SKK Migas – Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi – is a special task force that implements the production sharing contracts, develops the oil and gas upstream business and supervises the activities of the production sharing contractors in Indonesia.
SKK Migas is an institution created by the government of Indonesia based on the presidential regulation “Perpres Nomor 9 Tahun 2013 on the development and management of upstream oil and gas activities”.
SKK Migas is tasked to manage and supervise the upstream oil and gas activities – exploration, drilling, field development, and production – based on the production sharing contract system. It is established with the mission to ensure the exploration and production of the oil and gas will benefit the country and the people of Indonesia.
Here are the functions of SKK Migas:
Give considerations and recommendations to the Minister of Energy and Mineral Resources of Indonesia regarding the preparations and tenders of oil and gas work areas
Sign production sharing contracts
Study the development plan of a new oil and gas field in a work area, and submit the development proposal of the production sharing contractor for approval by the Minister of Energy and Mineral Resources
Give approval on the field development plan submitted by production sharing contractors
Approve the work program and budget of production sharing contractors
Monitor the operation and progress made by production sharing contractors and submit reports to the Minister of Energy and Mineral Resources
Appoint sellers of the produced oil and gas that will benefit the country.
These functions were originally carried out by BPPKA, a department under Pertamina, when the production sharing contract system was introduced in 1966. BPPKA (Badan Pembinaan Pengusahaan Kontraktor Asing) was later replaced by BP Migas. BP Migas later became SKK Migas in 2013.
To best serve and support the activities of oil operators around the country, SKK Migas has five field offices. They are:
SKK Migas Sumatera Bagian Utara located in Pekanbaru
SKK Migas Sumatera Bagian Selatan located in Palembang
SKK Migas Kalimantan and Sulawesi located in Balikpapan
SKK Migas Jawa, Bali, Madura dan Nusa Tenggara located in Surabaya
SKK Migas Wilayah Papua dan Maluku located in Sorong
The current head of SKK Migas is Mr. Dwi Soetjipto. Its head office is located at Wisma Mulia, Jalan Gatot Subroto Kav. 42, Jakarta, Indonesia.
Balikpapan, located in East Kalimantan, is the most well known and interesting oil town in Indonesia, and possibly in the world. It is at the center of oil and gas exploration and production activities that have been taking place in East Kalimantan since 1897 when the first oil well was drilled in Balikpapan. It is also the battleground of two fierce battles during World War II. It is set to become even more well known with the announcement of the relocation of the capital city of Indonesia from Jakarta to East Kalimantan.
Here are the interesting facts about Balikpapan.
The First Oil Discovery At Balikpapan
Oil was discovered in Balikpapan in 1897 when Jacobus Hubertus Menten, a Dutch mining engineer observed oil seepages in the area. With the help from Sir Marcus Samuel from Shell Transport and Trading Ltd, they drilled the famous Well Mathilda B-1 on 10 February 1897. The well was drilled to 222 Meter and it flowed initially at 184 barrels per day. This oil discovery in Balikpapan took place 38 years after Sir Edwin Drake drilled the world’s first oil well in America.
This picture shows the Mathilda B-1, the first well drilled in Balikpapan. The picture was taken by Chaz Tumbelaka.
With the discovery, Jacobus Hubertus Menten and Sir Marcus Samuel formed Nederlandsch Indisch Industrie en Handel Maatschappij (NIIHM), and it continued to discover other oil fields away from Balikpapan. 10 February 1897 is considered the birth date of Balikpapan.
The Balikpapan Refinery
To process the crude oil from the surrounding area and to meet the needs for fuel, the oil refinery of Balikpapan was completed in 1922 by BPM (Bataafsche Petroleum Maatschappij) which was a subsidiary of Royal Dutch Shell. The Balikpapan refinery was damaged in 1942 when the Japanese army invaded Balikpapan. The refinery was controlled by the Japanese army in 1942-1945. BPM regained control of the refinery after the Allied forces ended the Japanese occupation of Balikpapan in 1945.
Several years later, Pertamina gained control of the refinery in 1949. The refinery has been expanded and upgraded several times to meet the increasing demand for fuel in the eastern part of Indonesia.
As one of the largest refineries in Indonesia, it is set to become even bigger. It is currently undergoing a large 4-billion-dollar expansion which will increase its processing capacity from 260,000 barrels per day to 360,000 barrels per day when it is completed in 2021. The refinery will have the capability to produce high-quality Euro V standard fuels.
The Discovery of Giant Oil and Gas Fields
Balikpapan experienced its biggest boom when several large international oil companies came to town after the production sharing contract scheme was introduced by Indonesia in 1966.
Balikpapan was the base of Union Oil of California (Unocal), Total and Roy M. Huffington Incorporated (Huffco) during their exploration and production operations in East Kalimantan where they discovered several giant oil and gas fields.
Pertamina has a huge presence in Balikpapan since 1949 when it took over the oilfields and the refinery which were previously operated by BPM (Bataafsche Petroleum Maatschappij), a subsidiary of Royal Dutch Shell.
Operated from Balikpapan, Unocal in partnership with Japex discovered the giant offshore oil field of Attaka in 1970. It also discovered the offshore Sepinggan field and the Yakin field both of which are clearly visible from the hills at Balikpapan. In 1996, Unocal discovered and developed the West Seno field which is the first deepwater oil field in Indonesia.
Total with its partner, Inpex, acquired the Mahakam Block in 1966. They discovered several giant offshore oil and gas fields: Handil, Peciko, Tambora, Bekapai, South Mahakam, Sisi-Nubi, and Tunu.
Huffco discovered the giant onshore Badak gas field in 1970 in East Kalimantan. The discovery of the giant Badak gas field had a huge influence on the course of oil and gas development in East Kalimantan. It prompted Huffco and Pertamina of Indonesia to build an LNG plant making it possible to export the gas.
Besides the Badak field, Huffco subsequently discovered the Nilam, Pamaguan, Semberah, Mutiara, Beras, and Lempake fields.
Huffco later became known as VICO Indonesia (Virginia Indonesia Company) in 1990 after Mr. Roy M. Huffinton sold the company.
After the introduction of the production sharing contract scheme (PSC) in 1966, and with the discovery of several giant oil and fields in East Kalimantan and in other parts of Indonesia, crude oil production in Indonesia increased from 500,000 BOPD to 1,650,000 BOPD at its peak in 1977.
The Badak LNG Plant in Bontang
The LNG plant known as the Badak LNG was completed in 1977. Located in Bontang, besides processing the gas produced by Huffco from the Badak field, the Badak LNG plant also processes gas produced from the fields operated by Unocal and Total located in East Kalimantan. Up until the completion of the LNG plant, most of the associated gas produced by Unocal and Total were flared.
The Badak LNG plant initially comprised of two trains. Over the years, with new field discoveries, six additional trains were constructed. With 22.5 million tons per year LNG production capacity, it is one of the largest LNG plants in the world.
As of 16 September 2019, Badak LNG has delivered 9445 LNG cargoes to countries such as Japan, Taiwan, Korea, China, the USA, Russia, and India.
The Fierce Battlefield during World War II Twice
Being rich in oil and having a refinery, Balikpapan was so vital that it became a battlefield twice during World War II.
The Battle of Balikpapan in 1942
During World War II, in order to control the supply of fuel, Japan invaded Balikpapan in 1942. The Dutch garrison resisted the invasion but eventually was defeated by the much bigger Japanese forces. The refinery was partially destroyed during the invasion. Japanese forces took control of Balikpapan, oil production and the refinery from 1942 to 1945.
The Battle of Balikpapan in 1945
To regain control of Balikpapan and the oil supply, the Allied forces directed by General Douglas McArthur and spearheaded by the Australian 7th Division invaded Balikpapan on 25 June 1945. After 3 weeks of fierce fighting and heavy bombing, the Japanese soldiers in Balikpapan finally surrendered on 21 July 1945. Many Japanese soldiers fought to the end in the battle. There is a Japanese cemetery hidden among the hills in Balikpapan.
The Coal Boom of Balikpapan in the 1990s
Balikpapan experienced another economic boom when it became the center of the booming coal production in East Kalimantan beginning in the 1990s.
The Balikpapan Coal Terminal completed in 1995 is one of the biggest coal terminals in Indonesia. It has a throughput capacity of 15 million tons of coal annually.
Will Balikpapan continue to boom?
Since the discovery of the first oil well in Balikpapan in 1897, Balikpapan has seen several booms in the last 120 years. It has grown from a small fishing village to become a city with a population of 850,000 today.
On 26 August 2019, the President of Indonesia, Joko Widodo, announced that Indonesia will relocate its capital city from Jakarta to East Kalimantan. As the main gateway to East Kalimantan, Balikpapan will be the center of activities during the construction of a new capital of Indonesia. So, Balikpapan will likely continue to boom.
Finally, Balikpapan indeed is a very interesting town. As an oil and coal mining town, it has been voted several times as the most liveable city in Indonesia. Thousands of oil people from around the world have worked and lived here. Many children of international expatriates and Indonesian oil professionals from Java, Sumatera and other parts of Indonesia grew up in Balikpapan. Most of them have fond memories of Balikpapan.
Many sons and daughters of the first-generation Indonesian oil professionals follow the footsteps of their parents to work for oil companies in Balikpapan. There is a saying in Balikpapan whoever has drunk the water of Balikpapan will surely return. The writer of this article lived and worked for Unocal in Balikpapan from 1976 to 1980, and he has returned to visit this interesting place many times.
Since 1966 when Indonesia began offering production sharing contracts (PSC) for international companies to explore and produce oil and gas in Indonesia, many giant and super-giant oil and gas fields were discovered.
Giant fields are those with estimated ultimate recoverable reserves (EUR) of 500 million barrels of oil or gas equivalent (MMBOE) and super giant oil fields are those holding an equivalent of 5.5 billion barrels of oil reserves.
Here are the ten giant offshore oil and gas fields in Indonesia discovered between 1966 and 2000.
1. Abadi Field
Abadi is a giant gas field discovered by Inpex in 2000 in the Masela contract area in the Arafura Sea. The Abadi field has an estimated ultimate recovery (EUR) of 768 MMBOE and it is located 93 miles offshore from the province of Maluku in the eastern part of Indonesia.
Originally the field would be developed using a subsea production system and a floating LNG (FLNG) facility. The plan now is to develop the field based on an onshore LNG development concept.
Inpex in partnership with Royal Dutch Shell is currently conducting preliminary front-end engineering design (Pre-FEED) studies for the Abadi field development based on an onshore concept. The LNG project will produce 9.5 MM tons of LNG annually.
When developed, the Abadi field may become the biggest deepwater gas project in Indonesia. It is expected to produce more than 1 billion SCF of gas per day and 20,000 barrels of condensate per day for 24 years.
2. Gula Field
The Gula field is an offshore gas field discovered by Unocal in its Ganal production sharing contract area located in the Kalimantan strait in 2000. With an estimated ultimate recovery (EUR) of 545 MMBOE, it is a giant gas field.
The Gula field, along with the Gendalo discovery and the Gada discovery, is one of the many discoveries made by Unocal in the deep-water area between Kalimantan and Sulawesi. These discoveries confirm that the Central Delta play contains world-class gas resources.
The Gula field is currently an undeveloped discovered resource.
3. Ubadari Field
Ubadari is a giant offshore gas field discovered in 1997. The Ubadari field has an EUR of 500 MMBOE and it is located at Bintuni Bay in West Irian province.
The Ubadari field will supply its gas to the Tangguh LNG plant when the Tangguh LNG Train-3 project is completed in 2020. The Tangguh expansion aims at meeting the ever-increasing demand for energy in Indonesia and accelerating the development of West Irian.
PLN, Indonesia’s electricity company, has signed a sales and purchase agreement to buy up to 1.5 million tons of LNG produced by Tangguh LNG plant annually.
Tangguh LNG plant is scheduled to process the gas produced from the six gas fields located at Bintuni Bay: Vorwata, Wiriagar Deep, Ofaweri, Roabiba, Ubadari, and Wos.
4. Vorwata Field
Vorwata is an offshore giant gas field located in Bintuni Bay in West Irian Province. The Vorwata field, with an EUR of 1833 MMBOE, was discovered by ARCO in the Berau block in 1997. BP became the operator of the Vorwata field after it acquired ARCO.
Gas production from the Vorwata field started in 2009. The field is capable of producing more than 1 BCF of gas per day and the gas is processed into LNG by the Tangguh LNG plant.
5. West Seno Field
The West Seno field is a deepwater oil field discovered by Unocal in 1996. Having an EUR of 553 MMBOE, it is a giant oil field and is currently operated by Chevron.
Lying in water depths of 2,400 to 3,400 feet, the West Seno field is Indonesia’s first deepwater development. It lies in the Makassar Strait PSC off Kalimantan on the continental slope of the northern Mahakam Delta.
The oil is produced using a tension leg platform and a floating production unit, tied back by two export pipelines to onshore infrastructure.
6. Peciko Field
Peciko is a gas field located offshore in the Mahakam Delta in East Kalimantan. The field was discovered by Total with INPEX as its partner in 1991. The Peciko is a giant gas field having an EUR of 1180 MMBOE.
Of all the producing fields in the Mahakam River delta, the Peciko field is unique in that its reservoir trap is both structural and stratigraphic.
The Peciko wells are highly productive having an average well productivity of 80 MMSCF of gas per day. Total daily gas production exceeded 1 BSCF during its peak. A substantial quantity of condensate is being produced along with the gas.
7. Tunu Field
The Tunu field is a supergiant gas field discovered by Total along with Inpex as its partner in 1977. It is located in the shallow waters along the outer limits of the delta offshore Mahakam Block in East Kalimantan. It has an EUR of 4378 MMBOE.
Started in 1978, the Tunu field produces gas and condensate having negligible CO2 or H2S, with the main productive reservoirs lying at depths from 2,200 to 4,900 meters.
Developing the large Tunu field is challenging and producing the gas requires drilling a large number of wells. The field has a large surface area of 20 Km wide and 75 Km long and it is located at the wetland of Mahakam swamp.
8. East Natuna Field
The offshore East Natuna gas field was discovered by AGIP in 1970. It is located 140 miles northeast of the Natuna Islands, Indonesia’s northernmost territory. It is a super-giant gas field with estimated recoverable reserves of 46 trillion cubic feet (TCF) of gas.
There were serious studies done and attempts made by Exxon-Mobil and Pertamina to develop this field.
The field is currently undeveloped due to its very high CO2 content of 71%. To produce the gas will require removing the CO2 from the gas and injecting it back into the reservoir. Production can be commercially viable when the price of oil is above $100 per barrel.
9. Attaka Field
The Attaka field is a giant oil and gas field discovered by Unocal in partnership with Inpex in 1970. Chevron became the field operator after it acquired Unocal in 2005. Having an EUR of 1000 MMBOE, the Attaka field is located 12 miles from the shore of East Kalimantan.
The huge Attaka reservoir, formed in the very prolific Kutei basin, has an areal closure of 8000 acres. Due to its large areal extent, originally the oil and gas were produced from more than 100 wells located in 6 remote wellhead platforms.
Ten years later, five subsea wells were completed in 1981-1984 to produce the untapped oil accumulation in areas out of reach of the existing remote platforms. These are the first subsea completions in Indonesia.
Attaka field daily oil production was 110,000 BOPD at its peak and gas production was 150 MMSCFPD. Now the Attaka field is quite depleted.
10. Ardjuna Field
The Ardjuna Field is a giant oil field having an EUR of 698 MMBOE. This is the first offshore giant field discovered since the birth of the Indonesian PSC system in 1966.
The Ardjuna field was discovered by ARCO in the Offshore North West Java (ONWJ) production sharing contract area in 1969. Subsequently, it was operated by BP when it acquired ARCO in 2000. Now the field is operated by Pertamina Hulu Energy ONWJ Ltd.
Interesting facts about the Ardjuna field include the drilling of the first horizontal well in Indonesia in 1985 and supplying gas to PLN’s power plant in Muara Karang in Jakarta in 1993.
Pertamina’s refinery in Cilacap began using crude oil from the Ardjuna field in 1986.