Case Study 13
Technology Cooperation in Indonesia for Natural Gas Production
Sukumar Devotta and Saroja Asthana
National Chemical Laboratory
Pune 411 008, India
Keywords: Indonesia, energy sector, capacity-building, N
N, N S
This case study, for the energy sector, highlights the technology cooperation
between Arun Natural Gas Field (northern Sumatra), Mobil Oil Corporation, and
Pertamina, the Indonesian national oil company. The natural gas is produced,
liquefied, and shipped to Japan and Korea for use in power plants, displacing
the alternative use of coal or heavy oil. Mobil has utilised the best available
technology and upgrades it continuously. The development of Arun Natural Gas
Field is an example of both technology transfer and capacity building. The project
has the potential for replication under similar operations worldwide.
In 1971, Mobil discovered the Arun Natural Gas Field in rural Indonesia. This
is one of the biggest and most important finds both for Indonesia and Mobil.
The Operation at the Arun Field was the processing of liquefied natural gas
(LNG) for exportation to Japan and Korea as well as for use in Indonesia. The
Arun Field was located in a rural area that lacked industrial infrastructure.
There was no competent work force available to operate. The project not only
had to provide that infrastructure, but it also had to provide a competent indigenous
workforce to operate these facilities. The project also faced political and
The project is a cooperative effort between Mobil Oil Corporation and Pertamina,
the Indonesian national oil company. Mobile Oil Indonesia (MOI) was incorporated
as a production-sharing contractor for Pertamina in 1967. Although the development
of Arun Gas Field and its associated P.T. Arun LNG plant required a significant
financial investment, its operating costs were relatively low and its profitability
high. Hence, it was considered a low finance risk for MOI.
Mobil encouraged Indonesian participation through training and capacity building.
In 1998, 96% of MOI's more than 1,100 employees were Indonesian. At the P.T.
Arun LNG plant, only twelve of the nearly 1,750 employees were non-Indonesian.
To achieve this high rate of Indonesian participation in the workforce, Mobil
conducted an extensive series of training courses. In 1993, Mobil expanded its
training effort to Pertamina to train 100 Pertamina professionals over a two-year
period in the latest environmental, health and safety technology.
Since the first deliveries of Arun in 1977, the growth in sales from Arun has
been quite remarkable. In addition to long LNG sales contracts with Japan and
Korea, Pertamina has been able to provide incremental cargoes of LNG from Arun
to satisfy additional short-term market demands. Both Indonesia and Mobil continue
to share significant economic benefits from this operation. The gas produced
at Arun has opened the way for new commercial activities in North Sumatra, thus
helping to build a strong local economy.
At Arun, there were five discrete areas and four hydrocarbon producing clusters.
This cluster approach had minimised the use of cultivated land, centralised
process equipment and reduced the distance that high-pressure gas had to be
transported. The field also supplied gas to two fertiliser plants and a local
paper mill, creating additional job opportunities. The success at Arun is due
to a very competent Indonesian workforce and the application of technology improvements
to increase the plant throughput and field production, providing for the continued
growth in LNG and gas liquids sales.
The project provided significant economic benefits both to Indonesia and Mobil.
The continued operation demonstrates the success of technical cooperation for
In addition, the technology transfer and capacity building have made a significant
contribution to the people of Indonesia. Mobil assisted the development of the
country's infrastructure and workforce. In other local projects, Mobil had drilled
water wells, built and repaired roads and bridges, and assisted in the construction
of schools and mosques
Gas development at Arun has been a success both technically and economically.
This success can be attributed to several factors, the most pertinent of which
is the close working partnership between Pertamina, the LNG buyers and the production
sharing contractor, Mobil. The mutual commitment assuring the best technology
and a competent workforce was the key to the success of this operation.
UNEP & IPIEECA, 1995: Mobil in Indonesia. In The Oil Industry Experience
- Technology Cooperation and Capacity Building: Contribution to Agenda 21
Lenny S. Bernstein
Tel: (703) 846-3530
Fax: (703) 846-2972
Susan J. Sonnenberg
Tel: (703) 846-4752
Fax: (703) 846-2972