The title of this article is the title of a recent three day workshop that was organized by SkkMigas that had apparently been arranged due to the concern that Indonesia has with the ever-growing gap between the demand for oil and what is being produced in the country, as well as the ever-increasing concern about the economics of the country with the spending on infrastructure projects being a concern and development in the natural resource industry not being as expected.
There are other concerns, such as the ever-growing reliance on Pertamina to take over blocks from International companies, to develop existing and hopefully new blocks, or a recent headline: Pertamina sells off shares to stay afloat, or the concern of Pertamina to meet the government’s policy of ensuring the availability of Premium grade fuel at one price throughout the whole country. One senior person from Pertamina said to me recently, we will survive until the election, but what happens after that, who knows.
This makes one wonder, how will Pertamina develop new or existing blocks? How will they carry out the exploration that is needed to meet the subject of this opinion piece which is an interesting title in itself for many reasons. When I was asked about finding Giant Oil & Gas Fields by Badan Geology, I said, Pak, the chances of finding Giant Fields is fairly low, because if they were available they would have been found by now with existing methods of exploration. I was to learn that what they meant by Giant Fields is anything that contains a probable reserve of 500 million barrels of oil, (Giant oil and gas fields = those with 500 million barrels (79,000,000 m3) of ultimately recoverable oil or gas equivalent. Supergiant oil field = holds equivalent of 5.5bn barrels of oil reserves).
This is a different story then, as it is known that there are fields that contain this amount and above, just waiting to be confirmed and exploited, one such field has been known about for several years which contains something in the region of 1 billion barrels of oil, as well as gas and condensate, but due to political and other reasons this has not been developed until now.
The author of this article has written several times that Indonesia does have the potential to be self-supportive in resources, if only the knowledge of the country’s resources was known, sadly to say until now, the potential of the country’s resources is just that, potential. What has become apparent from the workshop organized by SkkMigas is that many people are concerned with the situation, but very few (if any) are prepared to take the risk for exploration, which does include the country’s own banks and entrepreneurs. What does risk mean? Put simply, it means loss of money. In my view, Indonesia is no different to any other country, the people in the country do not like to lose money, so why does Indonesia expect investors from other countries to lose money when they are not prepared to accept the risk themselves?
How to minimize the risk?, how to increase the success rate from 15%?, which is what Pertamina achieved last year for drilling of new wells, although this is not too far below the accepted success rate within the industry which is in the region of 20 – 25% (the normal). These figures can of course be argued about from company to company, but the overall success rate is low, if you were a gambling person, you would unlikely accept these odds. The answer is simple, technology, a technology that has been developed by people of the trade, not by some mad scientist, technology that has been used in different countries with a high success rate. Contrary to believe, Indonesia is no different to any other country when it comes to geology, yes Indonesia has complex geology such as volcanics in Java, deep water in East Indonesia, difficult terrain in Papua where some of the technology that is used today does not allow a detailed exploration survey to be carried out. I can name a number of other countries that have extremely complicated geology that has been successfully explored with technology. The old excuse that the technology has not been used in Indonesia does not wash, how can it be used if people do not want to accept technology readily? It does appear that SkkMigas is waking up, they realize that if they do not adapt to new technology faster, then the situation will not improve.
Technology that we take for granted has come a long way in the past twenty or more years, where did the technology come from? Normally technology comes from someone seeing a problem and asking a simple question, how can we do this better. I was giving a presentation the other day, when someone said, we have not been taught this in University, so how can we believe that this works, where I replied, it has been proven in many other countries with a high success rate, can you as a geologist work in another country, where the answer was “of course we can” where my reply was, if you can do this, why can technology that works in these countries not work in Indonesia? Technology that has been developed by people such as yourself which is based on geology, of course, there was no reply.
The point of this article is that Indonesia appears to be ready to accept technology, although there are still divisions within the government (ESDM) where you have so many different interests, what is required is that one central policy is required for technology and not so many different empires, it should be united.
Most people will accept technology from the medical industry that can save life’s, the same people in the exploration industry are reluctant to accept technology that not only improves the success rate of exploration but will create jobs for people as companies are exploring at reduced costs which in turn relates to reduced risk.
Indonesia does have the potential to meet its energy needs, to meet its goals that are agreed with increased success and reduced costs, as long as people are willing to accept technology and make decisions.
“Baby Giant Fields” are waiting to be discovered.
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The UK has just designated the Persian Gulf as a level 3 risk for its ships – the highest level possible threat for British vessel traffic – as the confrontation between Iran with the US and its allies escalated. The strategically-important bit of water - and in particular the narrow Strait of Hormuz – is boiling over, and it seems as if full-blown military confrontation is inevitable.
The risk assessment comes as the British warship HMS Montrose had to escort the BP oil tanker British Heritage out of the Persian Gulf into the Indian Ocean from being blocked by Iranian vessels. The risk is particularly acute as Iran is spoiling for a fight after the Royal Marines seized the Iranian crude supertanker Grace-1 in Gibraltar on suspicions that it was violating sanctions by sending crude to war-torn Syria. Tensions over the Gibraltar seizure kept the British Heritage tanker in ‘safe’ Saudi Arabian waters for almost a week after making a U-turn from the Basrah oil terminal in Iraq on fears of Iranian reprisals, until the HMW Montrose came to its rescue. Iran’s Revolutionary Guard Corps have warned of further ‘reciprocation’ even as it denied the British Heritage incident ever occurred.
This is just the latest in a series of events around Iran that is rattling the oil world. Since the waivers on exports of Iranian crude by the USA expired in early May, there were four sabotage attacks on oil tankers in the region and two additional attacks in June, all near the major bunkering hub of Fujairah. Increased US military presence resulted in Iran downing an American drone, which almost led to a full-blown conflict were it not for a last-minute U-turn by President Donald Trump. Reports suggest that Iran’s Revolutionary Guard Corps have moved military equipment to its southern coast surrounding the narrow Strait of Hormuz, which is 39km at its narrowest. Up to a third of all seaborne petroleum trade passes through this chokepoint and while Iran would most likely overrun by US-led forces eventually if war breaks out, it could cause a major amount of damage in a little amount of time.
The risk has already driven up oil prices. While a risk premium has already been applied to current oil prices, some analysts are suggesting that further major spikes in crude oil prices could be incoming if Iran manages to close the Strait of Hormuz for an extended period of time. While international crude oil stocks will buffer any short-term impediment, if the Strait is closed for more than two weeks, crude oil prices could jump above US$100/b. If the Strait is closed for an extended period of time – and if the world has run down on its spare crude capacity – then prices could jump as high as US$325/b, according to a study conducted by the King Abdullah Petroleum Studies and Research Centre in Riyadh. This hasn’t happened yet, but the impact is already being felt beyond crude prices: insurance premiums for ships sailing to and fro the Persian Gulf rose tenfold in June, while the insurance-advice group Joint War Committee has designated the waters as a ‘Listed Area’, the highest risk classification on the scale. VLCC rates for trips in the Persian Gulf have also slipped, with traders cagey about sending ships into the potential conflict zone.
This will continue, as there is no end-game in sight for the Iranian issue. With the USA vague on what its eventual goals are and Iran in an aggressive mood at perceived injustice, the situation could explode in war or stay on steady heat for a longer while. Either way, this will have a major impact on the global crude markets. The boiling point has not been reached yet, but the waters of the Strait of Hormuz are certainly simmering.
The Strait of Hormuz:
Headline crude prices for the week beginning 8 July 2019 – Brent: US$64/b; WTI: US$57/b
Headlines of the week
Utility-scale battery storage units (units of one megawatt (MW) or greater power capacity) are a newer electric power resource, and their use has been growing in recent years. Operating utility-scale battery storage power capacity has more than quadrupled from the end of 2014 (214 MW) through March 2019 (899 MW). Assuming currently planned additions are completed and no current operating capacity is retired, utility-scale battery storage power capacity could exceed 2,500 MW by 2023.
EIA's Annual Electric Generator Report (Form EIA-860) collects data on the status of existing utility-scale battery storage units in the United States, along with proposed utility-scale battery storage projects scheduled for initial commercial operation within the next five years. The monthly version of this survey, the Preliminary Monthly Electric Generator Inventory (Form EIA-860M), collects the updated status of any projects scheduled to come online within the next 12 months.
Growth in utility-scale battery installations is the result of supportive state-level energy storage policies and the Federal Energy Regulatory Commission’s Order 841 that directs power system operators to allow utility-scale battery systems to engage in their wholesale energy, capacity, and ancillary services markets. In addition, pairing utility-scale battery storage with intermittent renewable resources, such as wind and solar, has become increasingly competitive compared with traditional generation options.
The two largest operating utility-scale battery storage sites in the United States as of March 2019 provide 40 MW of power capacity each: the Golden Valley Electric Association’s battery energy storage system in Alaska and the Vista Energy storage system in California. In the United States, 16 operating battery storage sites have an installed power capacity of 20 MW or greater. Of the 899 MW of installed operating battery storage reported by states as of March 2019, California, Illinois, and Texas account for a little less than half of that storage capacity.
In the first quarter of 2019, 60 MW of utility-scale battery storage power capacity came online, and an additional 108 MW of installed capacity will likely become operational by the end of the year. Of these planned 2019 installations, the largest is the Top Gun Energy Storage facility in California with 30 MW of installed capacity.
As of March 2019, the total utility-scale battery storage power capacity planned to come online through 2023 is 1,623 MW. If these planned facilities come online as scheduled, total U.S. utility-scale battery storage power capacity would nearly triple by the end of 2023. Additional capacity beyond what has already been reported may also be added as future operational dates approach.
Of all planned battery storage projects reported on Form EIA-860M, the largest two sites account for 725 MW and are planned to start commercial operation in 2021. The largest of these planned sites is the Manatee Solar Energy Center in Parrish, Florida. With a capacity of 409 MW, this project will be the largest solar-powered battery system in the world and will store energy from a nearby Florida Power and Light solar plant in Manatee County.
The second-largest planned utility-scale battery storage facility is the Helix Ravenswood facility located in Queens, New York. The site is planned to be developed in three stages and will have a total capacity of 316 MW.