Methodological and Technological Issues in Technology Transfer

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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 cultural barriers.

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 environmental issues.

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

Lessons Learned

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

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