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with Bambang Purwohadi , Chairman, Indonesian Oil & Gas Drilling Contractors (APMI)

19.09.2007 / Energyboardroom

What is your personal academic and professional background? How did it bring you to the position of APMI chairman?

I am a Mechanical Engineer from the University of Indonesia. After graduating, I worked for a company from Houston doing exploration for oil and gas in East Kalimantan. Since then, I have been in love with geosciences, I have become a petroleum engineer by experience, and was even named chairman of IATMI in the late eighties. As an individual I am still a member of IATMI, and since 2005 I have been chairman of the Indonesian Oil & Gas Drilling Contractors Association (APMI).

Who are the members of APMI?

APMI was established in 1980. Currently we have a membership of 167 companies, though it must be said that our association is not exclusively for drilling companies. In fact, we have members covering 18 different activities, such as cementing, drilling fluid engineering, directional drilling, etc. In short, we include companies present in everything that is related to the well, including construction and maintenance. However, not all of them are active because some are still trying to get into the market, and first they have to be certified and classified.

Practically all of the onshore players are Indonesian, while in offshore about 60-70% are foreign. Around 40 of the members are drilling companies, and another 35 do drilling but combined with some of the other activities, like giants Halliburton and Schlumberger. There are some that are still just entering the market. They have to show the certifying body that they are capable of operating safely and efficiently. We have to be strict in order to assure quality and avoid accidents as much as possible.

How does APMI operate? What are its main goals?

We have bi-weekly meetings where we discuss operational issues and commercial matters, among other topics of interest to the sector as well as both technical and political issues. The main thing is that the association has to act on behalf of the whole sector, taking into account the views of all its members.

My dream with this organization is to step up the level of onshore and offshore drilling companies in Indonesia, and to reach a point where we can fully respond to the demand for equipment, rigs, and manpower for exploration and exploitation activities. Indonesia has a very long history of oil drilling, going back more than 100 years. This country should be in a better position to serve the domestic market and even to export its expertise to the rest of the world. This is already starting to happen with companies like Apexindo (of Medco) getting contracts to drill in places like Sudan and the Persian Gulf. Indonesian companies are beginning to show their international potential.

How do you communicate with the government?

We consider ourselves a partner of the government. This doesn’t mean that the relationship is always fluid, but we have a good understanding with the government and parliament. Defending our members’ interests means talking to many people domestically and abroad: players on the field, local governments, national figures, IATC, SPE, foreign leaders, CEOs of big oil companies, etc. The government assists us and of course in these discussions, we grow together.

How has the recent oil boom affected O&G drilling contractors?

Drilling contractors in Indonesia, as in other parts of the world, are having some difficulties responding to the demand boom. Overnight many oil companies have decided to develop oil fields, motivated by record-high oil prices. The problem is that the logistics of rig supply and demand does not allow for such a quick response to fast-changing market needs. Existing rigs are often already tied up under contract for three years, which doesn’t allow for real flexibility. The prices have gone up and the waiting lists keep growing. Of course, this means that it is a good time for drilling contractors’ business, but procurement is very difficult at the moment. This is especially true with regards to offshore drilling, since all the equipments are developing fields in places like West Africa, the North Sea and the Gulf of Mexico. We are working hard to get the equipments that Indonesian oil companies require, but it is not easy.

Are you getting ready to help reach the government’s announced production goal of 1.3 million bpd for 2009?

We talk to this about our members, and we are all aware of the government’s goals. It represents a great opportunity for us potentially, a room to grow more. It is like a blessing in disguise for us. All we have to do is ensure we do our best to contribute to filling the gap between the current level of production and the new objective.

What are some of the major difficulties that drilling contractors face in Indonesia? Regulations?

Generally speaking, regulations are not such a big problem for us now because we have the government’s support and understanding. There are always some issues with the import of equipment, but I would not classify them as big obstacles. The main difficulty for us is on the financing side. The exploration and development of fields require big investments which are not easy to come by. We are working on this matter together with Kadin, meeting with the Bank of Indonesia and other local banks.

Do you believe that the future of exploration in Indonesia is in deepwater?

The future of oil and gas exploration is definitely in deepwater, not only in Indonesia but across the world. We have examples of this in the Gulf of Mexico, West Africa, Brazil, North Sea, etc.

How prepared are the human resources in Indonesia to take on all of the challenges and opportunities?

Human resources is a big concern for us in Indonesia, because even among the college graduates you often find that they are not ready to follow instructions and assume responsibilities. Our engineers have a great potential, but there are deficiencies in areas like English proficiency. One of the main objectives of organizations like APMI and IATMI is to help match the skills and qualifications of the people with the demands of the industry. This is done through training, courses, and promoting autodidact. Multinational corporations which bring their technology and know-how are also very instrumental in helping breach the gap.

The brain drain of engineers is a big problem in Indonesia. We invest a great deal of time and money on the human capital, only to see them leave for other places like Qatar or Malaysia. We are currently looking into how to get them to come back, through better salaries and benefits, and contribute to the Indonesian O&G sector.

Do you see the development of Coal Bed Methane as a good thing for Indonesia and a business opportunity for drilling contractors?

CBM technology has been developed mostly in Canada and India, and we have been watching them closely. Now we have recently started to develop this energy source in Indonesia, since we have an abundance of coal in our subsurface. There is a huge potential for drilling contractors in the CBM field, as well as in other energy sources such as geothermal. Whichever type of resource you are looking for in the subsoil, there is always a need for drilling contractors and related service providers. The technical differences are minor, so we have a big advantage here in Indonesia with such a rich and diversified base of energy sources.

How are the installations for maintenance and refurbishment of drilling equipment?

We are always pushing our members to pay attention to maintenance of their equipments. However, the current facilities are not enough to service a country as wide as the USA from east to west. Choosing the best location becomes a key issue when thinking about setting up a maintenance centre. We finally have one operating in Batam, but we should have at least two other big workshops spread across the country.

How does the certifications body work with regards to APMI?

The certifying body reports to APMI, but they are independent in their work. They evaluate a company on several fronts: legal, financial, technical (equipment) and manpower. All companies wishing to work as a drilling contractor in Indonesia and become a part of APMI must obtain the certifications. The certificate is valid for two years and has to be renewed, although the renovation process is much simpler than for first timers.

What is your vision for the future of APMI’s members?

In 2015 we should be self-sufficient to a great degree in our demand for drilling services in the O&G industry in Indonesia. Indonesian companies should be competing actively on offshore operations and continue growing their onshore capacity. Being strong enough to cover the domestic market, we should be able to go offer our services to other countries.



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