THE GEOLOGY OF INDONESIA

PREFACE

Indonesia is the largest archipelagic state in the world comprising five major islands and
about 300 smaller island groups. Altogether there are 13,667 islands and islets of which
about 6,000 inhabited. The archipelago is situated on a crossroad between two oceans,
the Pacific and Indian oceans, and bridges two continents, the Asian and Australian.
Indonesia has a total area of 9,8 million sq km, of which more than 7,9 million sq km
under water. Physiographically, the islands of Sumatra, Java and Kalimantan are
attached to the Sunda Shelf of the Asian continent. On this landmass the water depth
does not exceed 200 meters. To the east, Irian Jaya and the Aru islands lie on the Sahul
Shelf, which are parts of the Australian continent. Located between these two shelfal is
the island grop of Nusa Tenggara, Sulawesi, Maluku and Halmahera. These islands are
encircled by deep seas which in many places reach 5,000 meters.

About 60 Tertiary sedimentary basins, spread out from Sumatra in the west to Irian Jaya
in the east, are identified in Indonesia. So far only 38 basins have been explored and
drilled for petroleum and 14 of the are now producing oil and gas. Seventy three percent
of these basins are located offshore, about one third of them in the deeper sea, with
water depth exceeding 200 m.

INTRODUCTION

Indonesia is the largest archipleagic state in the world comprising five major islands and
about 300 smaller island groups. Altogether there are 13,667 islands and islets of which
about 6,000 inhabited. The archipelago is situated on a crossroad between two oceans,
the Pacific and Indian oceans, and bridges two continents, the Asian and Australian.
Indonesia has a total area of 9,8 million sq km, of which more than 7,9 million sq km
under water. Physiographically, the islands of Sumatra, Java and Kalimantan are
attached to the Sunda Shelf of the Asian continent. On this landmass the water depth
does not exceed 200 meters. To the east, Irian Jaya and the Aru islands lie on the Sahul
Shelf, which are parts of the Australian continent. Located between these two shelfal is
the island grop of Nusa Tenggara, Sulawesi, Maluku and Halmahera. These islands are
encircled by deep seas which in many places reach 5,000 meters. About 60 Tertiary
sedimentary basins, spread out from Sumatra in the west to Irian Jaya in the east, are
identified in Indonesia. So far only 38 basins have been explored and drilled for
petroleum and 14 of the are now producing oil and gas. Seventy three percent of these
basins are located offshore, about one third of them in the deeper sea, with water depth
exceeding 200 m.

PLATE TECTONIC

Indonesia is a meeting place of two tectonic plates, Australia and Asia. The Australian
plate was moved northward and subducted under the Eurasian plate. The subduction
zone can be traced from northern tip of Sumatra until the Lesser Islands, that creates
deep submarine trench. Most of the earthquake also concentrate in this subduction
zone. This subduction also trigger the formation of volcanic range from Sumatra, Java to
Lesser Islands.

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The Eastern Indonesia also experienced another subduction of Pacific plate that move
southwesterly under the Eurasian plate. This subduction create the formation of
volcanoes in the North Sulawesi, Sangihe and Halmahera.

SEDIMENTARY BASINS

Introduction

The basic premise to explore the petroleum is the existence of sedimentary basin.
Sedimentary basin is a depression on the earth surface the can accummulated the
sedimentation material through time. Since most of the sediment transporting agent are
water, the sedimentary basin usually the place where the water finally accummulate. It
can be in the form of sea, lake, delta, or river.

Indonesia is a large country with various type of sedimentary basins. Most of the
sedimentary basin in the western Indonesia are already explored since the end of 19th
century. The recent years also saws the exploration on the frontier basins, especially in
the eastern Indonesia. Unfortunately, the interest of the major oil companies lost their
appetite to conduct explorationa activities in Indonesia probably due to the unfavorable
fiscal regime. As a result, the oil and gas production is keep declining in Indonesia
without any substantial reserve replacement.

The sediment which comprise of clay, sand, boulder or carbonate are being deposited in
the sedimentary basin over a geologic time (million years). Due to the weight of the
sedimentary deposit, the sedimentary basin experience subsidence to allow more
sedimentation. This sedimentary process may accummulate sediment with cumulative
thickness of several thousand meters.

Characteristics

About 60 Tertiary sedimentary basins, spread out from Sumatra in the west to Irian Jaya
in the east, are identified in Indonesia. So far only 38 basins have been explored and
drilled for petroleum and 14 of the are now producing oil and gas. Seventy three percent
of these basins are located offshore, about one third of them in the deeper sea, with
water depth exceeding 200 m.

Back-arc Basin

The most prolific sedimentary basin in Indonesia are belong to back-arc basin, whichis
located on the 'back' of the volcanic-arc. Most of the back-arc basin located in the
northeastern coast of Sumatra, northern Java, and continue to northern Lesser Island.
Almost all of the back-arc basin are currently producing oil and gas, therefore
categorized as proven petroleum province.

Fore-arc Basin

The fore-arc basin located to the 'front' of the volcanic arc, which is located along
southwestern coast of Sumatra, southern coast of Java and Lesser Island. The fore-arc
basin is mainly considered as a frontier basin and no commercial hydrocarbon found yet.
However, there is strong indication of working petroleum system in the fore-arc basin,
such as gas discoveries in the Nias area. Oil shows also reported to be found in offshore

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Bengkulu (Southern Sumatra). On the interesting note, the fore-arc basin in the southern
part of Papua New Guinea already found commercial gas accummulation in the
Pandorra Gas Field.

PETROLEUM ISSUES

Fiscal Regime

Fiscal regime for the petroleum exploration in Indonesia is considered un-competitive

compared to other countries. It reflected on the minimal interest from the major oil
companies to invest their money for the petroleum exploration activities in Indonesia.

Technical Brain Drain

The problem on the petroleum industry in Indonesia is the technical brain drain. Large
proportion of the highly skilled technical people with good experience in the oil industry
are left to working overseas to gain international experience and higher salary. It is not a
secret that oil industry in Indonesia is unfairly renumerate their workers. The
renumeration for expatriate personnel is about 5-10 times higher than the local
employee with similar technical skills and level of experiences.

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