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Deepwater in Indonesia: Now and Tomorrow

The 3rd Deepwater Asia Congress

Jakarta, 10-11 July 2014

Sinang Bulawan

Head of Indonesia Deepwater Development Project Supervisory Board

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• Evaluating a brief case study on the Indonesian Oil & Gas

business

• Zooming in on past, present and future conditions

• Dwelling into the geology and drilling constrains in Deepwater

Operation

• Understanding deepwater drilling: Getting to know the problem in

Indonesia and formulating an appropriate solution

• Makassar Strait: The Deepwater Exploratory Consortium

• The Current and Future Deepwater Project in Indonesia

• The Future Prospect of Deepwater Activities in Indonesia

Agenda

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Evaluating a Brief Case Study

on the Indonesian Oil & Gas Business

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Indonesia Oil & Gas Working Areas

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Indonesia Production History

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0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

OIL (MBOPD) GAS (MBOEPD)OIL

Shifting Roles : FROM OIL TO GAS

OIL PRODUCTION DOMINANT GAS

PRODUCTION

DOMINANT

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President Instruction No. 2 / 2012 Maintaining and Accelerating Indonesia Oil &

Gas Production

1. To increase the efficiency and to optimize the

production facilities

2. To optimize and to develop the field production

using EOR technology

3. To optimize PSCs Sharing Facilities

4. To accelerate the new field development and

marginal field.

5. To optimize and reactivate the suspended wells.

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The Policy of Indonesia Oil & Gas

Exploration & Development

1. To maintain the production oil and gas from

the existing onshore and offshore fields

2. To move the activities from onshore to offshore

3. To explore and develop fields from the west to

the east area

4. To accelerate activities in deepwater areas

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Courtesy of Transocean

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Zooming In on Past, Present and

Future Condition

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Deepwater Exploration

in Indonesia

1. Exploration of deep water sediments and play in present deep water area, e.g. the Makassar Strait.

2. Exploration of deep water sediments and play in present onshore or shallow water area (they were deep water area but now they have been uplifted by geological forces to become land or shallow water area), e.g. Java and the Madura Strait

In exploration, deep water could have two context:

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• The first production Sharing Contract acreage which included a deep water area, was awarded to International Oil in April 1968. The working acreage was located in onshore and offshore Timor.

• In 1971, Shell signed a PSC for offshore South Java deepwater basin. Two wells were drilled, the Alveolina-1 and the Borelis-1 well, respectively in water depths of 352 m and 373 m. They were the first deep water wells in Indonesia

Deepwater Activities in Indonesia :

History

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• Amoco was awarded a PSC in 1982 for a deep water

block in the Bali sea. Four wells were drilled in water

depths ranging from 301 m to 482 m. The L46-1 well

was spudded in a water depth of 482 m and flowed

936 BOPD and 295 MCFPD of gas on test. The l 46-1

was the first Indonesia’s discovery well in deep

water.

Deepwater Activities in Indonesia :

History

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• The first PSC in Indonesia developed deepwater

field was Unocal East Kalimantan in August 2003.

The field, West Seno, lies in 3300 ft water depth and

discovered in 1998.

• The Development using TLP (Tension Leg Platform)

reached a peak production at 30,000 BOPD in 2004.

Deepwater Activities in Indonesia :

History

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Deepwater Activity in Indonesia:

Exploration

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47 Wells: Bangka, Janaka North, Gambah, Giram, Aton, Pari Nilai Utara, Nakula, Bangka, Gandang, Gendalo, Gada, Gula, Geng, Ranggas, Wisnu East

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Abadi Field:

6 wells

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Discoveries in Tarakan Deep Water Areas, NE Kalimantan Offshore

9 Wells:

Aster Field: 5 wells

Padma Field: 3 wells

Tulip Field: 1 well

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Deepwater: Exploratory Wells

6036 ft

3600 ft

2225 ft

12,000 ft

TD

14,100 ft

TD

17,608 ft

TD 2004 to 2007

2000 to 2007

1999 to 2004

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Deepwater:

Future Development Wells (2014-2016)

Bangka Maha Gendalo Gandang Gehem

4500 ft WD

5600 ft WD

6000 ft WD

3300 ft WD

3000 ft WD

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Geological and Drilling Constrains

in Deepwater

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Future: Deepwater Challenges

Geologically there is no restriction to the

distribution of petroleum potential within

offshore basins. Oil and gas could accumulate in

continental shelf, slope, rise, and basin floor as

long as geological condition for petroleum

accumulation exist. But, to explore and produce

oil or gas accumulations in deepwater requires

high capital investment and high technological

expertise, adapted in difficult technical and

environment conditions.

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Deepwater: Drilling Chalenges

Reservoir

Characterization &

Monitoring

Weather

Narrow mud

weight window

Subsea BOP

Currents

Seabed

Temperature Subsea Completion

Shallow Drilling

Hazards

Template

Logistics

Flow Assurance

Courtesy of Schlumberger

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Deepwater:

CAPEX Look Like

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Understanding Deepwater Drilling:

Getting to Know the Problem in Indonesia

and Formulating an Appropriate Solution

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Deepwater: Cost Driver & Recovery

All Other29%

Contract Rig and Marine

Charters61%

Mobilization 10%

Cost Is Going Up

and hard to get rigs

Cost

Driver

Cost

Recovery

Courtesy of Schlumberger

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Barriers for bringing a Deepwater

into Indonesia

1. Tight Deepwater supply world Wide

No deepwater unit available locally

Deepwater supply might only be

available 2+ years ahead

Major deepwater upgrade not

feasible

2. Changing Deepwater market

Deep water contractors typically

offer subject to availability with 30

days validity

Priority given for long terms (3+

years)

Competition among

operators/countries

Rigid Indonesia procurement process

in dynamic market

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High Demand Has Driven

Daily Rate Upwards

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A Complex and Lengthy

of Procurement Process

in Indonesia

Indonesia Procurement Process

Total: 12 to 18 weeks

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Potential

Tax & Import Duty

Rig Importation

• Temporary Import – 2% of 15% import duty per month

• If temporary Import not allowed potential for 15% of Rig value

Import VAT

• 10% of fair market value of the imports plus import duty

Article 22 Import Withholding

• 2.5% for Indonesian companies with import license

• 7.5% for foreign entities or if no import license is available

VAT on Goods and Services

• 10% on goods and services delivered locally

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Makassar Strait: The Deepwater

Exploratory Consortium

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Makassar Strait:

The Deepwater

Exploratory

Consortium

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Makassar Strait

Explorers Consortium

(MSEC)

• One deepwater PSC Consortium now established.

• The members:

Marathon, StatoilHydro, ENI, Anadarko, ConocoPhillips and

Talisman Energy

• To drill deepwater exploratory well in Makassar Strait areas

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Makassar Strait

Explorers Consortium

(MSEC)

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Joining Together in

Unprecedented Cooperation

• All Deepwater PSCs recognize the need to work

together in this difficult rig market

• Individual companies alone will NOT be able to

attract the interest of rig contractors

• Working group between PSCs and Government

(MIGAS & BPMIGAS) will be needed to address

The Unique Challenges of A Deepwater Rig &

Shared Services Consortium

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PSC Consortium:

A Real Win–Win Solution

• Make a binding rig sharing agreement between PSCs

• Prepare In One Rig tender Package especially for Exploratory Deepwater Wells

• Propose In One PSCs Drilling Schedule for one period contract

• Share Mob/Demob cost

• Join together in one team with Government (MIGAS & BPMIGAS) to simplify AFE and Procurement process

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The Drilling Result of Deepwater PSCs in

Makassar Strait By Consortium 2009- 2012

Contractor Block Wells Status

ExxonMobil Surumana Rangkong-1 Dry Well

ExxonMobil Mandar Kris-1 Sultan-1 Kriss Well-1 ST

Biogenic Gas (MDT) Uneconomic Dry Well Dry Well

StatOil Karama Gatot Kaca-1 ST Anoman-1 Antasena-1

Dry Well Dry Well Dry Well

Talisman Sageri Lempuk-1X Dry Well

Marathon Pasang Kayu Bravo Well Romeo Well Romeo B-1 Rome C-1

Dry Well Dry Well Technical Problem Technical Problem

Tately Budong-Budong KD-1 LG-1

Technical Problem Uneconomical Well

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The Drilling Result of Deepwater PSCs in the

East Area of Indonesia

Contractor Block Wells Status

ConocoPhilips Kuma (Makassar) Amborip VI (Papua) Arafura Sea

Kaluku-1 Aru-1 Mutiara Putih-1

Waxy Oil (MDT) Dry Well Dry Well

Japex Buton Benteng-1 (Onshore) Dry Well

CNOOC SE Palung Aru (Kep. Aru)

Sindoro-1 Dry Well

Hess Semai V (Papua) Andalan-1 Andalan-2

Dry Well Dry Well

Murphy Semai II Lengkuas-1 Dry Well

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Different PSC, Different Result

• Makassar Strait Drilling Result is not a Nightmare.

• Even though the result of drilling produced dry hole, does not mean the area has no oil and gas reserve.

• The technique and data applied in drilling has a big influence on the result.

• Gendalo-Gehem in Makassar Strait was previously managed by ExxonMobil, drilling result was nil.

• After it was re-entered by Unocal, by using a different method and technique, a gladdening result was obtained.

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The Current and Future Deepwater

Project in Indonesia

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PSC Chevron IDD

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Bangka

BANGKA • 2 SUBSEA WELLS • TO FLOW TO SANTAN TOTAL RESERVES : - GAS APPROX : 143 BCF - CONDENSATE : 3,4 MMBO • TIE BACT TO WEST SENO FPU : - GAS : 150 MMCFGPD (EXISTING) - CONDENSATE : 60 MBOPD (EXISTING)

GENDALO HUB • 15 SUBSEA WELLS • TO FLOW TO SANTAN TOTAL RESERVES : - GAS APPROX : 2.064 BCF - CONDENSATE : 19 MMBO • GENDALO FPU DESIGN CAPACITY : - GAS : 700 MMCFGPD - CONDENSATE : 25 MBOPD

GEHEM HUB • 11 SUBSEA WELLS • TO FLOW TO SANTAN TOTAL RESERVES : - GAS APPROX : 932 BCF - CONDENSATE : 35,1 MMBO • GEHEM FPU DESIGN CAPACITY : - GAS : 420 MMCFGPD - CONDENSATE : 30 MBOPD

G 20”

C 8”

G 16”

C 8”

G 10”

PSC Chevron IDD

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Interest : JV Eni 55% dan GSZ 45%

Hidrokarbon : Gas & Condensate

Drilled Wells : JKK-1 (2009), JKK-2, 2 dir, 3 (2010),

JNE-1 dan JNE-2 (2011)

Location : Kutai Basin, Makassar Strait

POD-I Jangkrik (JKK) approved: 29 Nov 2011

POD-II jangkrik NE (JNE) approved: 31 Jan 2013

1st Gas JKK and JNE : Q4 2016

PSC ENI Muara Bakau

WD

@ F

PU

12

0m

WD

@ S

ub

se

a 5

00

m

Production Flowlines

Umbilicals

Jangkrik Barge FPU

Condensate Export

Gas Export

Jangkrik Jangkrik NE

Gas & CondensatesExport to shore

Floating Production Unit (FPU): Hull, Mooring

System, Topside Facilities for 450 MMSCFD

80 km Pipeline(s) : Gas and Condensate to ORF,

onshore dual tie-in points

Production Wells: JKK (7 wells), JNE (4 wells)

Subsea Flexible & Rigid Production Flow-line(s)

Subsea Manifold: JKK (3 ea), JNE (2 ea)

Umbilical & Subsea Control System

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The Future Prospect of Deepwater

Activities in Indonesia

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Deepwater Basin in Indonesia

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Deepwater Working Areas by PSC in Indonesia

Total: 45 PSCs Already Drilled: 13 PSCs

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Incentives of Deepwater Development

1. The oil split 65% for government and 35% for PSC

2. The split of gas 60% for government and 40% for PSC

3. Exemption for import duty and the PSC has no

obligation to submit firm commitment of exploratory

drilling in first 3 years.

4. Incentive package of investment credit and attractive

production split. For depth 200 – 1500 meter is 110%

and above 1500 meter is 125%.

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THANK YOU