with Hadi Purnomo, Director, Lemigas
You’ve spent a very big part of your life with Lemigas, what has made you dedicate your professional career to this institution?
Lemigas gave me the opportunity to study in the Imperial College in London with a full scholarship, as a part of a five-year long cooperation agreement with the British Geological Survey (BGS). The cooperation focused primarily on capacity building through technology and equipment transfers. Thanks to Lemigas I was able to get my Masters and PhD degrees in London, and this is the main reason why I have been with the institution so much time. I also enjoy working in Lemigas simply because I have a passion for the research that is done there. I have been with Lemigas since I finished my university studies, so this is like a second home to me.
Even before joining Lemigas, while I was still working on my final project for my undergraduate degree here in Indonesia, I was deeply involved in research. My supervisor at the time was offered an opportunity with a German university, so he asked me to finish the project he was doing for his PhD. That meant quite a challenge for me and two years of very hard work, but as I said I really love research.
How did you reach the top of such a prestigious institution as Lemigas?
The key to success is to not only work hard, but also to work smartly. It can take many years to see the results of research, which is why the business side of our organization cannot be left aside. We have to combine both aspects. We provide services for the industry, which represent about 30% of our current revenues and it is growing. We aspire to get even more from our services in the near future, to reach about 40% of our revenues. As a public institution we have to pass all of our revenues over to the government, to the national treasury. We can later get back a part of this money by developing programmes.
Lemigas became a part of the Ministry of Energy in 1977. What is the relationship with the Ministry, and how independent are you in terms of decision-making and defining your growth strategy?
Before becoming a government institution, Lemigas was called the Indonesian Petroleum Institute which was established in 1965. At that time it was operating oilfields in the Cepu area and conducting research there. When it became a part of the Ministry, some of the employees became government workers and others went over to Pertamina. In 1984, Lemigas was divided in two separates institutions, one based in Jakarta in charge of research named “Research and Development Centre for Oil and Gas” Technology “LEMIGAS”, and the other based in Cepu for manpower development named “Oil and Gas Manpower Development Centre”. The government decided to absorb Lemigas in order to have the technological support, and also assistance for policy-making. The technical expertise is essential for those taking the policy decisions for the industry. Although Lemigas is a governmental institution, it has independence to make its decisions for growth strategy within the limits of government regulation. For example, we can submit work programs and budget by considering national issues on energy and mineral resources. It is, of course, a bottom-up process which represents the institution’s independence in decision making and defining growth strategy.
How do you interact with the other main public institutions involved in the Indonesian O&G sector?
Lemigas has the mission of providing input for government policy, solving industrial problems and developing new technologies. We actively offer technological services to the oil and gas industry to solve their industrial problems in terms of technological consultation and laboratory analyses/measurement. We participate as an independent institution when difference of opinion occurs between BP Migas and one of the PSCs or between one PSC and another PSC. We are like an arbitrator; we try to find a solution satisfactory for both sides. For example, we help in determining the base line when a company uses EOR as an incentive or we help in splitting hydrocarbon reserve when oil or gas field lies across the border of two PSCs working areas. We also collaborate with the Parliament, especially Commission VII when there is a technical issue on which we can give our perspective.
Do you charge for these services? Are you acting as a consultant for the government and for the companies on these matters?
Yes, we charge for our services. Concerning the government, it depends because at times we are fulfilling our role as a supporting public institution, like when we give policy advice for example. In these cases we don’t charge.
Are you working with Exxon in the Cepu block?
Yes, at the beginning we conducted independent evaluation of Cepu block. Up to now we are still working with Exxon in the development of Cepu Block by providing technological services.
Does the government always follow your recommendations, or are there other kind of political considerations that determine their decisions?
We give the government our technical point of view, but they don’t always necessarily follow our recommendations. For example, we conducted independent study for our governments in order to determine the causes of blow-out occurring at one of PSC’s exploration site. Our findings can show that the main reasons for the accident were human errors, so we suggest to get people certified and to renew other certifications. This is the kind of thing we can do for the government, and this is free of charge because we are allocating resources in the budget for these purposes.
You mentioned that besides the government you also offer services to companies from the private sector. Where do you see the most potential for the development of your business in this line?
For the upstream sector, we focus on helping to optimize production. 70-80% of the producing fields are mature, so there is a need to improve the rate of recovery. We also offer assistance for the implementation of the EOR technology. This is very important at a moment when the government announces that the production goal for 2009 is 1.3 million boepd.. We also focus on seeking new energy by developing Coal Bed Methane (CBM) Pilot Project in South Sumatera. The potential of CBM as an energy source in Indonesia is clearly promising, and this will increase national gas reserve and contribute as energy back-up in the near future. The development of CBM will also be of great economic, social and ecological benefit.
As for downstream activities, we are involved in developing alternative energy sources. We have already developed a biodiesel plant, and are also constructing another one in Rokan Hulu regency in Riau. The capacity will be 30 kilolitres per day.
Do you collaborate actively with other countries? Do you transfer technology with international institutions or universities?
Of course, Lemigas cannot work alone. We need partners in order to develop our capacities. We work with foreign and domestic institutions and companies. For example, with Sojitz Corporation we are developing CO2 injections for EOR, and we are hoping to prove that this is the best way to improve oil recovery and it also allows the reduction of CO2 emissions. With Heriot Watt University we collaborate on flow assurance technology and natural gas hydrate technology development. With Research Institute of Petroleum Exploration and Development (RIPED) of PetroChina we cooperate on research, technological services and field implementation of chemical injections for EOR. So, by collaborating with foreign and domestic institution and companies, transfer of technology will take place directly.
Human resources are key to the industry and to Lemigas in particular. How would you benchmark the level of Indonesian engineers and researchers compared to Southeast Asia and the rest of the world? Are they well funded and prepared?
Based on my experience working with engineers and researchers from Southeast Asia and other countries, the level of Indonesian engineers and researchers are comparable. Well prepared, yes. But the funding for education and research is insufficient and this is a major problem.
Is the brain-drain of Indonesian engineers to other countries affecting Lemigas? What do you think about this worrying phenomenon for the oil and gas industry?
This is a big concern. Many engineers are going to Qatar because they can find better paid jobs there. Another thing that happens is that they prefer to work for private companies because they offer better conditions. It looks like the government is reacting and that the salary system will be changed so that the income during the active life will be higher.
On the longer term, in order for Indonesia to remain an important oil and gas producer there will have to be new exploration in remote areas. How is Lemigas preparing for this challenge?
We conduct research on the basins and try to find new areas with potential. Indonesia has around 60 basins, but only 15 are producing. We work together with the geological institute, they do seismic surveys and Lemigas assesses the interest and potential of the area. Then the Ministry of Energy uses this information for tenders. We routinely conduct research explorations for oil and gas every year, and also study how to lift production levels. We give our findings to the government in order for them to establish their policy.
How is the revenue split between the provincial government and the regencies?
The revenue split generated from oil and gas sub-sector between the respective Province (including regencies) and the Central Government has been regulated in the Law No. 33 year 2004. This has to be considered as internal affairs, which does not have any impact to the oil and gas industry.
What would be an ideal yet realistic energy mix for Indonesia in the 21st century?
The target of energy mix as stated in the Presidential Regulation No. 5 year 2006 is realistic because it is already considered the balance of energy supply and demand, and we are doing our best to adapt to its provisions.
What about the creation of the National Energy Council? Will it contribute to have a more focused and coordinated policy?
I think it is a good thing, we will see. Our Ministry will also improve its performance under this new structure. In order to come close to the target for the energy mix there is a lot of work to be done.
Any final comments for OGFJ’s readers about Lemigas and your vision for the future?
My dream is to make Lemigas an excellent, professional and world class research institution. To achieve this we need competent manpower. I want for our people to be ready to adapt to new technologies in order to be ready to offer services to the industry.