The Three Big Oil Companies in Indonesia before 1945

Sungei Gerong Refinery in South Sumatera in 1926

The first oil exploration in Indonesia started not long after Colonel Drake successfully drilled the first oil discovery well in Pennsylvania in the United States in 1859.

By 1869, Dutch businessmen in Indonesia, known as the Netherlands East Indies at that time, had noticed and recorded 53 oil seepage locations in Sumatera, Java, and Kalimantan.

Then the first oil well drilling in Indonesia took place in 1871 in West Java.

However, commercial discoveries were made only several years later when a Dutch businessman drilled successful exploration wells in Pangkalan Brandan in North Sumatera in 1885 and Sanga-Sanga in East Kalimantan in 1892.

These two discoveries caught the attention of the world and put Indonesia on the map as one of the countries with interesting oil potentials.

By 1900 there were already 18 oil companies searching for oil in the Netherlands East Indies (NEI). All these companies were either Dutch companies or non-Dutch companies registered in Nederland. The high level of activities resulted in significant oil discoveries in the early 1900s.

Following the oil discoveries, refineries were built in Pangkalan Brandan in North Sumatera in 1892, Sungei Gerong in South Sumatera in 1926, Balikpapan in East Kalimantan in 1922. By 1940, there were already seven refineries in NEI: three in Sumatera, three in Java, and one in Kalimantan.

In 1938, the daily crude oil production was about 140,000 BOPD and in 1953 it was about 190,000 BOPD.

The high level of oil production and refining activities from 1900 to 1940 made Indonesia well-known as one of the world’s significant crude oil producers and refined product suppliers at that time.

Recognized as a significant oil producer, Indonesia was invited to become a member of OPEC 1962.

The three oil companies that produced about 90% of all the petroleum in Indonesia during the Dutch colonial period are:

  • BPM – Bataafsche Petroleum Maatschappij
  • STANVAC – Standard Vacuum Oil Company
  • CALTEX

Here are the stories of these three big oil companies in Indonesia before 1945.


BPM

BPM is Bataafsche Petroleum Maatschappij, also called the Batavian Oil Company. Batavia, which is Jakarta today, was the center of the NEI government.

BPM was established in 1907 by KNPM (Koninklijke Nederlandsche Petroleum Maatschappij) also known as Royal Dutch Petroleum Company and Shell Trading and Transport Company to explore and produce oil in the Netherlands East Indies.

Royal Dutch Petroleum Company owned 60% and Shell owned 40% of BPM.

Before BPM was set up, there were already as many as 18 oil companies operating in the Netherlands East Indies (NEI) from North Sumatera, Java, Borneo, and all the way to Papua.

BPM quickly took over almost all of these companies and dominated the oil industry in Indonesia. By 1920, it had controlled more than 95% of crude oil production in Indonesia.

In 1921, as the government of the Netherlands East Indies wanted to take part in the booming oil business in Indonesia, NEI and BPM formed another company called NIAM (Nederlands Indische Aardolie Maatschappij).

Many big changes took place in the oil industry after Indonesia declared its independence in 1945. The first big change was the takeover by the government of Indonesia the NEI’s 50% ownership in NIAM.

This marked the beginning of an Indonesian government-owned oil company. It also started a working relationship between BPM and the government of Indonesia. With this relationship, BPM managed to extend its activities in Indonesia until 1965.

In 1965, BPM sold all its assets in Indonesia to the Indonesian state-owned company PN Permina for US$110 Million. Permina later became Pertamina.

BPM operations in Indonesia were extensive. They stretched from the western part of Indonesia to the eastern part of Indonesia.

Here are the operations of BPM in various parts of Indonesia.

BPM In Borneo

In 1907, right after it was formed, BPM acquired the oil fields and refinery in Balikpapan from Mathilda company. It also acquired the oil fields in Sanga Sanga and Tarakan which had been discovered previously by KNPM.

BPM expanded its exploration and production aggressively in East Borneo and continued to discover several other fields in these areas.

On the small island of Tarakan, BPM drilled 700 oil wells and built a refinery.

Production continued to increase and in the 1920s the Tarakan wells produced about 18,000 BOPD, a third of the total oil production in the whole Dutch East Indies.

BPM in North Sumatera

BPM acquired from KNPM the oil fields and the refinery located at Pangkalan Brandan. BPM also took over the operations of the oil tanking and the oil export facilities at Pangkalan Susu. Pangkalan Susu was the first oil-exporting port in Indonesia.

BPM in Java

In Java, BPM acquired the oil assets of DPM (Doordsche Petroleum Maatschappij), a Dutch oil company established by Adriaan Stoop in 1887.

DPM had discovered and operated the Kruka Field and the Djabakota Field near Surabaya in East Java. DPM also had built the oil refinery in Wonokromo. Completed in 1893, this was the first oil refinery in Indonesia.

By acquiring DPM, BPM also became the owner of some thirty oil fields in East Java including another refinery located in Cepu which was built in 1894.

BPM In South Sumatera

In South Sumatera, BPM took over SPPM (Sumatera Palembang Petroleum Maatschappij). SPPM had been operating the oil fields in its concessions in Banyuasin and Jambi.

BPM also acquired the oil assets of MEPM (Muara Enim Petroleum Maatschappij). MEPM had discovered the Muara Enim field and built the Plaju Refinery.

BPM In Irian Jaya

In 1935 BPM expanded its search for oil into Irian Jaya. For this venture, along with other partners, BPM formed a joint venture company named NNGPM (Nederlandsche Nieuw Guinea Petroleum Mij) with exploration rights for 25 years.

By 1938 they had discovered the Klamono oil field. followed by Wasian, Mogoi, and Sele fields.

However, for commercial reasons, these fields were not developed.

STANVAC

STANVAC – Standard Vacuum Oil Company – started as NKPM (Nederlandsche Koloniale Petroleum Maatschappij) in 1912. NKPM was set up in Nederland by the American company Standard Oil of New Jersey so it could explore for oil in Indonesia.

Since Indonesia was under the control of the Netherlands East Indies at that time, Jersey Standards had to set up NKPM as a Dutch-registered and Dutch-managed company with headquarters located in The Hague.

NKPM began to make exploration in Java and South Sumatera in 1914.

It was in South Sumatera NKPM found its liquid gold. Operating from the city of Palembang, it discovered the Petak field in 1914, the Trembule field, and the huge Talang Akar field in 1921. These discoveries prompted NKPM to construct the famous Sungai Gerong oil refinery.

In 1922 NKPM changed its name to SVPM (Standard-Vacuum Petroleum Maatschappij).

It also constructed the 130 Km long pipeline from Pendopo area to Sungai Gerong to bring the crude oil from the prolific Talang Akar field to the refinery.

The Sungai Gerong refinery began operating in 1926 and became the largest and important oil refinery in South East Asia.

It was so important that the refinery was occupied by Japanese forces from 1942 to 1945 during World War II.

To meet the increasing demands for petroleum products in Africa and the Asia Pacific, Standard Oil Company of New Jersey and SOCONY (Standard Oil Company of New York) jointly created STANVAC (Standard Vacuum Oil Company) in 1933.

This was a synergistic partnership as Standard Oil Company of New Jersey had the oil production capacity and SONONY had the marketing facility.

The newly created Stanvac in the Netherlands East Indies consisted of three companies: Standard Vacuum Petroleum Maatschappij (SVPM), the Standard Vacuum Sales Company (SVSC), and the Standard Vacuum Tankvaart Maatschappij (SVTM).

Stanvac took over all the assets of SVPM in Indonesia and became a full-fledged oil company involved in oil exploration and production, refining, transportation, and distribution in more than 50 countries.

However, Stanvac continued to operate under its Dutch company name – SVPM – in the NEI.

Stanvac produced oil from many fields in South Sumatera. The notable ones were Talang Akar, Djirak, Benakat, Radja fields.   

In 1934, Stanvac expanded its operations to Central Sumatera.  Here it discovered and developed the well-known Lirik field and later the Binio field.

Things began to change after World War II and the declaration of independence of Indonesia.

It was after the declaration of independence by Indonesia in 1945, to distance itself from its Dutch connection, Stanvac began calling itself  Stanvac Indonesia as its company name to show its American origin.

In so doing, Stanvac was able to keep its assets and continue to operate in the newly independent Indonesia.

In 1960, as Indonesia wanted to have more control of the oil operation and business, it introduced the 1960 Oil Law which stated that all foreign oil companies must operate as a contractor for the Indonesian government.

On 24 September 1963, Stanvac signed the “Contract of Work” agreement with Indonesia’s Pertambangan Minjak Nasional (Permina).

The contract allowed Stanvac to continue to have full control of its oil exploration and production operations in Indonesia. Under this agreement, Stanvac must sell its refinery within ten to fifteen years.

However, Stanvac had to sell its Sungai Gerong refinery to Pertamina in 1969.

Stanvac Indonesia continued to operate its oil fields until finally, it left Indonesia in 1995 when it sold all its assets to Medco Energi for 88 million USD.

CALTEX

CALTEX was established in 1936 by Standard of California and Texaco to explore and produce oil in Indonesia and to expand its oil business in the Asia Pacific.

Earlier in 1924, The Standard of California had sent its team of geologists to Indonesia.

To operate in the Netherlands East Indies at that time, Caltex must obtain oil concessions from the government of NEI (Nederlands East India) who was the ruler of Indonesia at that time. To do so, Caltex established NPPM (Nederlandsche Pacific Petroleum Maatschappij), a Nederland registered company with its headquarters located in The Hague. Also, the company must be run by Dutch nationals.

In the same year, Caltex received its first oil concession in the Rimba area which is now known as the Rokan Block in Central Sumatera.

Soon after that Caltex began to find oil, but it was in 1941 that  Caltex discovered the huge Duri field. Due to the high pour point of its low gravity crude oil, it was necessary to use steam-flood to drive out the oil. Due to the success of the steam flood method, the Duri field became known as one of the largest steam-flood projects in the world. In spite of the huge challenges to produce the field, it has produced more than 2.64 billion barrels of oil so far.

Several years later Caltex went on to discover another giant oil field, The Minas field.

The story of the Minas field discovery is very interesting. In 1940, at the beginning of World War II, Caltex had started the drilling of its exploration well in the Minas area. However, before the drilling was completed, Caltex had to abandon the drilling as the Japanese army was coming to occupy the area and to take over the oil facilities.

The Japanese army engineers resumed the drilling of the well in 1943 and discovered oil when it drilled down to 2600 feet deep.

At the end of the war, Caltex regained control of its oil assets and continued to investigate the Minas field. After drilling several additional wells, Caltex confirmed the discovery of the huge Minas oil field.

Caltex went on to discover many smaller oil fields in its concession area.

By the late 1950s, Caltex became one of the largest oil producers in Indonesia.  At its peak in 1973, Caltex produced about 1 million BOPD from the Duri, the Minas, and about 80 smaller oil fields. Caltex holds the record of having the highest daily crude oil production rate in Indonesia.

Caltex completed the construction of a crude oil export terminal in Dumai in 1958.

Caltex signed a work contract agreement with Indonesia in 1961 giving it the right to continue to operate the Rokan block until 2001. Later on, Caltex managed to obtain a work contract extension to operate the block for another 20 years until 2021.

The two owners of CALTEX, Chevron, and Texaco merged in 2001 to become ChevronTexaco Corporation. Later on, in 2005, ChevronTexaco Corporation dropped the name Texaco and renamed the company as Chevron Corporation.

Following the name change of its parent company, Caltex in Indonesia which was initially incorporated as PT Caltex Pacific Indonesia changed its name to PT Chevron Pacific Indonesia.

Although the name Caltex disappeared in Indonesia after the name change, the Caltex petroleum brand is still alive in many countries in the Asia Pacific.

Epilogue

These three companies of the past were great companies to work for. Since most of their oilfields were located in the middle of a jungle, the companies provided good and well-rounded facilities – schools, clinics, cafeterias, places for worship, sports, and entertainment – to their employees and their families.

Many people and children of those who had worked for these companies have fond and colorful memories of the companies.

To me, the one that is the most interesting is BPM.

The joint venture of Royal Dutch Petroleum Company and Shell Trading and Transport Company that formed BPM – Bataafsche Petroleum Maatschappij – in Indonesia in 1907 sowed the seed that eventually grew into the current giant Shell Oil Company.

Also, BPM had a role in the rise of Pertamina when Pertamina took over all the assets of BPM in 1965.

WRITTEN BY

Jamin Djuang – Chief Learning Officer of LDI Training and author of The Story of Oil and Gas: How Oil and Gas Are Explored, Drilled and Produced


 

The Famous Duri Oil Field

Duri to Dumai Road Construction in 1958

Eighty years ago, CALTEX discovered the huge Duri oil field in the Rokan block in Riau, Sumatera.

Oil was found at a shallow depth of 400 feet when CALTEX began drilling its exploration wells in 1941. After CALTEX managed to obtain the approval from the newly formed government of Indonesia to operate in the Rokan block under a work contract scheme, oil production began in 1954.

The giant Duri field – 10 km wide and 18 km long – is one of the many oil fields discovered in the Rokan block. Minas is another giant oil field discovered in this block.

Oil production peaked at 65,000 BOPD in the 1960s.

Due to the high viscosity of the low gravity oil, to enhance the production, the steam injection was introduced in 1985.

The Duri steam flood project was so successful that it became one of the largest and the best steam floods in the world.

Thanks to the successful steam injection, Duri oil production increased significantly to 185,000 BOPD.

After 30 years of the steam flood, the production had declined to about 50,000 BOPD by 2017.

With more than 2.6 billion barrels of cumulative oil produced, the giant Duri field is still producing today.

Chevron will hand over the operatorship of the Duri field and the Rokan block to Pertamina in August 2021.

The New Seven SUPERMAJOR Oil Companies

The Seven SUPERMAJORS (2)

 

Before there was OPEC, there were the “SEVEN SISTERS”.

The Seven Sisters, a consortium of seven world’s largest oil companies, was formed in the 1950s.

Here are the original members of the Seven Sisters:

  1. Anglo-Persian Oil Company (now BP)
  2. Royal Dutch Shell
  3. Gulf Oil (Acquired by Chevron in 1985)
  4. Standard Oil of California (now Chevron)
  5. Standard Oil of New Jersey (now ExxonMobil)
  6. Standard Oil of New York – Socony ( later became Mobil Oil and then ExxonMobil)
  7. Texaco (Acquired by Chevron in 2001)

Although the term “The Seven Sisters” was used for the first time in 1951, these seven companies had been dominating the oil industry since the 1940s. The Seven Sisters were so powerful that at one time, they controlled about 85% of the global oil and gas reserves.

Due to company mergers and acquisitions that took place in the oil industry in the last 40 years, the composition of the seven largest oil companies in the world had changed significantly.

The original Seven Sisters consisted of two European and five American oil companies whereas currently, the seven largest international oil companies in the world consist of four European and three American companies.

Here are the new seven largest international oil companies in the world which are now commonly referred to as the seven SUPERMAJORS.

BP (British Petroleum)

British Petroleum is a British oil company that started as Anglo-Persian Oil Company in 1908 as a subsidiary of Burmah Oil Company. BP grew bigger and bigger by acquiring SOHIO (Standard Oil of Ohio) in 1978, then Amoco in 1998 and ARCO (Atlantic Richfield Company) in 2000.

BP operates in 79 countries with 70,000 employees. The London-based company produces 3.8 million BOEPD of oil and gas.

CHEVRON

Chevron began as Standard Oil of California as one of the successors of the original Standard Oil company, the company founded by Mr. John D. Rockefeller after it was broken up into several companies in 1911 under the Sherman Antitrust Act in the US.

Chevron became a huge oil company after acquiring Gulf Oil in 1985, then Texaco in 2001, and Unocal Corporation in 2005.

With headquarters in San Ramon, California, Chevron operates in 180 countries and employs more than 48,000 people. Its daily oil and gas production is about 3.1 million BOEPD.

EXXONMOBIL

ExxonMobil that began as Standard Oil of New Jersey is also another descendant of the original Standard Oil company. Standard Oil of New Jersey changed its name to Exxon in 1972, and later on, Exxon became ExxonMobil after it merged with Mobil Oil in 1999.

Operating in 58 countries, ExxonMobil has about 71,000 employees. It produces about 2.3 million BOE of oil and gas daily. The company is based in Irving, Texas.

ROYAL DUTCH SHELL

The formation of the Royal Dutch Shell group came from the merger of Royal Dutch Petroleum Company of the Netherlands and Shell Transport and Trading Company Limited of the United Kingdom in 1907. The Anglo-Dutch company was formed to compete against the powerful American oil company – The Standard Oil.

The Royal Dutch Petroleum Company, known as Koninklijke Nederlandse Petroleum Maatschappij in Dutch, had its root in Indonesia when it was formed in 1890 to produce the oil it discovered in Pangkalan Brandan in North Sumatera and later on in Balikpapan in East Kalimantan.

Royal Dutch Shell became a big player in LNG when it acquired BG Group in 2016.

From its headquarters in the Netherland, Shell operates in 70 countries and has 81,000 employees. The company’s daily oil and gas production is about 3.7 BOE.

TOTAL S.A.

Total, a French supermajor oil company, started in 1924 as Compagnie Française des Pétroles ( CFP). It later changed its name to Total CFP in 1985 and finally to Total in 1991.

The company grew even bigger after it acquired the Petrofina of Belgium in 1999 and then ELF Aquitaine in 2000.

Based in France, Total has operations in 130 countries and it employs more than 100,000 employees. It produces 3 million BOEPD of oil and gas.

ConocoPhillips

ConocoPhillips started as Conoco 1875 in the US. Conoco merged with Phillips Petroleum Company to form ConocoPhillips in 2002.

Based in Houston, ConocoPhillips involving only in the upstream part of the oil industry is the world’s largest independent oil company. With about 10,400 employees, its daily oil and gas production in 17 countries is around 1.3 million BOE.

ENI (Ente Nazionale Indrocarburi)

ENI, a supermajor oil company from Italy was formed in 1953, and then it acquired AGIP, another Italian oil company, in 2003.

From its headquarters in Rome, ENI operates in 79 countries. The company employs more than 30 thousand people and it produces a combined 1.7 million BOE of oil and gas daily.

 

WRITTEN BY

Jamin Djuang – Chief Learning Officer of LDI Training and author of The Story of Oil and Gas: How Oil and Gas Are Explored, Drilled and Produced