IN THE NEWS / Indonesian Woes Don't Faze Canadian Oil Companies
Barry Nelson, Calgary Herald
Riots, corruption, economic collapse and political upheaval that could tear the country apart aren't enough to scare Canadian oil companies away from Indonesia.
"We are familiar with the political and economic situation and it's never bothered us," says Abby Badwi, president of Calgary's Carmanah Resources, which has been in business here since 1994.
"This is just a short period of unrest. It will eventually come to an end."
Calgary companies have operated in Indonesia since 1961, when Asamera Inc., now a Gulf Canada subsidiary, signed the first contract with Pertamina, the Indonesian national oil company.
PanCanadian Petroleum, Canadian Occidental Petroleum and Talisman Energy, along with Carmanah and Gulf, are among Calgary companies with significant interests here.
All do business with Pertamina. Despite widespread corruption elsewhere in Indonesia, the state oil company, which earns most of lndonesia's desperately needed foreign exchange, has remained squeaky clean.
"Pertamina is a strong, sophisticated company. The way they grant exploration and development blocks and operate their own activities is no different than many national oil companies," Badwi says.
Still, ordinary honesty isn't enough to lure these companies halfway around the world. The attraction is money.
In a triumph of understatement, Rod Wade, general manager of Talisman (Asia) Ltd., says: "The geologic potential of Indonesia is significant for Talisman."
It's damn significant. And it's actual as well as potential. Talisman routinely drills wells here that produce 1,000 to 5,000 barrels a day. In Canada, where the average well produces 40 barrels a day, finds like these would be big news. Here they are ordinary.
Talisman came to Indonesia in 1994 when the company acquired Bow Valley Resources. Since then, Talisman has tripled production from 14,000 barrels a day to 46,000 and Wade expects to hit 50,000 within a couple of months,
And the company has been able to increase its reserves here by 40 million to 50 million barrels in less than four years.
Rewards like these make it easier to endure some tough conditions.
Wade, a 25-year veteran of Talisman and its former parent company British Petroleum, is responsible for the safety of the 25 Canadians and 60 Indonesians who work for the company here.
The recent riots have been unsettling, but they have been far less serious than the May riots that claimed 500 lives, destroyed 5,000 buildings in Jakarta, forced President Suharto to resign and produced an exodus of foreigners.
"We were concerned about our families, but we had security plans for such an event," Wade recalls. "We were prepared to go to our homes, which is what we did, and stay there for a number of days.
"We had prepared food and other provisions to last several days and we had a communications system in place that allowed us to keep our people up to date. In general, our families were not in danger."
Wade agrees that the most recent series of demonstrations, riots and lootings, combined with political turmoil in a country unused to democracy, mean that the future is uncertain.
He takes comfort in the fact that all the important groups, including the students, the main opposition politicians, the military, religious leaders of all faiths and the government "have a common vision . . . of a democratic, peaceful, economically vibrant Indonesia."
Carmanah Resources has had less recent success than Talisman, but Badwi, a former vice-president of international operations for Sceptre Resources, which came to Indonesia in 1983, says his company is determined to stay in business here.
"We had a very disappointing capital program this summer," Badwi says. Carmanah drilled three wells in its Camar field about 100 kilometres off the coast of Java. Two of the wells are producing about 400 barrels a day and the third is pumping 2,000 a day.
Carmanah has shown its faith in Indonesia, buying out its minority partner in the Bawean production sharing contract that covers 750,000 offshore acres and includes the Camar field.
The company also holds rights to 725,000 acres in the Natuna Sea, but Esoo farmed into the property and hit a dry hole there after spending $25 million on exploration.
"But Indonesia is where we've built a niche," Badwi says. "The next few months are going to be testy because of the elections, but they will bring the stability Indonesia is looking for and investors are looking for."
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