Indonesia Essay

1206 words - 5 pages

The Indonesian Petroleum Association asserts that, “Exploration for oil in
Indonesia dates back to 1871, with the first commercial production beginning in 1885.” The success of one of the very first wells, drilled at Telaga Tunggal in 1885, triggered the explosion in the Indonesian oil industry. At a depth of only 121 meters, this well was producing commercial quantities of oil. This immediately led to further exploration and drilling of new oil fields throughout the region. The Royal Dutch Company and Shell Transport and Trading were the first two companies to spearhead the start of the oil industry in Indonesia. In 1890, the Royal Dutch Company was created to produce and refine oil as Shell Transport and Trading focused on the marketing and transportation side of the market. They merged in 1907 to form Royal Dutch Shell. In the literary work, “Earliest Days of Petroleum Industry in Indonesia,” it states that at this time “total production increased to 62,000 barrels per day, of which 95 percent was produced by Royal Dutch Shell.” By the turn of the century, there were about twenty companies exploring, if not already producing, oil in Indonesia. However, Royal Dutch Shell and the U.S. companies Stanvac and Caltex dominated the industry in Indonesia in the first half of the twentieth century. The major oil fields included Kruka and Ledok in East Java, Kampong Minyak and Sumpal in South Sumatra, and Perlak in North Sumatra. With these abundant fields and other new fields being discovered, crude oil production reached a new high in 1939. The production of crude oil reached 170,000 barrels per day, while approximately 180,000 barrels were being refined each day. As a result, nearly 75 percent of crude oil in the Far East came from Indonesian wells. Most of Indonesia’s natural resources remained untapped until they gained independence in 1945. Throughout World War II, the Japanese exploited Indonesia’s oil reserves and refineries. “With independence following WWII, the oil, oil fields, refineries and supplies seized by the Japanese invasion force were returned to the Indonesian Government, and the new era of Indonesian energy exploration and production began,” according to the Indonesian Petroleum Association. Indonesia’s economic development is in large, dependent on oil and gas production. The State
Constitution of 1945 mandated that “all of Indonesia’s land, water and natural resources are controlled by the State and will be utilized for the greatest benefit and welfare of its people.” Pertamina, Indonesia’s largest state-owned enterprise, was formed in 1957. The company is active in the upstream and downstream sectors of the oil, gas, and geothermal energy industries. Pertamina’s performance is reflected in the decline of Indonesia’s oil output since it is fully owned by the Indonesian government. Ultimately, the partnership of foreign and domestic companies with state bodies was needed to explore and produce oil, gas, and geothermal energy in...

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