Indonesia is seeking to boost oil production through new exploration as domestic demand rises sharply. Production has declined from a peak of 1.7 million barrels per day in 1991 to 918,000 barrels in 2012 due to mature fields. The government is offering tax concessions and streamlining regulations to encourage new investment in exploration from companies like Chevron and ExxonMobil. The new regulatory body SKK Migas aims to balance the interests of stakeholders and reassure investors after replacing the unconstitutional BPMIGAS regulator.

1. INDONESIA
Commited to Exploration
Indonesia’s long and storied history in
the petroleum business is well known
– it was the birthplace of Shell, a former
world oil power and still a major force
in the global trade of LNG that it helped
pioneer in the 1960s and 1970s. The 21st
century is a different story for Indonesia,
which has swung from an exporter of
energy on a global scale to an importer
of oil, with the prospect of also importing
LNG by 2018. Today, Indonesia is racing to
find more oil and gas to meet its booming
domestic energy needs.
The rapidly developing country is
caught between declining output from
mature fields and a sharp rise in domestic
energy demand. BP’s Statistical Review
of World Energy highlights Indonesia’s
soaring appetite for energy. Primary
consumption has jumped by almost 50%
in just 10 years. This has taken Indonesia
past Australia in terms of energy demand,
but with 10 times the population of its
wealthy neighbour and as the fourth
largest population in the world, energy
demand in Indonesia is set to continue
growing at a startling pace.
The Indonesian government is acutely
aware of the challenges ahead and eager to
encourage new investment in exploration.
State-owned Pertamina is leading the
charge with plans to drill 28 exploration
wells in the next 12 months.
Domestic issues complicate the picture,
including a rise in resource nationalism
ahead of next year’s election. However,
there is growing awareness of the economic
imperative of more oil and gas discoveries,
and the vital role that foreign petroleum
companies must play if Indonesia is to be
successful in meeting its energy needs. An
already attractive fiscal regime has recently
been improved, and new government
spending on precompetitive data is
helping to create opportunities onshore
and offshore.
This special report has been produced by Elite Special Sections for distribution with OIL & GAS JOURNAL

2. SKK MIGAS Managing Oil and Gas for the Nation
SKK Migas is building continued partnerships for sustainable development. With
the objective to match target and planning of oil & gas production and to generate the
maximum benefi ts and revenue for the nation and for the best welfare of the people.
www.skkmigas.go.id
New investors sought to
boost oil production
Indonesia is determined to reverse a long-term
decline in oil production by attracting explorers
National output has fallen from
a peak of 1.7 million barrels of
oil per day in 1991 to 918,000
barrels in 2012. Production dropped below
the country’s own needs in 2004, and the
imports have ballooned to almost 500,000
barrels a year.
Vice Minister Energy and Mineral
Resources, Susilo Siswoutomo, says the
“Yes, we are still
looking for oil because
there is still a lot of
oil to be found.”
DR. SUBROTO
BIMASENA Chairman,
Former Minister of Energy
& Mineral Resources
country’s top energy priority is to reverse
the decline. “We would like to have more
companies investing in exploration and
production to help the country increase
its production. Indonesia still has vast
resources that need to be explored. Based
on our latest estimates, we have 80 billion
barrels of oil and many hundreds of trillions
of gas, but it needs to be explored, it needs
to be found.”
He acknowledges that Indonesia has
challenges in creating exploration access
and permitting, but says the country has
an over-riding commitment to welcoming
investors and treating them fairly. “We follow
four principles. Number one is growing
together - the investor will profit, but the
people of Indonesia should also benefit.
Number two is creating jobs. Number three
is helping the poor. We are a developing
country and we must provide jobs for the
people and add to their income. The fourth
principle is environmental protection. This
is the framework in which we are working.”
Mr Siswoutomo says government
is working on several fronts to boost
investment, including new tax concessions
and streamlining the regulatory processes.
“The fiscal regime for petroleum exploration
is already attractive, but we are improving
that further with the exemption of import
duties for oil and gas activities.”
The government has clearly signaled
its intention to boost infrastructure to
support petroleum development. The
lack of investment in
pipelines and other
energy infrastructure
has been blamed in
part on a generous
fuel subsidy, which has
depressed returns and
discouraged privately
funded development.
In June of this year, the
government announced
significant cuts to the subsidy, and has held
firm despite large scale public protests.
Looking further ahead, the government
is investing in more pre-competitive data
to de-risk new exploration areas. About
$US10 million was allocated in this year’s
budget for 2D seismic studies. Parliament
is debating a plan to establish a Petroleum
Fund that would
have the capacity
to fund even
larger surveys
over the frontier
eastern areas.
Hadi Purnomo,
Secretary General
of the Ministry of
Energy & Mineral
Resources, says
the government is targeting a turnaround
in national oil production to one million
barrels of oil per day by 2014 and
2015. “One way to meet this level is by
optimizing our fields like in Cepu and
also by employing enhanced oil recovery
(EOR) in some existing fields. We are also
encouraging our contractors to increase
exploration, especially in east Indonesia.”
Indonesia’s largest petroleum producer,
Chevron, is leading the development of
EOR technology. Earlier this year, it began
the trial of surfactant flooding at its Minas
field, which has produced 4.5 billion
barrels since 1954. If the surfactant pilot
is successful, Chevron expects to double
production from Minas to 140,000 bopd
in the short term.
New fields are also being brought on
stream, led by the ExxonMobil-operated
Cepu field, the biggest discovery in the
past decade. ExxonMobil has an aggressive
drilling program to increase production
from about 25,000 bopd to 165,000
bopd by the end of next year. Other new
projects include the Ande Ande Lumut in
the Natuna Sea. Australian-based AWE has
expanded the scope of the development to
a possible 35,000 bopd.
Former Minister of Energy and Mineral
Resources Dr. Subroto, says he has no
doubt Indonesia can increase production
if it improves the investment climate,
regulations, as well as cooperation
and coordination between the various
“We would like to
have more companies
investing in exploration
.... to help the country
increase its production”
MR. SUSILO SISWOUTOMO
Vice Minister of Energy &
Mineral Resources
stakeholders in the oil industry.
“That is the first point that I want to
stress. Yes, we are still looking for oil
because we believe that there is still a lot
to be found. And while oil is declining,
the gas production in this country is
increasing.”

3. Business as usual for Indonesia’s
petroleum regulator
Within 24 hours of the Constitutional Court ruling
that regulator BPMIGAS was unconstitutional, it
was back to business as usual
The shock decision last November
reflected a growing mood of
resource nationalism, with the
judges stating as they handed down
their decision that Indonesia’s falling
petroleum output showed the regulator
was not acting on behalf of the people.
The decision sent shockwaves through
the Indonesian Parliament, but within 24
hours the government had filled the gap
by creating a special task force to assume
the responsibilities of BPMIGAS. Known
as SKK Migas, the new regulatory body
reports directly to Indonesia’s President.
The Secretary of SKK Migas, Gde
Pradnyana, says Indonesia was mindful of
the need to move quickly to reassure inves-tors
in the country’s oil and gas industry.
It’s important to emphasise that the oil and
gas laws of Indonesia were not affected by
the court’s decision. All existing contracts
continue to be honored and in fact it is
very much business as usual. “One of In-donesia’s
biggest selling points to interna-tional
investors is the sanctity of contracts
in our country, which was demonstrated
when the oil and gas laws were introduced
in 2001. That continues to be one of our
strengths. Economic and political stability
are also key competitive advantages.”
Mr Pradnyana says SKK Migas strived
to achieve a balance between the needs of
its many stakeholders. The government
of course demands more production and
more revenues. The people demand more
shares, while industry investors of course
ask for more stability, more incentives, and
more profitability for them. “It is not always
easy to create a balance between all of the
various conflicting demands. But I believe
that we are always available to talk and be
reasonable, we are not rigid in our position.
I believe we are willing to listen to many
other opinions. We certainly always try to
balance the concerns being raised by our
various stakeholders. We are here to support
the investors and
to give the best
benefits for our
people.”
Mr Pradnyana
says the strong
track record of SKK
Migas proves that
Indonesia’s oil and
gas industry has
not been affected
affected by last year’s changeover of the
industry regulator. “In 2012, the government
signed 25 Production Sharing Contracts
(PSC), boosting the number of contracts
under the supervision of SKK Migas to 308
at the end of the year. Of this total, 75 are
production PSCs, along with 179 exploration
PSCs and 54 contracts for exploration and
development of coal bed methane.”
He says the agency had also achieved
substantial improvements in the speed of
its decision making. “We have simplified
bureaucracy to speed approval times. For
“One of Indonesia’s
biggest selling points
to international
investors is the
sanctity of contracts”
MR. GDE PRADNYANA,
SKK MIGAS Secretary
Total has supported the creation of
thousands of micro businesses in
Indonesia through its corporate social
responsibility programs.
Many of these businesses have
grown thanks to Total’s policy of
local procurement of goods and services.
Many others are finding their own
customers by learning through Total’s
CSR programs how to combine modern
business practice with traditional skills.
Warsih, a local woman from East
Kalimantan is one beneficiary of Total’s
programs. This single mother of one,
Total: Empowering
Local Business
example, we have reduced the Plan of
Development approval from 47 days
to 28 days. We have also improved
coordination between central and local
government institutions to accelerate the
approval of exploration permits. This
is reflected in the fact that a total of 96
exploration wells were drilled in 2012,
up from 83 in the previous year.”
Mr Pradnyana says the biggest test
of regulation effectiveness to Indonesia’s
oil and gas sector is the commitment to
spending in exploration and development,
which continued to rise in 2012. “Last
year, total investment climbed to US$16.1
billion, which was more than double
the level of the previous year. This figure
included an investment of US$1.4 billion
in exploration, which shows there is a big
commitment to finding new oil and gas
reserves by local and international players.”
Pradnyana says SKK Migas still has
challenges ahead. “Our biggest challenge is
getting land access for petroleum explorers.
As the population increases, there are more
competing land uses such as forestry and
agriculture. These are very big issues,
especially in Java. It is much easier to obtain
access for exploration offshore, which
incidentally is where some of our biggest
opportunities lie for major discoveries.”
He says regional governments are also
increasing their demands, but his agency can
help explorers educate local governments
and communities about the nature of their
activity and the need to achieve a balance.
“Some companies are facing demands for
investment in corporate social responsibility
programs during the exploration stage and
before there is any wealth to be shared. So
we work with operators to educate local
communities and regional governments
are responsive to this and we find they
will stand behind you to convince local
communities that exploration access needs
to come first. If you are doing a seismic
survey on a populated area, of course
compensation would be requested for
disturbances, disrupting access with heavy
vehicles or any other interruptions to traffic
and daily life.”
Know-how
Excellence
Precision
Pertamina Drilling - a subsidiary of Pertamina Group - manages 39
drilling units and a drilling training center. The services provided
comprise drilling, workover activities, and drilling services that use a
Daily Rate and Integrated Project Management (IPM) system for oil,
gas, and geothermal wells. pdsi.pertamina.com
“We are aiming to achieve a 400%
reserves replacement ratio with an
ambitious drilling program.”
MR. SYAMSU ALAM
PERTAMINA EP President Director
produces Krupuk Amplang fish-flavored
crackers and started her
home industry six years ago with three
employees and a turnover of US$50
per month. Today, after receiving
assistance, her earnings have risen
six fold and sales have extended
outside of Warsih’s home province.
Total is also a big supporter of
education in Indonesia. It funds
scholarships that take top students
to universities in Europe, as well as
programs to help students in junior
school prepare for higher education.
Oil and gas workers
Photo: Tiki Budiono

4. MedcoEnergi: National oil company leads Exportable know-how
oil exploration effort
Indonesia is investing heavily in a revival of its oil
sector through its national oil company, Pertamina
The President Director of Pertamina,
Syamsu Alam, says the country
must find new reserves to boost
production. “Our strategy is to be very
aggressive in terms of exploration.
We currently spend about 20% of our
annual budget on exploration, and will
be increasing our spend
on exploration by US$300
million in 2013. Most of
that will be spent on drilling
and our program includes
28 exploration wells this year.”
Mr Alam says Pertamina’s
exploration success rate is
high, and he is confident it
will continue to improve.
“Last year we achieved a
200% reserves replacement
ratio, and we are aiming
to achieve 400% this year
with an ambitious drilling
program.”
Pertamina is the second
largest petroleum producer
in the country, accounting
for about 17% of national
production thanks to large
mature fields on onshore
Java and offshore gas fields
supplying Bontang LNG.
Pertamina is currently ranked
behind Chevron, and ahead
of Total and ConocoPhillips.
Pertamina is also the
largest company in the
downstream sector of
the country, with eight
refineries and plans to build
additional capacity at Bontang.
Mr Alam says the oil industry in
Indonesia has been around for more
than 100 years and needs fresh thinking
to improve its chances of exploration
success. “One of the keys to success will
be a change in the mindset from the old
plays into the new plays. Right now we
are setting deeper targets and have tried to
identify the most strategic path possible
to boost discoveries and reserves. Last
year we were quite successful, with an
exploration success rate of 80%.”
Pertamina’s chief executive officer,
PERTAMINA EP is one of the most prominent
oil and gas producers in Indonesia. With endless
waves of passionate enthusiasm, PEP commits to
constantly increase its exploration and production
undertakings through proper implementation
of Good Corporate Governance to achieve the
desired-end-state, ‘PEP WORLD CLASS’.
Energy for
the People
Ms Karen Agustiawan, has outlined a
much larger role for the company in
gas exploration in a bid to reduce the
country’s dependence on oil.
In a recent speech to the Center for
Strategic and International Studies, she
highlighted the fact that it has an estimated
gas resource of 335 trillion cubic feet,
equivalent to 59.6 billion barrels of oil.
“We should increase our speed in
transferring the energy mix towards gas.
For that, we must first ensure that there
is continuity in the sector, especially as
exploration activities have been stagnant
in recent years and is not
enough to replace the aging
fields. I believe that to achieve
our maximum potential, we
should not be afraid to deal with
foreign experts and cooperation
with foreign parties that can
help us increase our energy
infrastructure and knowledge.”
Ms Agustiawan said the
recent discoveries of gas in the
Makassar Strait, the Masela
block and East Natuna block
showed promising potential,
with East Natuna alone hosting
an estimated 46 trillion cubic
feet of gas.
She said development of
new resources was best served
through partnerships with
foreign petroleum companies
and the sharing of world-best
practices and technologies.
“For example, Pertamina
has led a consortium including
ExxonMobil and Total since 2010
to secure a market for the gas
from the East Natuna field. These
partnerships provide a knock-on
effect on local firms because
they learn from the experiences
of foreign counterparts, thus
helping other projects.”
“The government should help us
find ways in which we can improve
cooperation with foreign companies so
that we can further develop this sector
to replace oil as a source of sustainable
energy in the long term.”
www.pertamina-ep.com
Setting the stage for growth thanks to major projects
MedcoEnergi is already Indonesia’s
largest home-grown petroleum
producer with production of
oil and gas equivalent to about 50,000
barrels per day and this does not include
the more than 20,000 barrels of oil per
day produced under a service contract in
Oman. Overall production will increase
sharply from late 2014 when two major
new projects, based on the remote Senoro
gas in the Central Sulawesi province, are
due to be commissioned.
The Senoro field, which has proved gas
reserves of 2 TCF and can be up to 2.5 – 3
TCF, including potential upsides, is the basis
of a new gas processing plant with capacity
of up to 310 million cubic feet of gas per day
and MedcoEnergi has a 30% stake in the
gas processing plant. Supply contracts have
already been finalized with an adjacent LNG
plant now under construction and other
domestic customers. The gas supply facilities
and LNG plant are due to be commissioned
in the third quarter of 2014.
MedcoEnergi President Director &
CEO, Mr. Lukman Mahfoedz, says the
domestic gas market is growing very
quickly and presents suppliers with great
opportunities. “Last year, the Indonesian
Petroleum Association reported that its
members supplied about 3.5 – 3.6 BCF per
day, compared to about 2.5 BCF only five
years ago. This is a tremendous increase
and in terms of the price, it is also fantastic
compared with other parts of the world.”
The major off take from the Senoro gas
plant will be Donggi-Senoro LNG (DSLNG),
Indonesia’s fourth LNG project. DSLNG will
come on-stream in late 2014, and will supply
“MedcoEnergi is on the cusp
of transformational growth
thanks to a number of major
projects at an advanced
stage of development”
MR. LUKMAN MAHFOEDZ
MEDCOENERGI President
Director & CEO
customers in Japan and Korea with 2 million
tons of LNG per annum. MedcoEnergi
holds an interest of 11.1% in DSLNG, with
Pertamina, Mitsubishi and Kogas.
Led by the Area 47 oil project in Libya,
the company’s growing international
asset base will have a greater impact on
production over the next few years and the
Phase 1 development of six fields with 301
MMBOE recoverable reserves is targeted to
be completed in 2016. The remaining 10
fields will be appraised in 2013 - 2014, to
be followed with the Phase-2 development
with another 287 MMBOE recoverable
reserves (internal estimates). MedcoEnergi
has a 25% interest in the project.
The Area 47 project is the result of a cor-porate
strategy to diversify internationally,
thereby creating new growth opportuni-ties
and reducing risk. The company now
has seven assets
spread across the
Middle East in
Oman, Yemen,
North Africa and
the US. In Oman,
the company has
operated a mature
oil field, owned
by PDO and Shell
since 2006, and
has successfully increased production from
9,000 to 22,000 BOPD early this year.
In other energy related business,
MedcoEnergi operates coal mining with
a high-caloric coal production capacity
of 600,000 ton per year. In power
generation, MedcoEnergi operates a 200
MW gas fired plant and a 2x660MW coal
fired plant. Additionally it develops two
major geothermal projects that have a total
capacity of 500 MW as well as an annual
50MW capacity of minihydro project.

5. Explorers active on a wide
range of fronts
Salamander Energy, both from the UK
and Sweden’s Lundin Petroleum.
There is also a big Australian contingent
of explorers and producers, including
Santos, AWE and small caps Cue Energy,
Nido Petroleum and Neon Energy.
Additionally, a number of Indonesia
companies servicing the oil and gas
sector are joining the exploration push,
including Sugih Energy and IMECO.
Sugih Energy began operations in 1990
as an oil field services company and listed
on the Indonesia Stock Exchange about a
Niko Resources is one of the
more aggressive new explorers,
with a focus on high risk, high
reward opportunities in deep water.
The Calgary-based independent is the
largest deepwater acreage holder, with
21 PSCs and seven joint venture areas
over a gross area of 28 million acres. In
2012, Niko brought the Ocean Monarch
to Indonesia for a four-year campaign of
up to 25 deepwater wells - the largest in
Indonesia’s history.
Niko is a partner with ENI in the
Makassar Strait., where the Italian major
recently made its biggest discovery
in Indonesia, the Jangkrik Northeast
gas field, with gas reserves of about
200 million barrels of oil equivalent.
The field is being developed to produce
145 million cubic feet of gas per day for
Bontang LNG.
ENI has been in the country since 2001
and recently signaled plans to maintain a
high exploration
spend in Indone-sian
waters, with a
budget of US$400
million over the
next four years.
Another aggressive
new independent
is Singapore-based
KrisEnergy. It has
a strong focus on
Indonesia, which accounts for half of its
14 contract areas across southeast Asia.
The company has recently made a series of
gas discoveries in the Kutai PSC, which are
being appraised for development.
Other active independents in Indonesia
include UK-based Premier Oil and
ENERGY FOR
INDONESIA
PT Sugih Energy Tbk is a publically-listed company on
the Indonesia Stock Exchange (IDX) trading under “SUGI”.
Sugih creates wealth and value through the exploration,
development and production of Indonesia’s vast energy
resources, specifi cally oil and natural gas. With more than 20
years of experience please contact us at www.sugihenergy.com
ELISABETH PROUST, TOTAL ESP
President Director & General Manager
ADVANCED OFFSHORE SERVICES
www.advancedoffshore.com
We are a subsea engineering, construction, diving, and ROV contractor in a highly expansive phase
with many exciting projects, investments and major long-term contracts secured. We are confi dent in
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Total Set to Remain in Indonesia
The Mahakam Production Sharing
Contract (PSC) expires in 2017 and
speculation is rife about whether
the Indonesian government will
renew or bow to public calls for
nationalization of petroleum assets.
Total’s director and general
manager for Indonesia, Elisabeth
Proust, says the Paris-based oil
major has a important future
in the country regardless of the
government’s decision on Mahakam.
“For Mahakam, the challenge is
not only the extension of the PSC
post 2017, but reversing the decrease in
production. We have already produced
more than 80% of reserves and rapid
field decline is normal at this stage. We
are very focused on this and, through
our exploration in new areas, finding
reserves that can replace Mahakam.”
Proust adds that Total is willing
to work with a government partner
beyond 2017. “Our most likely
scenario is we will remain a partner
in Mahakam, possibly as a part of a
consortium with PERTAMINA and
the regional authorities. We need to
perform a smooth transition over
five critical years from 2018 to
2022 because there are still
major commitments to deliver
gas and these require substantial
investment before 2017.”
Total continues to see a bright future in Indonesia. Total’s President
Director and General Manager for Indonesia, Elisabeth Proust, says the
Paris-based oil major has important future prospects in the country
Oil majors dominate the sector, but a group of
independents is leading the new wave of exploration
NuEnergy Muara Enim PSC Pilot Production
“We plan to acquire
more blocks especially
now that the government
is making more room for
local companies”
MR. ANDHIKA ANYNDYAGUNA
SUGIH ENERGY President
Director & CEO
decade ago. In 2012, Sugih changed its
focus to exploration and development
with the goal of becoming a significant
domestic producer. The company
acquired interests in two blocks in
Sumatra - a 49% interest in the Lemang
PSC and a 100% interest in Kalyani
PSC - and was quickly rewarded with
discoveries at its first two exploration
wells in the Lemang block. The Akatara
discovery has already been assessed as a
gross prospective recoverable resource of
almost 150 million barrels of oil.
Sugih has also announced plans to
acquire SelatPanjang PSC, which has
recently begun production at 5 million
standard cubic feet of gas and 300 barrels
of oil per day.
Andhika Anyndyaguna, Chief executive
officer of Sugih Energy, says Sugih plans
to acquire more blocks in the near future
“We plan to acquire more blocks especially
now that the government is giving more
room to local companies to take over blocks
that are going to expire soon. We see those
as opportunities as well.”
The growth of unconventional gas,
including coal bed methane (CBM) and
shale gas, is also contributing to a more
diverse exploration industry in Indonesia.
Indonesia is estimated to have 453 TcF
of CBM gas in place and is considered to
have some of the world’s best undeveloped
potential. The first CBM PSC was
awarded in 2008 and BP was the first to
commercialise Indonesia’s CBM reserves,
with sales to Bontang LNG beginning in
2011. Total, ExxonMobil and Santos are
also investing heavily in CBM exploration.
Shale gas exploration is also underway
and earlier this year, Pertamina signed
the first PSC for shale gas, in Sumbagut,
North Sumatra. This was among 14
shale gas PSCs awarded to domestic and
foreign investors via tender.

6. Services industry swings
offshore to support explorers
A shift towards offshore exploration boosts
Indonesia’s oil and gas services sector
A growing number of local
of wells will be drilled
over the next couple
of years. We need to
move quickly to cap-ture
that opportunity
through these strate-gic
alliances.”
Trust Corporation is
another local company
expanding its marine
services. The company
has grown quickly from its inception only
five years ago. It already has a fleet of 20
tug/barge sets, and recently launched an
integrated marine services section to cater
specifically to the oil and gas industry.
Chief executive officer, Mateus Lesmana,
says the future of Indonesia’s petroleum
industry is offshore. “There will be a lot of
offshore drilling and exploration activity.
The cabotage law is also encouraging
local marine service companies with the
capacity to participate in that sector. We
are looking at opportunities for growth
in the next two or three years, including
the possibility of an IPO to give us the
financial structure to fund our expansion.”
Trust Corp’s strategy is to lower costs
through innovation and pass on the benefits
to customers, thereby increasing market
share. “Our mega jumbo barges are a good
example. They can carry 30% to 40% more
load than a normal barge, but can still be
powered by a standard engine, which means
It recently started operating offshore in
the West Madura oil field through a joint
venture with KS Drilling. Mr Rudiono
says the company intends to form more
joint ventures with partners with the right
technologies and
competencies. “We
have the market
and the local
expertise and will
be able to open
up more offshore
drilling operations.”
Pertamina Drilling
is also keen to ex-pand
into services
such a cementing
and directional
drilling to capture a
larger share of drill-ing
budgets both
onshore and off-shore.
“Hundreds
Shipping Industry Readies for
Bigger Role in Oil and Gas
Under Regulation 48 introduced in 2005, Indonesian
owned and flagged vessels have exclusive rights to
operate in local waters, also known as cabotage. This
includes vessels such as offshore drilling rigs and
floating production storage and offtake vessels (FPSOs).
The oil and gas industry has originally granted an
exemption until 2011, but this has been extended to
2015 because of the specialised and demanding needs
of the industry.
Bill Sullivan, partner with Christian Teo Purwono &
Partners, a local law firm specializing in the resources
sector, says it is difficult to see Indonesian companies
acquiring the capacity to meet the needs of the offshore
oil industry. “It might well be the government extends
the waiver again for the petroleum industry.”
But local shipping operators see cabotage as an
opportunity. Many are seeking to form partnerships with
foreign drilling services operators, who are permitted to
take minority stakes in Indonesian vessels.
Mateus Lesmana, chief executive officer of Jakarta-based
marine services company Trust Corporation, says
his company will be ready by 2015 to meet all the needs
of the oil and gas industry.
“Oil and gas activity
has picked up in
2013 and there are
many more projects
on the horizon”
MR. R.P. SINGH
ADVANCED OFFSHORE
President Director
companies are investing in
offshore marine services, including
Pertamina Drilling, a unit of the state energy
company. Pertamina Drilling is focused on
supplying services to its parent, but works
for other operators if it has available rigs.
Pertamina Drilling director, Mr Faried
Rudiono, says the company’s priority is to
provide operational and safety excellence to
all customers inside or outside Pertamina
and establish a reputation as the drilling
contractor of choice. The company operates
almost entirely onshore, with a fleet of 39
rigs, but is moving into the offshore market
by forming partnerships with specialists.
Drilling unit
www.trustcorp.co.id
Your
preferred partner
in Indonesia
A one stop solution provider for
marine needs, Trust Corporation, is an
Indonesian company headquartered in
Jakarta that delivers a wide spectrum
of marine logistics. Trust Corp
ensures safety, accuracy, quality and
speed in all its marine infrastructure
from cargo transport, offshore
support and all related services.
Oil and gas exploration
30%
50%
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are clients are paying less. This is just one
example of the positive impact our technical
and engineering team has over naval design,
load factors, fuel consumption and speed.”
Advanced Offshore Services is also
investing in marine services for Indonesia’s
oil and gas industry. Jakarta-based
company provides diving services and
Remote Operated Vehicles (ROVs), which
are required for all work below depths of
200 metres in southeast Asia. President
director R. P. Singh says offshore oil
and gas activity has picked up in 2013 and
there many more projects on the horizon,
especially for Chevron and Total. He says
ROVs and DP2 dive support vessels are
in high demand. “We operate one world-class
ROV with a Tether Management
System, and have plans to buy two more
of these vehicles by the end of the year. As
for DP2 vessels there are only one or two
available with the Indonesian flag.”
Mr Singh said he is seeking to partner
with other companies to bring in more
DP2 vessels. “They will need to convert
to an Indonesona flag to operate here, but
I don’t think that’s a real barrier for any
company that is looking at Indonesia’s
potential over the long term. It’s the only
country in Southeast Asia that is going to
boom, ahead of Myanmar.”
Jakarta-based services company IMECO
is also developing its offshore capabilities in
support of the industry shift from onshore
to offshore exploration. President Director,
Mr Tanu Wijaya says marine services is a
key growth area for the company. “If you
look at the map, Indonesia is as big as the
United States but maybe 70% is water, so
there will be an increased need for better
infrastructure and sea transportation,
and of course there is the government
regulation on cabotage that will be key.
Offshore is the place to grow in the future,
particularly the deep water eastern area.
When somebody makes a discovery of
a giant field then they will need marine
services by providing support to the
onshore base and the vessels. Therefore,
we are developing our marine division to
have a wider range of services, by which
to so that we are not only providing vessels
but also shore base facilities.”

7. so big. Normal learning is not enough.
We need to have fast track learning with
students and young professionals not
only doing routine jobs but also attending
events at both IATMI and SPE will help to
accelerate the development.”
He says there is also a concerted push
to bring many Indonesian engineers back
to their home country from places such
as Dubai, which has historically offered
better salaries and career opportunities.
But local salaries have improved, and the
country has no shortage of opportunities.
“Indonesia is a newly full democratic
country. So, it is very open. Yes, there are
some challenges, but the opportunities
are also there in some of the deepwater
exploration in the east part of Indonesia,
in enhanced oil recovery both onshore
and offshore and do
not forget the uncon-ventionals
such as CBM
and maybe shale gas.
Shale gas is probably
still too early, but it is
a potential. It is a good
country to invest in. In
terms of the people, we
have good universities
locally, but of course,
we need to train.”
Skill shortages also extend into
specialized areas of expertise such as
diving, although industry participants
say this is primarily due to a lack of
training providers rather than potential
trainees.
Bormindo’s
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Skill shortages highlight growth
in local petroleum sector
Multi-billion dollar investment in new projects
has left Indonesia’s engineering industry
struggling to keep up with demand
International firms in engineering,
procurement, construction (EPC) and
project management are prominent in
most Indonesian projects, but there is also
a strong contingent of fast-growing local
firms. President director of Jakarta-based
engineer and construction contractor
Tripatra, Joseph Pangalila, says “everyone
is short of engineers because there are so
many projects, onshore and off-shore.”
The trend towards deep water areas is
also increasing the complexity of projects
and demand for skills. He says Tripatra
has refocused on the Indonesian market
because there is
more domestic
demand than it
could meet. “The
last few years we
started our inter-national
market-ing
and we have
executed projects
in Sharjah. But
increased invest-ment
on the upstream investment here,
specifically in deep water areas, has led
us to refocus on Indonesian projects. It
does not make
sense to look for
new markets when
we are still short
of engineers for
domestic projects.”
Mr Pangalila says
the company’s five-year
plan envisages
the company will
be four times its
current size. “In
Indonesia, there is
sustainable growth
in investment.
Chevron, Exxon-
Mobil and Total
have been here
for many years,
and they remain
in the market so
that means some-thing.
For Tripatra,
we want to grow
with the Indone-sian
economy.” He
says local firms
have the advan-tage
of a deeper
understanding of
local people and culture, backed by the
capability to deliver projects to interna-tional
standards. “Working with us not
only brings technical expertise but also
local know-how, that is very important
especially after the Suharto era. Local
governments are becoming more power-ful
and we have found that many inter-national
companies are having difficul-ties
entering the communities because
they do not know the culture and they
do not know how to approach them.”
He says CSR programs that create
prosperity for local communities are vitally
important, and can also help to create the
supply of skills needed. “Our CSR programs
are not only in health, but also education.
We have trained 15,000 people in the last
year. Most of the local people are farmers
and we need to train them in construction.
We have spent a lot of time training them
in safety, trade skills, even as truck drivers.
It is good for the community because it has
a multiplier effect.”
Chairman of the Society of Indonesian
Petroleum Engineers, Bambang Ismanto,
says the shortage of local engineers has
been compounded by a generational “crew
change” that has seen many experienced
engineers retire over the past few years.
“Basically, the experienced people retired,
and that’s why the gap between the
experienced people and the graduates is
The high level of drilling activity in
some parts of onshore Indonesia
has created a business boom for
Bormindo. The Jakarta-based dri-lling
services contractor is enjoying
its best year and plans to increase
the number of rigs in its fleet from
11 to 16 by the end of the year.
President director, Charles Gobel,
says demand is underpinned by
Chevron Pacific Indonesia, which has
been a customer since the 1980s.
“Bormindo’s customer base is made
up of prominent companies that are
well established in Indonesia. They
are increasing their activity, while
new entrants who are coming in and
exploring for new fields are finding it
more difficult to invest.”
Gobel says drilling rigs have not
changed significantly since the
1980s because of customer pre-ferences.
“We need more rigs, es-pecially
those that might no longer
be considered economical in North
America. There is an opportunity
here for rig owners who team up
with us in Indonesia.”
Tunu Field, N “ orth Processing Unit (NPU) Our five year plan
is for the company
to grow four times its
current size”
MR. JOSEPH PANGALILA
TRIPATRA ENGINEERS
CONSTRUCTORS
President Director
“There will be a lot
of offshore drilling
and exploration
activity.”
MR. MATEUS D. LESMANA
TRUST CORPORATION
Chairman CEO

8. President director Advanced Offshore
Services, R. P. Singh, says Indonesia wants
to improve the skill base in the country’s
oil and gas sector, but has not invested in
training capacity. “We can train only 10
or 15 people every year, when really we
need over 100 or 200 divers here.”
He says local industry insisted on the
international standard certification for
divers - the International Marine Con-tractors’
Association (IMCA) standard.
“We need to spend the money to train
Indonesian nationals because recent
graduate engineers coming out do not
want to spend up to $30,000 on this
training because they have already spent
all their money for their schooling and
college. The government should provide
the funds to train the Indonesian divers.
In addition, oil companies must assist by
funding Indonesian divers to train over-seas
and qualify them as IMCA divers,
which can only be done in Australia,
Africa, UK, and France.”
Total is the only oil company so far in
Indonesia to come up with the proposal
to pay part of the training and train 12
divers per year. “We
share the costs with
Total to train these
divers, but we need
other oil companies
to follow suit and
train Indonesian per-sonnel.
There should
also be thought given
to a diving training
centre here in Indo-nesia,
where an inter-national
standard of
diving qualification
can be provided.”
Another home-grown
company that
is growing in the EPC
sector is IMECO.The
company was established in the 1970s
and initially focused on the supply of
high technology equipment and then
later manufactured under the license
of products such as wellheads and
christmas trees. In 2007, it completed
its first EPC project, a 40MW gas-fired
power station in South Sumatra.
“IMECO now
successfully man-ufactures
its own
brand of pumping
units and has a
contract to supply,
maintain and op-erate
800 units for
Chevron. It is cur-rently
working on
establishing an international distri-bution
network for its own brand of
pumps, GIGATECH, with an initial
focus on the South East Asian re-gion”,
says IMECO president director,
Mr. Tanu Wijaya.
Companies such as Sagatrade
Murni have already proved that home-grown
products and expertise can
compete successfully in the global
market. Sagatrade Murni has been
manufacturing oilfield equipment
at is Samarinda facility since 1987.
Sagatrade products have run
successfully in every major oil and
gas producing region in the world,
with customers including major oil
companies and independents.
Rising standard of living drives
a bright energy future
Increased gas production counters
the decline in oil and gas
In fact, there is ample evidence the only
constraint on the growth of the country’s
oil and gas sector industry is a shortage
of skills and labor. Uncertainty about
aspects of regulation has undoubtedly
hindered some investment, but no-one
argues with the desire of the government
to promote energy development and its
willingness to find solutions.
The government has the difficult task in
the world’s fourth most populous country
of balancing the needs of petroleum
operators with many local stakeholders,
who are eager to exercise their power in
the newly democratic Indonesia.
Indonesia also has the enviable
problem of sky-rocketing domestic energy
demand, which continually shifts the goal
posts of energy self-sufficiency and makes
the country an easy target for its critics.
The rapid growth of Indonesia’s LNG
industry is proof of the overwhelmingly
positive outlook for the country’s
petroleum sector. First cab off the rank is
Donggi-Senora LNG, which will become
Indonesia’s fourth LNG project when it
comes on stream in 2015 at a rate of 2.1
million tonnes of LNG per annum.
Inpex and Shell hope to develop the
country’s fifth LNG project at Abadi, using
Shell’s innovative floating LNG technology.
Existing projects are also expanding.
BP is working towards a final investment
decision in 2014 on the addition of a third
train at Tangguh LNG, expanding capacity
to 11.4 million tonnes per annum. And at
Bontang LNG, new gas discoveries are being
made to keep the giant project supplied
with feedstock for many more years.
The future is bright across the country’s
petroleum sector for two simple reasons.
Indonesia’s 240 million people have a
higher standard of living within their
sights, and no-one will be able to slow their
demands for the energy that is necessary
to fulfil their aspirations. Secondly,
the country is rich with untapped
opportunities. In conventional oil and gas,
the country has vast areas of unexplored
but highly prospective frontiers, and
almost limitless opportunities in coal bed
methane, geothermal energy and shale gas.
It is easy to imagine the story of Indonesia’s
petroleum sector is still at the beginning.
Crude oil refinery
Global Presence, Local Expertise
AMEC Berca Indonesia is active in the local market
and is a high value engineering center for AMEC’s
global business across 40 countries. Vice President
Director of AMEC Berca, Dr. Willy Wiyatno, says the
firm’s high level of local expertise makes it a key
office in the global network.
“Collaboration across our various centers of
expertise is the way we do business because we
can assign our best people to deliver the best
outcomes for the client, no matter where the
project is located.”
AMEC Berca professionals in Indonesia have
worked on projects for oil majors in a number of
countries, including Russia, the Philippines, Qatar,
and United Kingdom.
A world class
oil and gas support
service company
With over thirty three years of solid
experience, PT Bormindo Nusantara is
poised to expand and diversify within
the growing industry and region.
Our proven track record of safe, reliable
and timely performance assure that our
clients continue to receive the total quality
service they have come to expect.
Our long term relationships with industry
leaders has established our reputation as
one of the foremost drilling and workover
service companies in Indonesia.
www.bormindo.com

9. www.elitespecialsections.com
Photos Courtesy of:
SKK Migas, Medco Energi, Tripatra Engineering Construction, Total
EP Indonésie, Oscar Segura Alonso
Special Thanks to:
Dr. Subroto, Chairman Bimasena and Former Minister of Energy; Hadi
Purnomo, Secretary General of the Indonesian Energy Council; Widhyawan
Prawiraatmaddja, Deputy Chairman for Commercial Management at
SKK Migas; Lukman Mahfoedz, Chairman of the Indonesian Petroleum
Association; Bambang Ismanto, Chairman of the Society of Indonesian
Petroleum Engineers; Alfian, Communications Department SKK Migas;
Imron Gazali, Head of Corporate Secretary at Medco Energy; Ekhsan
Nulhakim, Head of Corporate Communication at Medco Energi; Amahl S.
Azwar, Journalist at The Jakarta Post