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Interview

with Eko Lumadyo, President and General Manager, Niko Resources Indonesia

05.04.2012 / Energyboardroom

There is currently a transition from onshore to offshore and West to East in Indonesia’s upstream industry. How do you see Niko Resources positioned within this dynamic?

In Indonesia, Niko Resources is an exploration company with focus on frontier basins in the deep-water area. We operate 14 PSCs and have working interest in additional 6 non-operated blocks, where we partner with major companies.

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 Eastern Indonesia basins are under-explored basins and offers 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.

As for our role, Niko Resources have helped promoting more exploration activities in Indonesia frontier basins through our joint studies with MIGAS and universities in Indonesia. We have undertaken several studies and surveys that had the effect of renewing outdated information in many of the frontier basins. We have applied our SeaSeep technology to map anomalies in the sea floor, piston coring, heat flow sampling and 2D seismic survey during our joint studies.

Using our technology, we were able to see structures and anomalies never before observed in the subsurface. Our exploration team also conducted core geochemistry studies to identify the thermogenic charge in our focused areas.

These studies have helped us to reduce the risk of the petroleum system and have encouraged us to be aggressive in our bidding strategy. As such, Niko Resources has been able to position itself strategically in Indonesia across 20 blocks and able to bring in several partners to explore these potential basins with us.

What role would you attribute to your technology in the success of Niko Resources operations?

Although Niko Resources brought in the latest exploration technologies to the Indonesia, our fundamental strategy is not dissimilar from that of the first geologists who first went into the Indonesian jungle looking for oil seeps. Obviously, as exploration evolved in deep-water areas at depths in excess of 3,000 feet, we have to employ remote sensing to explore these regions. Our multi-beam technology allows us to map the seafloor in extremely high detail. This survey then allows our scientists to tell us if we have a mud volcano with potential oil seeps and we can then go back and drop the piston cores. If our samples contain any hydrocarbons, we conduct geochemistry study to fingerprint the oil. If the oil happens to have a similar composition to that found in a major nearby discovery or production then we have lowered the petroleum system risk significantly.

We were also fortunate in the run up to our seismic program that we were able to execute our committed seismic program efficiently. We were able to secure a seismic vessel that acquired our seismic program in 18 months non-stop for all our blocks in Indonesia.

When you carry out these processes repeatedly you gain efficiencies by performing repeated actions and this led to a very efficient program. Niko Resources in 2012 is now at the stage where we can commence exploratory drilling.

Given Indonesia’s current stage of the production cycle, would you say that now is a good time for the independent company?

An independent company like Niko Resources has the advantage of being able to move quickly, thanks to the minimal bureaucracy within our company. If we see an opportunity in a particular area, our decision making process is very simple. Our fast approval process provides a competitive advantage to Niko Resources and inside the company we enjoy the team dynamic.

However, it should be said that the exploration business is more about collaboration than competition. We have formed strategic partnership with major upstream E&P companies in Indonesia who bring their own established processes, in terms of work-flow, technology and screening.
Through this collaboration, we are able to add new technologies to our exploration area. The synergies created in these partnerships are beneficial for the Indonesian exploration industry as a whole. By virtue of having more experts analyzing our oil and gas plays, the chances of developing the playinto a drillable prospect will be better.

Given your range of partners, how do you manage to keep all of them happy?

The most important part of the partnership occurs at the negotiation stage of the joint operating agreement. After this agreement is finalized the responsibilities of each party should already be firmly established. The key beyond this point is to maintain a very good communication in order to keep our partners well informed. With so many partners, our project management has a lot of challenge and we therefore have to make an effort to dedicate our time appropriately.

Niko Resources brings a lot to our partnerships in terms of our experience of drilling in deep-water in this region. Our drilling team is actually composed of many individuals who used to work in deep-water in East Kalimantan in the late-1990s and early 2000s.. At that time, we were drilling hundreds of wells in Makassar strait. We believe that we have the experience of executing our deepwater drilling operation with efficiently.

Would you inform our readers a little about your current drilling program and the situation today?

Niko Resources has very recently signed a 4-year rig contract with Diamond Offshore, which reflects our firm commitment in in Indonesia. The seismic is completed for all the PSCs that Niko Resources has signed in Indonesia, so if everything goes to plan then in the third quarter of 2012 we should begin our drilling operations.

With so many potential prospects, choosing where to focus our drilling activity will be somewhat a balancing act. Because our portfolio of blocks stretches from one end of Indonesia to the other choosing where to send our vessels is important. If the rig goes East then it will likely remain there for some time in order to improve our mobilization costs and of course if we make a discovery then the rig will remain in the East to fully explore its potential and develop the asset. This will be what is demanded by our stakeholders: Niko shareholders, our joint venture partners and the government.

It is very important at this stage to work out the possible scenarios in advance so that we lose as little time as possible during the operation. As a consequence, our project management is multi-layered and highly adaptable to the range of discovery scenarios we may encounter. The main challenge we see for operating in the East is the logistical side given that this is a long way from our office right now. 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.

What would be your final message to our readers on exploration in Indonesia?

As a location for exploration, Indonesia is very important for Niko Resources and it constitutes the largest investment for the company worldwide.

I would recommend others to come to Indonesia as there are many places to explore for a new play concept and potential opportunities for discoveries. Contract sanctity is very well established in Indonesia creating a stable upstream environment and the government is working to further improve the investment climate. Indonesia is therefore a good country for exploration companies, so please come and join us.

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