with Yanni Kussuryani, Chairman, Lemigas
What is the role you see for LEMIGAS as a technical advisor to government on Indonesia’s oil and gas industry?
LEMIGAS is the R&D center for oil and gas technology under the Ministry of Energy and Mineral Resources. The center strives to be an excellent, professional and world-class oil and gas R&D institution whose role is to provide inputs to government through the Ministry of Energy and Mineral Resources. Our inputs are solid and accurate because they come from the R&D activities, carried out by high ranking experts from various educational backgrounds. These inputs are important information for discussing oil and gas regulations. LEMIGAS’ R&D results function to provide basic information to the government regarding current oil and gas challenges and how to respond.
Besides its service to the government and state institutions, which are BPMIGAS, Pertamina, etc; LEMIGAS also provides for clients from private sector such as ConocoPhillips, Chevron, Total, ExxonMobil and many more. LEMIGAS always makes the greatest effort to keep its clients satisfied. The institution has competitive prices, high quality services, and always meets its deadlines. Our results are precise and accurate because our equipment is routinely being renewed. Surveys of our private clients also allow LEMIGAS to quickly address issues and improve our working performance.
In addition, LEMIGAS publishes our magazines, which contain the results of R&D conducted by LEMIGAS. We send these magazines to our many stakeholders, so that they are able to follow our R&D activities.
One of the challenges faced in Indonesia is declining production and in 2011 Indonesia’s oil producing industry missed its production target of 945,000 barrels per day. What is best strategy for generating production growth in 2012?
There were a number of obstacles encountered in achieving production targets of 945,000 barrels per day last year. There were several technical problems: most fields are brown fields in which production is declining, there were project delays resulting from planned/unplanned shut down as a result of repairing production facilities and there were delays in receiving drilling permits.
LEMIGAS sees it as imperative that production increases in 2012. Production will increase only as a result of intensive exploratory drilling activity, simplification of the drilling permits, speeding up the plan of development (POD) programs, and the application of enhanced oil recovery (EOR) technology on old wells. These are the measures being advocated by LEMIGAS to the government.
In the case of EOR, what is your perspective on the willingness of producers to adopt these high-cost technologies?
Based on oil and gas reserve databases managed by LEMIGAS, around 87% Indonesia’s national oil production is produced from mature fields. Available technologies which are proven to increase oil recovery significantly at these fields are water injection and EOR. The oil and gas contractors have realized that although EOR technologies are costly, they will have to start applying these technologies in order to sustain the oil production and increase the value coming from mature fields. BP MiGAS has also put in place a requirement that oil companies include EOR activities within their annual budgets.
However, the application of EOR technologies requires a lengthy period until oil production is at its optimum rate. The issue is that many of these mature fields are mostly at the end of their contract period, which creates a dilemma for private contractors. In my opinion, to cope with this issue, the government should design particular mechanisms for extending contracts and enabling EOR projects in cases where production contracts are near the end.
Future EOR technology development in Indonesia would contribute considerably to our national production. Almost 20% of current production comes from EOR Duri steam flooding. There are still very large oilfields in Indonesia with good data and which are good candidates for EOR technology. If 5% of the estimated 42 billion barrels of oil remaining after primary and secondary depletion can be produced, this additional recovery would be very significant for Indonesia.
LEMIGAS studies show EOR application using chemical and CO2 gas injection as being the most promising technologies applied to Indonesia’s mature fields. Therefore, we have to ensure the application of EOR technologies and the implementation of chemical injection should be promoted by empowering existing associated chemical manufacturers. The application of CO2 injection can potentially provide low carbon energy and assist the government in achieving national greenhouse gas emissions reduction targets.
You also mention exploration and one of the main paradigm shifts in Indonesia is the movement of E&P from West to East. How can LEMIGAS assist in this transition?
LEMIGAS supports the Directorate General MIGAS in this transition and has been conducting research in the East for many years.
LEMIGAS uses a portion of the budget it receives from government for exploration activities in Eastern Indonesia in order to evaluate its potential. It is important that the government is aware of the full extent of the resources in East Indonesia. Eastern Indonesia has been our focus for the last few years and LEMIGAS has been trying to inform outside investors of its potential. There are many blocks in Eastern Indonesia meaning that many companies have already seen its potential and are working there already.
One of the key developments in Eastern Indonesia is the Abadi gas field operated by Inpex. LEMIGAS is involved in this project and is providing information to the government so that it can make appropriate decisions regarding the operational environment. There are challenges owing to the fact that it is on the border between Indonesia and Australia. It will be the first floating LNG plant in the world, so there are many aspects that the government must consider carefully. LEMIGAS is capable of making a significant contribution to ensuring the efficiency of the Abadi project.
The East of Indonesia has a very different geology to the West of Indonesia. However LEMIGAS has spent 5-6 years evaluating and investigating its potential. LEMIGAS has also cooperated with several institutions to improve our knowledge of deep water technology. Other government institutions have also supported LEMIGAS and provided vital seismic data, which has given LEMIGAS a reliable source for interpreting these regions.
LEMIGAS is now encouraging the government to push investors into carrying out intensive exploration. One of the key elements in encouraging exploration in the region is to provide good data to companies in the first place. The results of LEMIGAS’s research in East Indonesia must be made public to investors. LEMIGAS is working to socialize the oil and gas community and let them know the potential of the region. However, investors also need a good investment climate and there should be a clear divide between mature and frontier regions in this respect.
Would you explain In a little more depth how LEMIGAS is working with the private sector?
Over the last three years, LEMIGAS has entered into partnerships with several reputable contractors such as Chevron Pacific Indonesia, Pertamina EP, MEDCO E&P, and TOTAL, to cooperate in preparing EOR chemical injection implementation plans at their fields. LEMIGAS conducted technical feasibility studies and evaluation of their chemical injection plans on a laboratory scale with the main objectives being to anticipate the uncertainties and predict the performance of the chemical prior to field-scale implementation. In order to do this, LEMIGAS has state of the art laboratories for EOR, cores, and fluids research purposes and a dedicated laboratory for reservoir modeling equipped with the latest software.
LEMIGAS is now forging international partnerships with our researchers going on exchanges with institutions around the world. LEMIGAS currently has 2 researchers on a 2 month visit to Total’s research center in Paris. We are collaborating on designing new methodology and approaches for core analysis.
LEMIGAS’s work is mostly of a technical nature and lies in providing the government with information on the most prospective areas for development, whether that is oil and gas, coal bed methane or shale gas. To this end, LEMIGAS has a governmental budget to further its own internal R&D activities.
On the development of gas fields, LEMIGAS has also been entrusted to certify the reserves of several gas fields namely Abadi, Senoro, Vorwata, and some other gas fields in the Corridor Block. The reserve certificate issued by LEMIGAS is one of the requirements for the government in approving field development. Moreover, the GGR study outcomes resulting from certification LEMIGAS made have helped the contractors in improving gas production on those fields. At the moment, we are also assisting several contractors in revitalizing shut-in wells.
LEMIGAS has worked on many projects concerning alternative energy source. How do you see Indonesia’s energy matrix evolving in the short term and how is LEMIGAS working to speed up the transition to alternative energy sources?
LEMIGAS has developed alternative energy sources such as biofuels, coal bed methane, and shale gas. CBM and shale gas are categorized as unconventional gas. The development of unconventional gas needs time to prove its potential for increasing Indonesia’s hydrocarbon resources. However, LEMIGAS is trying to speed up the contribution of unconventional gas to the national energy matrix through intensive research. In addition, LEMIGAS support Directorate General of Oil and Gas to make a policy, which encourages investors to invest in this area.
LEMIGAS is also conducting research to find the alternative energy potential of biofuel (biodiesel an bioethanol). Since promising feedstock for biofuel is abundant in Indonesia as a result of biomass, agricultural waste and vegetable oil (crude palm oil, waste cooking oil), alternative energy in the form of biofuel can easily become a part of Indonesia’s energy matrix. LEMIGAS has an accredited laboratory to test the physical and chemical properties and also the performance of biofuel to ensure its quality.
The growing issue of subsidized fuel restriction has served as a good momentum for increasing the role of alternative energy sources as stipulated in the government’s 2025 energy targets. The government is very interested in the development of non-conventional hydrocarbons and continuously encourages CBM, shale oil, and shale gas exploitation as well as the conversion of coal to liquid (CTL), and coal to gas (CTG). 42 CBM working areas have already been designated showing that the interest of project developers in these alternative energy sources is high; working areas are still being offered today. Furthermore, a ministerial decree regarding shale oil and shale gas business is in the final phase whilst CTL and CTG legislation is being initiated.LEMIGAS has been providing information and technical feedback to the government. Since 2004, the government has assigned LEMIGAS to develop CBM pilot project in Muara Enim, South Sumatra. This work is still in progress and we are testing the gas for its potential to generate electricity. Besides this, LEMIGAS is drilling a CBM well at Barito basin, East Kalimantan in order to increase data quality from that area. LEMIGAS also has cooperation with Pertamina to drill wells in North Sumatra – we hope to attract a high level of government spending to investigate this area. We expect that these breakthroughs could speed up the commercialization of non-conventional hydrocarbon.
What would be your final message to the readers of Oil and Gas Financial Journal on your ambitions for LEMIGAS?
As we know, fossil fuels will not last forever and one of the most pressing current issues is climate change, therefore we need to do more research into alternative fuel. LEMIGAS has a duty to support R&D on environmentally friendly alternative fuels and energy sources. In the future, we can create the clean s