Indonesia is a
prolific oil and gas province with discovered reserves of more than
23 BBO and 150 TCFG. Most of the reserves originate from Tertiary
source rocks and are trapped in Tertiary reservoirs on or immediately
offshore of Java, Sumatra and Kalimantan.
Though these
western areas have been the main focus of the country's petroleum
activities, explorers have searched for giant accumulations in eastern
Indonesia for more than a century.
In
Irian Jaya, Trend Exploration discovered about 350 MMBO of Miocene-sourced
oil in Tertiary reefs in the Salawati Basin during the 1970s. Phillips,
Conoco, Total and Occidental subsequently tried to emulate Trend's
success by exploring the adjacent Bintuni Basin, but found only a
small (3 MMBO), shallow onshore oil field called Wiriagar in 1981
and some uneconomic offshore gas in the early 1990s.
Arco entered
Irian Jaya in 1989 by farming into a Conoco-led partnership holding
an onshore block called KBSA on the northern side of Berau Bay. Gene
Richards, Arco Indonesia's exploration vice president, executed the
original farm-in as an opportunity to explore for large reserves in
a frontier area where Pertamina had recently instituted improved fiscal
terms.
Two dry holes
were drilled in 1990, and Arco faced a decision -- to drop out of
the Petroleum Service Contract (PSC) and exit Irian Jaya, or to continue
exploration in the Bintuni Basin.
Looking Deeper
Arco's new ventures
exploration manager in Indonesia was Dick Garrard, who had joined
the company's Jakarta office in 1989. Working with him was a team
comprising Larry Casarta, Sonny Sampurno and Suherman Tisnawidjaja.
This group performed
two critical analyses that convinced Arco not to relinquish its position:
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The first
was Casarta's interpretation of some old KBSA seismic data, which
hinted at a pre-Tertiary structure below the shallow Wiriagar oil
field.
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The second
was a new geochemical evaluation of the Wiriagar oil, which showed
that the oil was from a Jurassic, not Tertiary source.
Combined with
the knowledge from well control that the Jurassic Roabiba sandstone
pinched out from south to north across the Wiriagar area, the two
analyses suggested that there could be a hydrocarbon-bearing structural/stratigraphic
trap at Jurassic level below the shallow Wiriagar field.
The
prospect was christened Wiriagar Deep.
The team convinced
Arco's international exploration executive management, Marlan Downey
and Jamie Robertson, of the merits of their analyses and hypothesis,
and Arco stayed in the play.
Overcoming Obstacles
Arco approached
the rest of the KBSA partnership in late 1991 with a recommendation
to jointly drill a deep test (Wiriagar Deep No. 1) on the Wiriagar
structure.
The partners,
who had already spent $145 million on the block, declined the proposal.
Arco was unwilling to carry the other partners in a deep test despite
the attraction of retaining KBSA's sunk cost pool, and no deal was
reached among the group.
Arco's commercial
manager in Jakarta, Thorkild Juul-Dam, then developed an economic
case for a new PSC, aided by drilling manager Brett Crawford's analysis
that the deep well could be drilled for much less than operator Conoco's
cost estimate. The KBSA PSC expired, and Arco began discussions with
Pertamina for a new PSC.
Crucial to these
discussions were Roger Machmud, president of Arco Indonesia, and Larry
Asbury, operations corporate vice president. Machmud and Asbury entered
into serious negotiations with Pertamina in June 1992.
A new onshore
Wiriagar PSC covering the deep structure and incorporating newly revised
frontier incentives was signed in February 1993. Kanematsu joined
Arco as a partner in the block. With help from Richard Leturno of
drilling operations, petrophysicist Tony Lawrence and reservoir engineer
John Marcou, Wiriagar Deep No. 1 was successfully drilled, logged
and tested at 30 MMCFPD in August 1994.
The well was
initially disappointing, as it was not an oil discovery.
However, a thoughtful
analysis of pressure data by Larry Casarta and John Marcou indicated
that the gas zones were significantly overpressured, and that a gas
column height in excess of 2,000 feet was a reasonable interpretation
of the data.
In other words,
the discovery could be large enough to anchor an LNG project even
if there was no downdip oil leg below the gas.
Tom Velleca,
Arco corporate vice president of exploration, encouraged by chief
geologist David Nicklin and chief geophysicist Barry Davis, decided
to move ahead with appraisal of the Wiriagar Deep discovery -- but
there was a commercial obstacle. If Casarta and Marcou were right
about the size of the accumulation, much of the field lay to the south
on the offshore Berau PSC held by an Occidental-led partnership.
Brad Sinex at
Arco International's headquarters in Plano, Texas, took charge of
the negotiations with Occidental and worked a farm-in to the Berau
Block aided by Thorkild Juul-Dam in Jakarta. Oxy had already spent
$64 million on the Berau PSC and had an additional $8 million work
obligation.
Sinex was able
to secure a 60 percent working interest for the Arco/Kanematsu group
and operatorship for Arco in February 1995 in return for funding the
drilling of a well. Offshore appraisal subsequently demonstrated that
the Wiriagar anticline was indeed a large gas-bearing structure.
Geophysicist
Stephen Scott joined the exploration team in December 1994. In addition
to producing the maps on which the Wiriagar Deep appraisal locations
were selected, Scott worked with Casarta and Sampurno to refine the
regional geological picture. Previous Total, Occidental and Arco maps
had contoured some small closures to the east of Wiriagar.
Scott put all
the regional data together, and conceived that the closures could
be part of one large anticline parallel to and immediately east of
the Wiriagar fold. The new closure was named Vorwata.
Vorwata had a
potential technical problem: At Jurassic level, it was several thousand
feet deeper than the Wiriagar anticline, and generally accepted wisdom
was that porosity would be low and reservoir quality poor.
John Duncan became
exploration VP of Arco Indonesia in 1992, and in addition to managing
the Indonesian exploration program was also a technical expert on
burial history analysis. Recognizing that there might be a more optimistic
scenario for Vorwata Jurassic reservoir quality, Duncan consulted
with Alton Brown of Arco's geoscience technology group in Plano.
Brown analyzed
burial history, facies controls and diagenesis, and concluded that
conventional wisdom was wrong and reservoir quality would be fine.
That analysis
gave Arco the confidence to push Vorwata as a viable drilling target
to expedite certification of gas reserves. Vorwata No. 1 was drilled
in late 1996, Brown's porosity prediction was exactly correct, and
the well tested at 31 MMCFPD in January 1997.
Subsequent appraisal
confirmed that Vorwata was a significant gas accumulation. The Wiriagar
Deep/Vorwata complex, together with satellite gas accumulations, has
now been named Tangguh by the Republic of Indonesia.
After 25 wells,
500 pressure measurements, more than a mile of cores and a 3-D seismic
survey, DeGolyer & MacNaughton in mid-1998 estimated Tangguh to
contain at least 24 TCF of reserves.
Lessons Learned
So what are the
lessons of this super-giant gas discovery?
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Perhaps -- That it is
very hard to be optimistic and aggressive when you are burdened
with past exploration failure costs.
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Perhaps -- Having acreage
is nice, but knowing what is on acreage is even more useful.
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Perhaps. -- Proper analysis
of pressure data is immensely valuable in exploration.
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Perhaps -- Understanding
geochemistry is as important as understanding geology and geophysics.
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Perhaps -- The technical
and commercial expertise of team members really makes a difference
when applied at the proper moment in the history of a play.
And is that the way it happened?
Well, that's our recollection.