott cuMMinS: McDermott acquired the Batam facility in 1970 in order to capitalize on a significant market opportunity arising from the expanding oil and gas sector in Indonesia, which at that time was leading Southeast Asia in terms of activity. Over time, other countries including Malaysia started to become more aggressive in upstream operations and this gave impetus to expand the Batam facility’s capacity because it was the perfect location to sup-port the growth of McDermott’s operations across the Southeast Asian region. For example, there are huge logistics savings brought through Indonesia’s strategic loca-tion and proximity to fast growing oil and gas production in countries like Australia.
The Batam facil ities have steadily expanded through investment over the last 40 years thanks to the availability of land and labor. This expansion has allowed McDermott to attune to the increasing scale and complexity of projects in the Asia Pacific (APAC) region. In 2011, McDermott’s work-force in Batam peaked at 9,000 employees and although the cyclical demands for labor rise and fall, we have a very strong base level of engineers, 98% of whom are Indonesians. This high level of local participation makes the operation very competitive at the same time as providing jobs for Indonesia. We
expect that Batam will be the major center for fabrication in the Asia Pacific region, given the commendable track-record of this facility.
FR: How do you see the various individual mar-kets, particularly Indonesia, evolving in their contribution to McDermott’s performance in Asia Pacific?Scott cuMMinS: The success of McDermott’s operations in individual markets across the region changes significantly over time. At this particular point in time, Australia is an extremely large part of our market in Asia Pacific, last year contributing $1.3 billion to our revenue base, although it has not always been this way. Earlier this year, McDermott Indonesia was awarded the $2.1 billion Ich-thys URF contract by Inpex, the largest sin-gle subsea project ever awarded to McDer-
The success of McDermott’s operations in individual markets across the region changes significantly over time.
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We expect that Batam will be the major center for fabrication in the Asia Pacific region, given the commendable track-record of this facility.
mott. McDermott is also involved in Chevron’s Gorgon project and the company has just finished work on a major project for Woodside in Australia.
Significant attention is also being directed towards deepwater offshore devel-opments, including a number of major pros-pects such as the Chevron Gendalo-Gehem project, ENI’s Jangkrik and the Inpex-led Masela FLNG development. The country has had waves of heightened activity in the past and we are now expecting there to be another wave of development in the near-term future.
FR: How would you sum up McDermott’s main contribution to projects in the region? Scott cuMMinS: McDermott brings a lot of experience from the Gulf of Mexico where we have been operating for many years. The technology and know-how from this region has facilitated our expansion in Asia-Pacific. This mixture of competencies allows us to bring solutions under one umbrella for the client. Customers are increasingly looking at safety and reliability and there are rela-tively few contractors in the world like McDermott which can take on these major projects and deliver them with certainty, cost, quality and the safety that customers require. McDermott can therefore contrib-ute by bringing superior expertise, technol-ogy, project management experience, and a huge manufacturing capacity to these proj-ects.
FR: How are you positioning the company in the offshore construction market?Scott cuMMinS: McDermott has recently undertaken some challenging projects off-shore. None more so and successfully exe-cuted than an offshore pipeline installation project offshore north-east Russia. This project was awarded the McDermott Global Project Excellence Award in 2011. It was suc-cessful in terms of safety – no LTIs – and in meeting all quality, schedule, cost, environ-
mental, operating and client satisfaction expectations. The project is also exemplary in the way its teams responded to significant challenges. Most importantly, the proof of our client’s satisfaction with our perfor-mance was that having completed our scope ahead of schedule, we were then awarded an additional work to undertake before we demobilized, prior to the onset of the Rus-sian winter.
The proof that McDermott provides added value to our clients has come from our clients themselves. Being awarded sev-eral customer awards including Chevron’s Global Contractor of the Year for both 2009 and 2010 is a tremendous achievement and one for which we are rightfully proud. It reaffirms to us that we are doing the right things and continues to drive our resolve to improve our safety and quality initiatives to help us deliver certainty for our clients’ projects.
McDermott has invested heavily in its people in Indonesia and we were the first company to create a fully integrated train-ing facility on Batam. Having our own train-ing facilities allows us to guarantee the quality and performance of our operations
The company continues to target a wide range of offshore infrastructure projects where we are confident that we can add value. You will see us in our traditional mar-kets as well as the deepwater arena, both in terms of floating production facilities and subsea infrastructure, such as subsea facil-ities, pipeline and SURF installation.
40 Elisabeth Proust President Director & General Manager of Total E&P Indonesie President of the Indonesian Petroleum Association
IntervIew wIth:
elisabeth proust president director & general manager of Total e&p Indonesie president of the Indonesian petroleum association
Elisabeth Proust President Director & General Manager of Total E&P Indonesie President of the Indonesian Petroleum Association
Focus Reports: Having very recently assumed the position of President of the Indonesian Petroleum Association, how do you see your role? ELiSabEtH PRouSt: The role of the IPA is to represent the oil and gas industry’s interests on a range of common issues and be the partner of the Government on oil and gas policies and strategy.
Indonesia faces a strong need to acceler-ate the development of proven fields not yet in production and the exploration to bring new reserves. In order to achieve this, the uncertainties both in the regulatory frame-works, in the stability of the contracts and in the future pricing mechanisms for gas must be eliminated. The conditions for per-forming exploration work-programs must also be improved with rationalization of the regulations on local content in order to cre-ate a better match between the require-ments and what is actually feasible. These various issues have had a negative impact on the development of oil and gas projects and have slowed down production in Indo-nesia. The IPA will therefore do its upmost as representative of the industry in contrib-uting to resolve these matters.
There are major fields yet to be developed
in Indonesia, this capital intensive and chal-lenging businesses need a long-term, stable and attractive investment climate. Major oil and gas companies have a very important role to play in bringing competences, high technology, financial capacity and resil-ience. The government must give confidence to the investors and provide attractive terms to promote the development of fields and exploration..
With a history going back to 1968 Total was one of the pioneers of the PSC model and is today the largest gas producer in the country, yet it is facing an upstream produc-tion environment which increasingly favors domestic producers. How do you see Total’s role evolving in Indonesia?
Total and the government have a part-nership which has evolved over many years. Total has always made a substantial contri-bution to Indonesia in terms of know-how and technology transfer. Total’s CSR pro-grams are also well established and known to the authorities.
From a production standpoint, Total has decades of experience in Indonesia and con-sequently the company can guarantee a high-level of efficiency in delivering current and future upstream projects. Total has taken the strategic decision to redeploy its
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From a production standpoint, Total has decades of experience in Indonesia and consequently the company can guarantee a high-level of efficiency in delivering current and future upstream projects.
portfolio and acquire new production assets in Indonesia.
Given the trend towards domestic com-panies taking on a greater responsibility in production, Total is initiating many part-nerships with Indonesian companies and these partnerships will serve to increase the transfer of technology to the Indonesian production environment.
FR: Over the last couple of years you have initi-ated a massive exploration program in Indone-sia, investing in the acquisition of deep-offshore exploration blocks. How have you convinced the Head Quarters in France that Indonesian E&P makes economic sense?ELiSabEtH PRouSt: Ultimately, it is our large exploration portfolio which will be essential for guaranteeing future success. Statisti-cally our work programs should provide the company with discoveries and consequently a greater share of production going forward.
Total’s aggressive exploration and pro-duction activity is also what Indonesia needs to increase its production as the num-ber of wells drilled in the country is cur-rently insufficient to achieve national pro-duction targets.
FR: You preside over Total’s Indonesian opera-tion at a time when the future of the Mahakam Block in 2017 will likely be decided. What do you feel is the best outcome for Total and Indo-nesia regarding this block? ELiSabEtH PRouSt: The Mahakam block has been the primary reason why Total is the number one gas producer in Indonesia. As such, the company’s ongoing priority is to maintain a high production level from this field and Total performs still exploration and developments to achieve this. In terms of current activity the company is at the peak of its operations. Last year, Total drilled 125 wells when we had initially intended to drill 110 and every year we increase our investment budget – last year it stood at $2.3 billion. Total is still shooting
seismic acquisition and alongside our drill-ing program we performed over 8,000 well interventions last year with projections for 9,000 this year.
Total is investing with the assumption of a positive outcome beyond 2017. The com-pany has been accelerating the investments in this block to the benefit of all stakehold-ers. However, very soon Total will need to have an indication of the terms and condi-tions of its possible participation in the block after 2017.
FR: How does Total fit in with Indonesia’s greater demands for energy security? ELiSabEtH PRouSt: Total has been active in the country’s transition from oil to gas and is the supplier for the petrochemicals plant in Kalimantan - 400 MMcf/day is delivered to this plant. Total has also started deliver-ies to the West terminal on Java, having committed to provide 1.5 million tons LNG in 2010. Total is not just accompanying, but leading the transition in Indonesia from oil to gas for household and industrial needs.
Total has another focus on alternative energy, particularly solar energy. We created a small company to promote solar energy in Indonesia and increase the access to power for people who are in remote areas and who do not have access to energy from PLN. This is working well in East Java and Total is looking to develop this type of project fur-ther.
42 Jae Yong Choi, Chief Representative of Jakarta Office , Toyo Engineering
IntervIew wIth:
Jae yong choi chief Representative of Jakarta office Toyo engineering
Jai Yong CHOI Chief Representative of Jakarta Office
Focus Reports: Can you our readers a brief his-torical overview of the main milestones and achievements since Toyo Engineering settled in Indonesia?Jai yong cHoi & yoSHinaRi MiaZaki: We are cur-rently involved in a number of projects, mainly on our fertilizer sector, with ammonia and urea project in Kalimantan. We had two great achievements since 2010, as we were awarded two more projects recently.
The first one is butadiene for the Chandra Asri plant, and the second one is a polymer project in Cilegon. Last year we were awarded three projects as well.
FR: How significant is the Oil and Gas activity of Toyo Engineering in Indonesia?Jai yong cHoi & yoSHinaRi MiaZaki: We have many different business units among our global operations but in Indonesia, our main business is focused on the petrochemical and fertilizer. There is an ongoing proposal to extend our activities in this sector, as we believe it is a very promising market. We have managed to build deep relationships with state-owned fertilizer clients so this has become our most significant business. We are
also working on refineries and infrastructures but we can easily say that 100% of our reve-nues originated from Indonesia come from the oil and gas industry.
FR: Based on your own assessment and the inter-national experience of the company, how would you describe the Indonesian operating environ-ment? Jai yong cHoi & yoSHinaRi MiaZaki: There are some obstacles that foreign companies can encounter in Indonesia such as the local con-tent clauses but we manage to overcome this challenge because we are very close to Indo-nesian companies. Localizing is one of the pri-orities of our strategy. Historically we have been doing very well with local companies. We believe that harmonizing with the local enterprises is the most significant key factor to conduct successful business here. Last year we achieved a very important milestone in that regard with the decision to acquire a major share in a local company called IKPT.
FR: How would you define your partnership with IKPT in terms of know-how and technology shar-ing, and what was the vision behind this strategic
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investment decision?Jai yong cHoi & yoSHinaRi MiaZaki: Considering the future trends of the Indonesian market, there are more and more requirements for for-eign companies to localize. Generally, local companies that are capable to handle such large-scale oil and gas projects are rare. In the past we used to select our local partners project by project. In order to build an advantage and be privileged in this competitive environment, we decided as a marketing strategy, to team up with a local company on a permanent basis. However, we are not collaborating with IKPT for all the projects, as we are quite flexible with partnering with other local companies to share expertise when needed.
FR: What is the significance of the Asia-Pacific market for Toyo Engineering and where do you see the potential?Jai yong cHoi & yoSHinaRi MiaZaki: Historically, the Asia Pacific market is very important for Toyo because it accounts for more than 30% of our global revenue. We have achieved a very good network thanks to companies with whom we had great relations with, and clients who were satisfied during past projects.
Indonesia accounts for about 40% of the Asia Pacific, so it is a key market for us. Toyo has most of its Urea technology and network in Indonesia. Fortunately for our company, there will be a high demand of fertilizer in the near future and we forecast a growth of fertil-izer demand in Indonesia as well, so it is really a strategic location for us.
FR: What would you define as your main competi-tive advantage and what makes you the partner of choice in this competitive market?Jai yong cHoi & yoSHinaRi MiaZaki: Our main strength lies in the fact that we do very sys-temic and planned project execution in pursuit of on-time or earlier completion. Delivery is our main competitive edge, and we provide high quality in all the services and operations we undertake. Our philosophy is that once we get committed, we deliver, and deliver it well.
On all the projects we are working on, we are also very supportive for all the work that needs to be done afterwards, and if one of our clients has a problem, we provide all the sup-port needed in maintenance. We are very flex-ible and we can easily provide solutions and advice, given that we are a knowledge-based company. This is another significant advantage for our clients because they know that we are committed on a long-term basis.
FR: What is Toyo’s policy in that regard and how significant are safety and quality among your oper-ations?Jai yong cHoi & yoSHinaRi MiaZaki: “Safety first” is our motto. When we conduct a project, our managers always educate our workforce based on an everyday training. We believe it is a major concern, and we never compromise on safety. Sometimes when we fell that we need to reinforce the message, we hire an Indone-sian safety officer that speaks to the employees in Bahasa Indonesia. We are a global company, but we like to act local.
FR: Where do you see the company in the near future?Jai yong cHoi & yoSHinaRi MiaZaki: We want to dominate the fertilizer industry in Indonesia. There are many plants to be built and we want to spread our urea technology and demon-strate that we are quite superior in that sector, in terms of technology and project manage-ment. We also want to move to the upstream sector thanks to our partnership with IKPT. In terms of revenue, our ambition is to achieve double-digit growth.
We believe that harmonizing with the local enterprises is the most significant key factor to conduct successful business here.
44Samir Abbes, Director Indonesia Spie Oil and Gas
IntervIew wIth:
samir abbes – director, Indonesia spie oil and gas
Samir Abbes – Director, IndonesIa spIe oIl and Gas
Focus Reports: Would you begin by outlining SPIE Oil & Gas Services’ (SPIE) growing presence in Asia Pacific and Indonesia in particular? SaMiR abbES: SPIE began its business in South-east Asia in 1991 having been called to the region by Shell to carry out commissioning for its refinery in Kuala Lumpur. Shell then continued to offer work to SPIE (known as IPEDEX at the time) for various commission-ing operations. On the back of these projects, SPIE saw an opportunity to develop its busi-ness in Indonesia and began by working with Total in Balikpapan in 2001. From 2001 to 2009 SPIE was working on all of Total’s proj-ects from Tunu field , Tambora to Peciko.
Aside from Total, all the major players are already present in Indonesia and this has pro-vided good grounds for SPIE to grow. SPIE consequently diversified its business here beyond commissioning to operations and maintenance, and drilling activities.
One of the main activities of SPIE in South-east Asia has been O &M Technical Assistance and systems integration and automation ser-vices for large-scale projects. The company started with Total and carried on with the major EPC contractors. SPIE saw a niche in Indonesia where the market is relatively lim-ited with only a few companies offering sim-ilar services.
In 2008/9 SPIE then decided to target some other niche areas especially with Chev-ron in the field of geothermal energy and
CBM. SPIE now also offers services in CBM. Our activity has therefore diverted from con-trol systems and systems integration to be more focused on Drilling, geothermal activity.
SPIE aims to be one of the major subcon-tractors for technical assistance and services to the major oil and gas companies. The regional headquarters is based in Kuala Lum-pur covering all the markets in Southeast Asia from Thailand to Indonesia, Brunei, China, Malaysia and Vietnam. Kuala Lumpur is the center of all of our technical support and whenever a client in Indonesia requires an expert engineer we have people ready who are based in the region. Secondly SPIE has activ-ity in training, fully aware of the Indonesian nationalization policies and capable of answering the call for
FR: Looking at your track record, what would be some of the most interesting projects over the last 9 years? SaMiR abbES: SPIE’s work on an EPC contract in 2007 for Total in Balikpapan was 100% car-ried out in Indonesia and it was the first EPC contract conducted by SPIE in Indonesia, rep-resenting a major milestone. 90% of our experts working on procurement, commis-sioning, installation etc were Indonesian. SPIE was dealing with the client, with cus-toms authorities, suppliers, and EPC contrac-tors. Everything is working properly and it was one of the most important projects for
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the company in Indonesia.
FR: Indonesia’s production environment is chang-ing rapidly. How do you intent do focus your invest-ments? SaMiR abbES: SPIE’s first priority is to train peo-ple. When a project is finished and the client needs to run his facility the client often faces a problem because they do not have sufficient skilled people to operate the plant. SPIE there-fore trains the people to run the plant, working closely with the engineering contractors to obtain all the technical information about the equipment and material required in order to train and supply the expertise necessary. This is one of our major activities now, especially in geothermal energy. When providing engineers for a given project, SPIE maintains close coop-eration with the engineers supplied for a cou-ple of years until they are capable of running the plants completely independently. Then SPIE only needs to maintain technical support.
Finding well-trained, experienced nationals continues to be a serious issue. In line with the continued increase in global demand for oil, the demand for employees working in the oil and gas industry in Indonesia is likely to increase over the coming years, although there has been a shift towards “remaining the same”, especially for the expatriates.
Indonesia will need many skilled engineers in the coming years given the current level of activity. Few companies have set up training centers to train future engineers in the indus-try. Many PSCs are requesting fully trained engineers who are ready to operate immedi-ately. Companies like Total have many engi-neers which are due for retirement and they are facing difficulties finding replacements.
FR: Given the demand for expertise in the Indone-sian market, how do you see your business growing in the coming 3-5 years? SaMiR abbES: SPIE has doubled its turnover from 2010 to 2011 based on the high level of activity now in Indonesia. However, the com-pany has attempted to stabilize this growth to
avoid overreaching. SPIE is now specializing on the niche markets where we know that there will be development for a long time to come such as geothermal and CBM.
Over the next 5 years SPIE will concentrate mostly on training and one of our aims is to open a training center in Indonesia, even though we face a fair amount of local bureau-cracy. Our target is to be one of the prime ser-vice providers for companies seeking to build geothermal power plants. In this model we train the specialists, carry out the project with the EPC contractor and then begin the plan with the clients to deliver the team which will operate the plant.
Regardless of these new directions, SPIE will maintain its activity in oil and gas, provid-ing technical assistance, providing engineers and consultants to the PSC. However, the com-pany is now looking for more challenging proj-ects with more added-value so that we are doing something for Indonesia. 96% of our employees are Indonesian so creating value for Indonesia is a strong philosophy within the company.
SPIE brings in experts from the Indonesian oil and gas industry and is developing its part-nerships with institutions such as the Bandung Institute of Technology, the University of Indo-nesia.
SPIE wants to have the largest training cen-ter in Indonesia. Although there are many local companies with training centers, they are mostly using obsolete equipment and technol-ogy whilst all the modern PSCs are working with new equipment. Pertamina clearly has many needs for new technologies. SPIE cannot finance this training center completely on its own but must collaborate with a local company like Pertamina if they are willing to cosponsor the project.
Indonesia is one of the regions where oil and gas activity is booming, but Indonesia was not prepared to face this fast growth in the mar-ket. SPIE is working to address this shortfall in labor in order to leave a positive mark on the country.
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PAst rePOrts
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