Indonesian-OIL

Indonesia's oil production was formally governed by a quota allocation from OPEC. At the March 1991 OPEC ministerial meeting, Indonesia's quota was set at 1.445 million barrels per day, below the country's estimated production capacity of 1.7 million barrels per day. Indonesia's quota represented about 6 percent of total OPEC production. About 70 percent of Indonesia's annual oil production was exported on average during the late 1980s, but domestic consumption was increasing steadily and reached half of annual oil production by 1990.
Indonesia's oil industry is one of the oldest in the world. Oil in commercial quantities was discovered in northern Sumatra in 1883, leading to the establishment of the Koninklijke Nederlandsche Maatschappij tot Exploitatie van Petroleum-bronnen in NederlandschIndië (Royal Dutch Company for Exploration of Petroleum sources in the Netherlands Indies) in 1890, which was merged in 1907 with the Shell Transport and Trading Company, a British concern that had been drilling in Kalimantan since 1891, to form Royal Dutch Shell. Royal Dutch Shell dominated colonial oil exploration for more than thirty years. By 1911 Royal Dutch Shell operated concessions in Sumatra, Java, and Kalimantan (then called Borneo), and Indonesian oil was almost 4 percent of total world production. Indonesia's most important oil fields, the Duri and Minas fields in the central Sumatran basin, were discovered just prior to World War II by Caltex, a joint venture between the American companies Chevron and Texaco, although production did not begin until the 1950s. By 1963 the Duri and Minas oil fields, located in Riau Province near the town of Dumai, accounted for 50 percent of oil production.
The postindependence government increased its control over the oil sector during the 1950s and 1960s by increasing operations of several government-owned oil companies and by stiffening the terms of contracts with foreign oil firms. In 1968 the government companies--Indonesian Oil Mining company (Pertamin), National Oil Mining Company (Permina), and the National Oil and Gas Company (Permigan)--were consolidated into a single operation, the National Oil and Natural Gas Mining Company (Pertamina). At this time, a new form of contract--the production-sharing contract--was introduced. A production-sharing contract split total oil production between the contractor and the government, represented by Pertamina, and allowed the government to assume ownership of structures and equipment used for exploration and production within Indonesia. Indonesia's contract terms were considered among the toughest in the world, with the government in most cases receiving 85 percent of oil produced once the foreign company recovered costs.