Senin, 04 Maret 2013

The promise of exploration in eastern Indonesia


The promise of exploration in eastern Indonesia
Aussie Gautama  ;  The writer, Geologist,
is SKK Migas Deputy for Planning Management
JAKARTA POST, 26 Februari 2013


The year 2012 was noted by Wood Mackenzie as another good year for exploration worldwide, with huge numbers of newly discovered oil and gas resources. 

There was at least 25 billion barrels equivalent from 300 new field discoveries in 50 different countries. Of the 10 best discoveries worldwide, Mozambique ranked first with a discovery of 50 trillion cubic feet (TCF) by Anadarko in the Rovuma basin, while Tanzania ranked second with a 16 TCF deep-water discovery by British Gas and StatOil. 

What about exploration activity in Indonesia? In 2009–2012, exploration activities in Indonesia were quite active, particularly in the deep-waters of eastern Indonesia. In February 2009, the first eastern Indonesia exploration well of this four year period — ExxonMobil’s Rangkong-1 well — was spudded, targeting the Oligo-Miocene carbonates. The well reached a total depth of 4,500 meters without encountering any hydrocarbon, and was plugged and abandoned as a dry well. 

The drilling continued from one location to another by various companies: StatOil, ConocoPhillips, Talisman, Marathon, Tately, Japex, Genting Oil, CNOOC, Hess, Murphy — to name some, testing various concepts, and after four years, by the end 2012, around 25 exploration wells had been drilled in Eastern Indonesia, mostly in the deep-water part of the Makassar Strait and several in the Arafura–Papua area. 

Overall exploration results in eastern Indonesia in 2009–2012 can be summarized as 25 wells drilled: 15 dry wells, four wells encountering non-economic hydrocarbon accumulations, three wells not reaching their targets due to technical problems, and the discovery of 2 TCF was confirmed by three wells drilled by Genting Oil. The preliminary total expenditure for the four years was estimated at more than US$2 billion.

Putting this four-year, eastern Indonesia exploration campaign into perspective, one may observe that expenditures of $2 billion, leading to a discovery of 2 TCF of gas, demonstrates the high-risk, high-gain nature of exploration. Balancing the $2 billion spent versus the 2 TCF discovered, and a very simplistic calculation shows that 2 TCF of initial gas in place is equal to 1.4 TCF resources — assuming a 70 percent recovery factor — and taking a simple pricing of $10 million per billion cubic feet (BCF), then the 1.4 TCF value would be roughly equal to $14 billion.

Hence, $2 billion in total expenditure for discovering $14 billion worth of gas still means a 700 percent gain. If the Indonesian state had the resources and a $2 billion exploration budget, the 2009-2012 campaign would have been a success, with economic gains of 700 percent. 

Unfortunately, this is not the case. The exploration campaign was carried out by various international companies. Therefore, we have some losers — and when we say losers, for some it is a quite a significant loss, but also some winners, with one company — Genting Oil — firmly in this category.  As for Indonesia, it gains 70 percent of the discovery (minus cost recovery), whilst Genting, after spending roughly $200 million drilling three wells, gains about 30 percent of the $14 billion (minus cost recovery), which would be somewhere to the tune of $3 to 4 billion, which is quite a handsome profit.

Coming back to the exploration results in the deep-water Makassar Strait, the main question is whether this region can be downgraded as a non-prolific region, void of any hydrocarbon accumulations, or whether the oil and gas is yet to be found. As with any exploration activities throughout the world, the devil is in the detail. Were the wells well positioned? Were the whole potential stratigraphic layers investigated? Have the seismics been well calibrated?

The wells that encountered non-economic hydrocarbon accumulations have proven that a hydrocarbon-generating system once existed in the area. The challenge is to prove whether economic size hydrocarbon accumulations do exist and where: Is the kitchen and the source rock rich enough to expulse hydrocarbons in vast quantities? Where have the hydrocarbons migrated during the million years of their generation? Do we have enough structure and seal to trap the hydrocarbons?

One should also note that some wells have not reached their target due to technical problems: These wells should be considered as not having proven anything yet in their respective areas. 

And for the wells that have investigated the whole zone of interest and not encountered any hydrocarbons, conclusions need to be drawn, but they have proven that in the positions where they have been drilled, there are no hydrocarbons. So the next exploration targets are more limited, in the areas not yet investigated by these previous exploration wells.

History has shown that many times, discoveries were made after the second, third or fourth exploration attempt in the area. One well-known field in Java was discovered after more than a century of exploration and development in the region. Another field was discovered by a company that farmed-in into the block, after the initial operator positioned the exploration well incorrectly by 500 meters. 

Therefore, this writer believes that after the exploration campaign between 2009 and 2012, eastern Indonesia remains an interesting, albeit challenging, exploration playground, with a proven working hydrocarbon system, a large area to be investigated and a diverse and complex geologic setting.

Companies with the tenacity and persistence to finding oil and gas will further scour existing and new data obtained by the previous campaigns, such as the understanding of the evolution of the subsurface setting and acquiring more data in some target areas. Those who manage to correctly reconstruct the geological evolution of the region, trace hydrocarbon generation, migration and trapping through time and have the courage to spend more on exploration drilling will reap the results. ●

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