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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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