Model
Model
In past years, Indonesia has been a major energy The bar graph in Exhibit 3 shows actual and forecast
provider in the Pacific Rim, first as an oil producer energy growth for the Asia Pacific region by major
and exporter, and more recently as a gas producer categories of fuel use expressed in million barrels of
and foremost marketer of liquified natural gas (LNG) crude oil equivalent per day. It reflects the significant
in the world. From Indonesia's largest operating gas increase in energy use experienced since 1980, and a
field, Arun Field in North Sumatra (Exhibit 1), projected future growth rate of about 4% per year
Pertamina, the Indonesian state-owned oil and gas through the year 2010.
company, exports over 12 million metric tons of LNG
each year. Pertamina operates a similar LNG facility The dominant energy supply in the region, solid fuels
at Badak in East Kalimantan province on the island of such as coal, will continue to be the major energy
Borneo which processes both associated and non- resource for some time in the future. However, other
associated gas from nearby oil and gas fields. Both forms of energy, including oil and gas, now represent
Arun and Badak furnish fuel gas for domestic better than half of Asia Pacific consumption. While
industrial projects in their respective areas. A LNG and locaVpipeline gas demand growth is
domestic gas market is beginning to emerge .in expected to outperform other forms of energy in the
Indonesia centered on the island of Java, with fuel gas years ahead, it should be noted that gas will still
for power generation the primary demand, although account for less than lO%of'overall energy use.
other commercial uses are also developing.
Electric power, derived from these primary sources of
All of this has resulted from the economic and energy, is in the greatest demand. As indicated. by
industrial boom enjoyed by the Asia Pacific region Exhibit 4, use of electric power in 'the Asia Pacific
over the past twenty years. region is forecast to increase dramatically, surpassing
U.S. electricity consumption later this decade. Natural
gas, including LNG, will make a significant
FAR EAST GROWTH contribution toward satisfying the region's growing
fuel requirements for electric power demand created
This vast and rapidly developing region has virtually by new industrial, commercial and residential needs.
doubled in Gross Domestic Product (GOP) since 1980
(Exhibit 2), and is expected to double again by the
year 201 O. Real GDP for Asia Pacific nations will
experience the fastest growth rate of any area of the APPETITE FOR GAS
world ....faster than the U.S.; and even faster than
Western Europe~ Asia's growing appetite for natural gas is clearly
illustrated by Exhibit 5. Consumption of gas has
Growth in the more industrialized nations of the increased steadily since 1980 and is projected to
region, such as Japan and Australia, may slow some continue growing at an average of 5-6% per year into
from past performance; but the emerging economies the next century. Gas can be supplied to con~uniers
of China, India, Vietnam, Thailand and Indonesia, to in three ways ... local requirements from domestic
name a few, are likely to more than double GDP over sources, where available; intra-regional overland
the next fifteen years. This very rapid economic trade by pipelines connecting gas sources with distant
.growth can only be achieved by a comparable increase markets; and by the international LNG trade from
in energy consumption. large gas development projects such as Arun.
S.D. MYERS 3
Exhibit 6 shows this same gas demand by consuming Indonesia, a production sharing contractor to
sector. Nearly half will be for electric power Pertamina. In September, 1973, a 20-year contract
generation which is essential to the economic growth was signed by Pertamina to sell Arun LNG to Japan.
aspirations of most countries in the Asia Pacific Field development and construction of the PT Arun
region. Natural gas represents a preferred fuel, both LNG liquefaction plant were initiated the following
for environmental reasons and as a result of the year. Sales of condensate began in October, 1977,
higher efficiencies now being achieved by new with first LNG deliveries one year later. Thus, Arun
combined-cycle gas turbine power plants. The production started some 18 years ago at a time when
availability of natural gas in areas undergoing rapid gas demand in the Asia Pacific region had just begun
industrial development, along with emerging new its rapid growth, and serves as a good model for
private sector opportunites in power project future gas development opportunities in the ever
investments, will continue to drive this market. expanding Far East market.
There are several factors (Exhibit 7) which favor The Arun Field, one of the largest and most
accelerated future development of natural gas in the productive gas fields in the world, is located onshore
Asia Pacific market: in a coastal plain only a few miles from the Strait of
Malacca (Exhibit 8). The PT Arun LNG plant and
l:J The importance of natural gas as a "fuel of the deep water docking facilities were constructed 20
future" has achieved growing recognition in all miles to the northwest near the city of Lhok
energy markets around the world. Seumawe. The economy of the area is primarily
agrarian with fish farming along the coast and rice
l:J Gas has proven to be very cost competitive with farming further inland.
alternative energy sources in most areas.
Arun is a large limestone reservoir which was
l:J The ability to use a variety of fuels reduces the deposited in a marine environment (Exhibit 9) and
risk to importing nations who must depend heavily trends roughly north and south for approximately
on outside sources of energy. Natural gas, much twelve miles. Maximum gas pay is 1,050 feet along
of it coming from within the region itself, will the eastern edge of the reservoir. The east-west
continue to provide supply security to countries in crossection, ranging from 3 to 4 miles in width,
the Asia Pacific area. portrays the resevoir shaped like an airfoil, gradually
shaling out to the west.
l:J Recent technological advances, such as combined
cycle gas turbines, have lowered costs and The Arun reservoir is comprised of interbedded reef
increased market demand. and lagoonal limestone segments with the reef and
near reef portions being highly permeable. Most early
l:J Natural gas itself benefits from being viewed as a Arun development wells had initial flow rates of 200-
clean-burning fuel having desireable environmental 300 million cubic feet per day under test.
qualities.
The average depth of the Arun formation is 10,000
feet. At initial reservoir conditions, the bottomhole
ARUN DEVELOPMENT pressure was 7,100 psia at a mean temperature of 352
Of (Exhibit 10). Average reservoir porosity is 16%
The Arun gas field on the northern coast of Sumatra, with 10.7% connate water saturation. Original
Indonesia, was discovered in 1971 by Mobil Oil hydrocarbon gas in place at Arun exceeded 16 trillion
4 ARUN FIELD: MODEL FOR SUCCESSFUL GAS DEVELOPMENT
cubic feet (TCF), with more than 14 TCF considered hydrocarbon gas was 1140 BTUs per standard cubic
recoverable. foot.
Because of the need to mtnulUze impact of gas In 'the field, the production stream is separated into
producing operations on local agricultural activities in gas, condensate and water at separator operating
and around the ArunField, development of the field specifications (nominally 850 F and 1220 psi). This
was carried out from four cluster areas with surface means both temperature and pressure of the produced
facilities to handle 21 wells each. In each gas must be lowered from wellhead conditions. After
producing cluster all wells drilled, except one, are leaving the well, the wellslream gas passes through a
deviated to prOVide uniform coverage of bottomhole pressure control choke/valve, aerial wellstream coolers
locations. Following the initial development phase, and gas-to-gas hew exchanger before entering the
new producing wells have been added each year as separator. FollOWing gaslliquid separation, the gas
needed to maintain field deliverability. Produced gas stream again passes through the gas-ta-gas exchanger
and liquids', after separation, are routed to a central reheating to 1250 F... above the water dewpQint... thus
location, Point "A", before being transported by allowing the gas to be moved by pipeline to the LNG
pipeline to the LNG plant at Lhok Seumawe. plant while avoiding the risk of line corrosion from
liquid wa(er in contact with CO2,
To maximize condensate recovery early in the life of
the project, gas injection wells were drilled around the The unstabilized condensate is also transported to. the
perimeter of the field and 800-900 million cubic feet plant by pipeline. Condensed water from the
per day of wellstream gas recycled to recover separator is moved to a treating plant where it is
additional liquids. Sales of condensate from recycling purified. The excess produced gas is sent to the
began in 1977, prior to completion of the initial three reinjection compressors to be returned to the reservoir.
LNG trains at the PT Arun plant. A small fraction (less than 10%) of the reinjection
stream is diverted for use as fuel gas in the field.
Well completions at ANn were designed to sustain
high rates of production through the operating life of By mid 1979, two producing clusters in the Arun
the field. As shown by Exhibit 11, standard Field and three LNG trains at the PT Amn LNG Plant
completions typically used 9 S/8-inch casing cemented were in full operation. Exhibit 13, is a simplified
at the top of the Amn formation, with 7-inch tubing process flow diagram for the field and plant facilities.
as the production string. To offset declining reservoir The produced wellstream gas undergoes field
pressure, a more recent "big bore" completion design separation as described above. Unstabilized
employs high strength 9 S/8-inch casing as the condensate from the separators is then moved by
production string allowing 70% higher wellstream pipeline to the PT Amn plant. After field separation,
rates than the conventional 7-inch completion. the residue gas is split into two streams ... one going
to the LNG plant for further processing, and the
remainder (now a much leaner gas after the
PROCESS FLOW condensate has been removed) reinjected or used as
fuel gas. At the PT Amn plant, the residue gas and
The Amn Field facilities are designed to process over unstabilized condensate are recombined to obtain a
three billion cubic feet per day of high temperature, stabilized condensate product that can be loaded on
high pressure gas. The wellstream composition is tankers. The gas stream is then further treated to
approximately 82% hydrocarbons, 14+% CO2 and 4% remove water vapor and CO2 before undergoing the
water (Exhibit 12). Initial heating value of the
S. D. MYERS 5
liquefaction process, then stored in thermally insulated cargoes per year. In 1994, PT Arun delivered 224
tanks ready for shipment. cargoes.
Over the next ten years (1980-89), Arun continued to The improvements were accomplished in stages.
expand its facilities to satisfy a growing LNG market Following construction of the first three LNG trains,
By 1989, four producing clusters were in operation in the liquifaction process was redesigned to provide
the field, and six LNG trains at the plant. Because of additional horsepower and extra cooling capacity. By
the high BTU content of Arun gas, the decision was the time the sixth train had come onstream, plant
made to market a third product ... liquid petroleum LNG throughput had been upgraded to 187 cargoes
gas, or LPG. Facilities for LPG extraction were per year.
added at both the field and plant (Exhibit 14).' A
fractionation unit was installed at PT Arun to split the With the addition of LPG extraction facilites in 1988,
raw LPG mix into propane and butane product lines. more horsepower and cooling became available to
Also, over the ten-year period three national projects, again boost LNG capacity to 200 cargoes annually.
two fertilizer plants and a paper mill, began operations
in North Sumatra supplied by gas from the Arun Subsequent technical improvements have further
Field. enhanced treating efficiency and carbon filtration.
Compressors were re-wheeled and turbines fitted with
Since the first deliveries of condensate in 1977, the high-tech metallurgy to withstand higher temperatures,
growth in sales from Arun has been quite remarkable. thus providing still more horsepower to the
In addition to long term LNG sales contracts with liquifaction process. Finally, a standby main heat
Japan and Korea. Pertamina has been able to provide exchanger was installed which could be quickly
incremental cargoes of LNG from Arun to satisfy substituted at any of the six operating trains to avoid
additional short-term market demand. As shown by downtime in the event of a mechanical problem.
Exhibit IS, Arun sales for each of the last five years
... including LNG, condensate, LPG and domestic gas In the Arun Field, high initial well deliverabilities
... have exceeded 400,000 barrels per day measured in required few operating changes at first to meet the
crude oil energy equivalents. higher throughput capacity being achieved by the
plant A detailed reservoir management study
conducted in 1985 indicated Arun recovery would be
ROLE OF TECHNOLOGY 23 TCF greater than'indicated by earlier calculations.
However, with the decisions to add LPG extraction
The outstanding success at Arun has resulted from a and market additional LNG cargoes, it became
very competent Indonesian workforce and the necessary to plan for a more rapid decline in reservoir
application of technological improvements to increase pressure.
plant throughput. and field production, thus providing
for the continued growth in LNG and gas liquids As a result, a number of operational changes were
sales. initiated to improve field performance at Arun
(Exhibit 17). Separator modifications were undertaken
The PT Arun LNG plant has undertaken a number of to increase liquid recovery; new well test facilities and
technical improvements over the years to upgrade its spare field process capacity were added; and, as noted
capacity to produce LNG (Exhibit 16). The original earlier, higher volume well completions were designed
6-train plant design anticipated the sale of 158 LNG to increase well flow rates. Special workover
techniques using coiled tubing were applied to
6 ARUN FIELD: MODEL FOR SUCCESSFUL GAS DEVELOPMENT
increase field condensate recovery. An inter-cluster Collectively, the nations of Southest Asia will also
pipeline was installed to selectively direct gas with account for a major share of the region's future gas
higher C02 content to the reinjection compressors and demand growth.
minimize' CO2 to the LNG plant, thereby allowing a
higher percentage of hydrocarbon gas to be processed. Using natural gas as fuel has certain advantages for
the consumer. Competition of gas with alternative
As reservoir pressure at Arun continues to decline, fuels such as distillate (fuel oil), coal, and nuclear
water vapor in the wellstream will progressively power will be most intense in the electric utility sector
increase and wellhead flow rates decrease. In 1993, which is forecast to experience the highest demand
installation of dehydration facilities in the field were growth in the Asia Pacific region. .Electricity cost in
completed. Booster compression to maintain well cents per kilowatt-hour for power generation in Japan,
deliverabilities is scheduled for startup later this year. shown by Exhibit 20, indicates that gas and distillate
using combined cycle gas turbines are clearly
At Arun,both at the plant and in the field, application competitive with power generation by coal or nuclear
of the latest technology has significantly contributed fuel. The low cost of natural gas also makes it a
to meeting the growth market for natural gas in the desi.reable fuel for many other industrial and
Pacifi.c Rim area. commercial uses.
Future gas supplies to PT Arun will come from Another advantage of using gas as fuel is its clean
pbmned development of the NSO gas fields, located burning qualities (Exhibit 21). Natural gas is lower in
70 miles offshore from the plant, and the South Lhok CO2 and nitrous oxide emissions than distillate, and
Sukonfield onshore (Exhibit 18). Exploration to much lower than modem coal burning power plants ...
identify additional gas resources in the area continues. even those equipped with flue gas desulfurization
facilities. Most countries with undeveloped natural
gas resources will soon come to recogni1.C the
BENEFITS OF GAS DEVELOPMENT economic potential of these environmental and cost
benefits.
As we enter the 21st Century, the success at Arun can
be viewed as a forerunner of even greater business
opportunities to come in the Asia Pacific region for FAR EAST LNG OUTLOOK
finding, developing and marketing natural gas.
LNG will continue as a good business opportunity
LNG sales will grow as demand for gas increases in where significant gas resources are found. The Asia
existing LNG markets, and as new' markets develop Pacific LNG market is the largest in the world and
around the Pacific Rim area. The largest demand for certainly appears. to have the widest range of
natural gas, however, will be for local gas suppliers.
consumption as new industries emerge to fuel rapidly
growing economies; and intra-regionally, as pipeline The three current LNG importers ... Japan, Korea and
systems are developed to transport gas to new Taiwan ... are supplied from six countries, including
overland markets (Exhibit 19). Indonesia, Malaysia, Brunei, Abu Dhabi, Australia and
the United States (Exhibit 22). Many of these
Countries with large populations such as China and countries have plans to expand existing facilities.
India will have the greatest need for all forms of New grass roots construction is underway in the
energy, including significant quantities of natural gas. Middle East country of Qatar to capitali1.C on existing
S. D. MYERS 7
.d potential new markets. Additional new LNG Construction and operation of the Arun field and LNG
projects have also been proposed in a number of other facilities resulted from a close-working partnership
countries. between Pertamina, the LNG Buyers and the
produ·ction sharing contractor.
The appetite for gas in the Asia Pacific region will
add to LNG demand from current markets. China, Marketing efforts, led by skilled Indonesian
India and Thailand are considered prospective new negotiators, were able to establish for Indonesia a
markets for LNG within the next ten years. However, preeminent position in the Pacific Rim which has
most LNG demand growth from such markets is not become the largest LNG market in the world.
expected to occur until after the end of the decade.
Arun, and other LNG projects over the past 20 years,
LNG consumption in the Pacific Rim is forecast to have proven the dependability of LNG supplies. Arun
double by 2010. Exhibit 23 is a projection of this alone has delivered over 2400 cargoes since 1978
growth expressed in million metric tons per year without missing a shipment.
(MMTA). Less than half will come from supplies
already contracted in existing markets as contract Despite being discovered in a rural area lacking
terms begin to expire. These older contracts along industrial infrastructure, the Arun gas field had several
with incremental new demand will be replaced critical economic advantages. This very large gas
primarily by contract extensions and project resource, located near the coast, was ideal for LNG
expansions, where sufficient reserves are still development. A high liquids yield associated with the
available, and by grass roots projects representing new gas production provided for additional income from
'lJrces of gas supply. condensate and LPG. And, North Sumatra
geographically was well positioned to serve key Far
Soon, however, the need will arise for additional East LNG markets.
volumes of LNG to supply new markets representing
demand from countries such as China and India who Finally, the gas produced at Arun has opened the way
have already expressed an interest in LNG for power for new commercial activities in North Sumatra, thus
generation and other industrial development projects. helping to build a strong local economy.
The extent to which this additional LNG demand can
be satisfied over the next 10-15 years will depend
largely on how many new, high-cost LNG projects ACKNOWLEGEMENTS
can be supported by world financial markets at
investment costs which are now approaching $1 The author wishes to thank Mobil Oil Corporation for
billion (US) per MMTA of new LNG capacity. permission to present this paper, and acknowledge
Pertamina and Mobil Oil Indonesia for outstanding
technical and operational achievements at Arun. I
CONCLUSIONS would also express my appreciation to Masyhur
Alaydrus and Maman Budiman, Mobil Oil Indonesia,
Gas development at Arun has been a success both and Phil Muth, Richard Northrip and Doug Smith,
technically and economically. This success can be Mobil E&P Technical Center, for their helpful
attributed to several considerations (Exhibit 24): suggestions and technical assistance.
8 ARUN FIELD: MODEL FOR SUCCESSFUL GAS DEVELOPMENT
REFERENCES
to
I ~ 'Unlled
Exhibit 1. Exhibit 2.
---"=-
Energy Growth -0 Electricity Consumption· BIllion Kwh
1IIIIIlIID-0I1.......
•
1.0lllI----~=---t_------
~1~1d
10
AI'a
Paclllc...........
-~-~
,., IllS IIID IllS _ 101II lOt. ,. I. 20lllI 21110
Exhibit 3. Exh1b114.
Asia Pacific Asia Pacific
Appetite for Gas Gas Growth by Consuming Sector
Bcm 8CI'D
«0 i i
co, i
• 30
20 20
10
Exhibit 5. ExhibitS.
Exhibit 7. Exhibit 8.
Arun Field Arun Field
Cross Section a Isopach Development Plan
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Exhibit •• exhibit 10.
.~.~ •.••=
Field Separation
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__............. ~ __ I I L__..... "='
mt===s.... ~M."
_
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E)(hfblt 15. Exhibit 18.
Arun Field North Sumatra Area
Production Improvements Future Gas Development
• Separator Modifications
• Well Test Facilities
• Spare Capacity
• Inter-cluster Pipeline
• Dehydration
• Booster Compression
Hue....
1190 2000 2010
40
20
o
GulLNG Coa/(FGD)
•
Exhibit 21.
- Exhibit 22.
100
75
50
25
2010
'"5 1000 2005