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Show OIL&GAS JOURNAL March 30, 1970 INDONESIA'S Gen. Ibnu Sutowo: It's only natural that contract terms get tougher. Prospective acreage gone in hot Indonesian waters F R A N K J. G A R D N E R International Editor PROSPECTIVE open acreage in expansive Offshore Indonesia-snatched up by the millions of acres in the past few years-has virtually disappeared. And if you're inclined to plunge into this hot exploration arena, odds are you'll have to buy into someone else's contract area. That's the word from Lt. Gen. Dr. Ibnu Sutowo, head of the Indonesian state oil company Pertamina, via a Journal interview in N e w York. " W e simply don't have any more prospective acreage left to offer. Those who want to join the play now will simply have to take an interest in one of the ventures already formed," General Ibnu says. That's the route taken by Continental Oil Co. recently when it took a 2 0 % interest in a 38,000-sq-mile permit off West Irian held by the Agip-Phillips Petroleum Co. team. Meanwhile, terms of Indonesian production- sharing contracts have steadly toughened. But that doesn't seem to deter oil companies, large or small, from going after them. At least one small company, Australia's Endeavor Oil Co., did withdraw from negotiations with Pertamina, saying it felt shareholders' interests would be better served by employing its funds elsewhere. Undoubtedly, there've been several others who felt the same way. "Will the government's demands continue to get tougher in these contracts?" the Journal asked General Ibnu. "Naturally," he replied, "we are businessmen, and it's our business to make as good a deal as we possibly can for the government. "If you offer us a better deal than the other man, certainly we will accept it. It's impossible to make a new agreement which is less than a previous one. *'If, for instance, I succeed in concluding a production-sharing contract with the balance of 65-35 in our favor, and with the management in our hands, I can't conclude another with less favorable conditions the next week." In recent months, the Indonesian production-sharing contract has assumed a rather general pattern, calling for a 65-35 split in production (rising to 671/i-321/2 at a certain level of production), signature bonus, work commitments in dollars, and production bonuses that escalate with the level of production. But with available acreage becoming more scarce, bidders have begun adding new frills to their offers, and in some instances, this has paid off with a contract. Last September, for example, White Shield Indonesia Oil Corp. agreed to offer 5 % of its rights to Indonesian investors at its "then fair" market value when commercial oil production begins. " W e are most interested," says Gen. Ibnu, "in encouraging Indonesian capital investment in Indonesian ventures. This will help to restore capitalism in our country." Pertamina now has signed production- sharing contracts with at least 30 oil companies and one individual. the latter being Dr. Wendell PhillTpt of Honolulu. Asked about Indonesia's fast-growing oil output, Gen. Ibnu said production now is about 900,000 b/d, and that it should reach 1 million b/d by the end of the year. "That compares with only 152,000 b/d in 1951," he added. Indonesia's first 5-Year Plan. adopted in the spring of 1969, called for a production target of 803,000 b/d for 1970-71 and 1,205,000 b/d for 1973-74, so apparently the country is ahead of target already. But the general has even more ambitious targets. H e hopes to see production rise to 3 million b/d, and says it may take a $ 1-billion investment to achieve that. Originally, oil-company budgets called for expenditure of $23 million in 1969, but actual expenditure was $68 million. Over the next 5 years, they'll spend $198 million on exploration alone. Gen. Ibnu is concerned about markets for all this oil, however. If Indonesia's share of the U.S., Japan, and Southeast Asia is to be maintained, production will have to reach 4 million b/d by 1985, and much of this depends on the offshore gamble. Japan now takes about 4 7 % of Indonesia's oil exports, Australia 2 3 % , and the U.S. 2 0 % . The discoveries in Australia's Bass Strait, Gen. Ibnu says, can be expected to back out Indonesian oil, however, and Alaskan oil, when it begins to flow, could seriously threaten Indonesia's markets on the U.S. West Coast. H e adds that it's dificult to increase the markets in other parts of Southeast Asia, for most countries there are nonindustrial and have little incentive to buy low-sulfur oil. Their requirements are also quite modest. But still, the Indonesians have the big Japanese market, and it is skyrocketing, so Indonesia will probably find a home for just about all it can produce. Internally, consumption runs about 109.590 b/d, and this will grow to about 142,000 b/d by 1974. Indo- |