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his article was written in response to the two interesting articles that have been written by Madjedi Hasan, a director of PT Pranata Energi Nusantara, which was titled '€œIndonesia'€™s Oil and Gas Paradigm Shift'€ and '€œAdditional Incentives to Accelerate Oil, Gas Exploration'€.

Both articles relay the same message, '€œIndonesia needs to do more to attract investment'€.

The minister of energy and minerals has stated that Indonesia needs to carry out exploration and it needs to attract investment. This has led to groups and individuals stating the same message, although, making statements is different to making things happen.

The government has said that it plans to accelerate oil and gas exploration by providing fiscal incentives. This statement was made by Andang Bachtiar, the head of the National Committee for Exploration (KEN) in a press conference that was attended by Energy and Mineral Resources Minister Sudirman Said.

KEN has recommended that the exploration period is accelerated from six-10 years to three-and-a-half years by providing financial incentives, progressive production splits and simplifying permits.

It is difficult to see how this time frame can be met if other methods of exploration are not accepted and used.

Exploration takes time, especially in the remote areas of Indonesia, no amount of incentives can reduce the time that it takes to physically carry out exploration by traditional methods.

Madjedi stated that that there are still considerable prospects for new oil and gas reserves in Indonesia, particularly in the deep seas and remote areas. The problem with this statement is, no one knows. Why is this? Detailed exploration in many parts of Indonesia has not been carried out, not only in the potential basins offshore but also the potential blocks and concession areas onshore.

Madjedi also stated Indonesia still depends largely on foreign capital for the oil and gas business in view of the high risks involved.

Traditional exploration methods are extremely expensive and come with a high risk, therefore, the pace of investment is well short of hopes and expectations, especially if the investor has to pay all of the costs for exploration with a high risk of discovering non-commercial resources or even nothing.

Indonesia needs to provide a catalyst for the explorer and investor to bring their capital to Indonesia. That catalyst should be in the form of confidence building data and indications of prospect.

Financial incentives are not enough, many of the large companies do not need finance incentives, they have sufficient finances to take their business to more attractive countries where the cost of production is far less, and the terms and conditions are far more conducive to good business practices.

It is acknowledged that Indonesia is not the hardest country to work in, but neither is it one of the easiest. Flexibility for change is a must; knowledge of what resources the country has is a must.

How does Indonesia get into a position where investors will be interested? This is a hard question to answer as there are so many areas that have been recommended for change, but the two main areas are: knowing what potential resources are contained in any given area and reducing the bureaucracy, risk and the cost of doing business.

Indonesia should compare the cost of oil and gas production with the production cost of countries in the Middle East, Europe and Africa. Doing business in Indonesia is much more expensive and risky, due to ambiguous and variable interpolations of the governments regulations/bureaucracy and the third party costs for nearly all services provided.

In exploration, risk in the form of time, expense and success are a given. '€œThe key is to manage the risk effectively, which means that we need to use all the tools available in the modern explorer'€™s tool box, which includes traditional and unconventional methods.'€

Technology is part of the answer for successful exploration of the smaller, deeper and harder to find resources.
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Indonesia is not the hardest country to work in, but neither is it one of the easiest.

Technology will dramatically reduce the time, cost and risk before applying more expensive traditional exploration tools such as seismic and exploratory drilling.

By pre-staging conventional exploration with unconventional tools, one focuses precious exploration finances on high-probability targets, which in turn will achieve higher returns on investment.

It is normal that 80 percent of a given area does not contain resources, the 20 percent of the
area that may have potential needs to be defined prior to the traditional exploration tools being deployed.

These tools become tools of confirmation instead of exploration tools.

Very few companies can afford to carry out a full 3-D seismic survey of a large area, therefore, it makes economic sense that a 3-D survey is carried out on high profile targets, which in turn reduces the risk of drilling a dry hole that may cost US$50 million or more.

Equally, the cost of carrying out a seismic survey in Papua is expensive, time-consuming and detrimental to the environment.

All finance managers consider costs, but do they consider the cost of drilling noncommercial or
dry holes? The costs of using unconventional methods incorporated with traditional methods far outweigh the costs of unproductive holes.

Drilling is an accepted risk but this risk needs to be reduced. Seismic has provided and continues to provide enormous value to the industry, but it has its limitations, especially in the geological challenging areas of Indonesia.

Greater productivity with less risk is within our grasp if new technologies are leveraged.

Nothing is full proof or guaranteed in life, but in a business that spends an enormous amount of money every year on areas that will never produce a drop of oil or a whiff of gas, wouldn'€™t it benefit all parties involved to reduce some of that waste?

Even if new technologies provide only marginal incremental improvements in productivity, the gains are still enormous.

Indonesia needs to increase their knowledge of the resources they believe they have for the whole country, provinces, regions, unexplored oil basins such as the 22 unexplored basins in Eastern Indonesia, areas with geothermal potential, unexplored areas for minerals, areas which are covered by jungle without causing environmental damage, volcanic areas, green field, brown field areas, oil blocks that have produced can also be explored for potential oil that remains (because it does). The potential is there.

A more intelligent strategy is needed to reach the potential and meet the claim that Indonesia is '€œrich in resources'€.
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The writer, a hydrographic surveyor by background, worked in the Royal Navy for 24 years and has been involved in various projects in Indonesia for the past 22 years.