Abstract

Geologically, the Indonesian archipelago may be sub-divided into Western and Eastern regions. The Makassar Strait and the continuing sea-passage to the south between Bali and Lombok islands separates these regions.

Sedimentary basins in Western Indonesia are relatively large and mostly located onshore or in shallow water. On the contrary, sedimentary basins in Eastern Indonesia are relatively small and mostly located in deep water. Roughly, 30% of the offshore basins in Western Indonesia and 86% in Eastern Indonesia are classified as deep sea basins. Compared to Western Indonesia, most of sedimentary basins in Eastern Indonesia are less explored. These under-explored basins are located in remote areas, deep water or other geologically complex regions. From an exploration point of view, Eastern Indonesia at present, can be considered as a frontier area.

Since 1968, several Production Sharing Contractors (PSC's) have searched for petroleum in deep water and frontier areas. Extensive exploration campaigns have not yet been finished and the results to date are moderate.

Recognizing that exploration in deep water and frontier areas is a high risk venture and demand high technology, the Indonesian Government introduced two separate incentive packages in August 1988 and February 1989. The incentives improved after tax sharing splits for oil produced in deep water and frontier contract areas. Besides, additional investment credit is given to PSC's operating in deep water. The incentives have generated greater interest in the less explored areas of eastern Indonesia.

However, after 3 years since their announcement, actual implementation of the deep water and frontier incentives has not yet been realized because the discoveries made in those two regions have as yet not been developed.

As exploration in deep water and frontier areas is tough and expensive, close cooperation or joint effort among industries to collect more data as a basis for further exploration, is recommended. Besides, some adjustment in the incentives should be considered and a more open file system is suggested.