Indonesian Oil Industry Essay

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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 …show more content…

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 Indonesia. By 1977, the annual oil production rate in Indonesia peaked at over 600 million barrels per day. At that time, the price of crude oil was about $14 U.S. dollars per barrel. Prices continued to rise until they peaked at $35 U.S. dollars per barrel and a sum of $15 billion dollars for oil exports. However, in 1982, production declined and the oil market began to weaken. The market eventually collapsed in 1986, bringing prices to an all time low. By 1989, total production was about 500 million barrels and oil exports valued at $6 billion U.S. dollars.The main petroleum-producing

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