Hunt for Sunken Treasure

The invading explorers from nine different countries man an odd armada that ranges the long shoreline of Indonesia. Their expanding expeditions have already spent well over $100 million, and the cost rises steadily. The gamble, they figure, is worth the price. So the big rigs throb day and night as crewmen drill deep into the continental shelf. They are all racing to tap the same treasure--an undersea source of oil that is far from the dangerous uncertainties of the Middle East and close to the great Japanese market. To make it even more attractive, the oil is "sweet crude," relatively free from pollution-producing sulfur.

Geologists suspect that the undersea oilfields stretch in twin crescents from the coasts of Burma and Thailand along the Indonesian Archipelago to as far south as Australia. If drilling proves them right, the results can not only spur development of the whole region, but will also surely alter the balance of global oil politics. Southeast Asia, along with Alaska's North Slope and the Siberian field that the Soviets revealed last month, could give world oil users great new sources of supply.

Fencing with Foreigners. Those sources would be especially welcome. Elsewhere, the world's oilfields are pocked with trouble. Libya is threatening to issue a decree raising royalties. The Shah of Iran is fencing with foreign oilmen in an attempt to increase his government's take. Bolivian development stopped with the nationalization last October of Gulf Oil Corp. Nigerian production suffered during the long war over secessionist Biafra. By comparison, Indonesia seems relatively calm.

The archipelago has been producing oil from land-based wells since 1893; last year the flow was 850,000 bbl. a day, compared to about 9,000,000 bbl. daily output in the U.S. The offshore rush began to heat up last year, when a combine of Atlantic Richfield and IIAPCO (a subsidiary of San Francisco-based Natomas Co.) made a find of potentially commercial size in the Java Sea. Soon after, Japex Indonesia Ltd., a Japanese government-controlled company, discovered oil in the Malacca Strait. Japex's results have yet to measure up to early expectations, but the Atlantic Richfield-IIAPCO group has lately hit some promising sources.

The potential has attracted dozens of companies. Union Oil Co. of California is drilling off Sumatra; Cities Service brought a rig in from Beaumont, Tex., to bore beneath the Java Sea. Others scheduled to begin exploration wells this year include Continental Oil, Phillips Petroleum, and possibly Italy's state-controlled AGIP. Last month a number of new offshore exploration contracts were signed. British Petroleum agreed to invest $8,500,000 in the first eight years of a 30-year contract. Gulf & Western Industries, the Manhattan-based conglomerate that has never been in the oil-drilling business, also signed a pact to explore. Dr. Wendell Phillips, a skillful promoter, won the only contract awarded to an individual in Indonesia; he paid a $500,000 fee and agreed to spend $17.5 million exploring onshore and offshore in West Irian.

Commuting from Singapore. All companies that enter the search pay heavily for the privilege. They must join a partnership with Pertamina, the government oil monopoly, which is run as an independent fiefdom by Lieut. General Ibnu Sutowo. The initial charge can run to as much as $7,000,000 in so-called signature fees--"just for a hunting license," as one oilman puts it. The companies take all the risks. If oil is found, Pertamina allows a foreign contractor to keep the first 40% to pay exploration and production expenses; the remaining oil is split, with the government monopoly taking at least 65% of it. Pertamina pays all local taxes and supplies "environmental assistance," meaning help in slicing through red tape.

Oil figures importantly in Indonesia's economic development plans, and Djakarta is, in effect, counting its wells before they are proved out. Deeply in debt after years of misrule under former President Sukarno, the country owes $2 billion to foreign creditors. If oil is produced on a large enough scale, it will strengthen Indonesia's economy and finance sorely needed development.

The oil rush already has spread benefits throughout the region, notably to Singapore, the principal supply center for prospectors. In partnership with the Singapore government, Santa Fe-Pomeroy Services, Inc., a U.S. company, has leased part of an abandoned British naval base and established a humming business supplying the offshore oilmen with pipe, chemicals and even food. Shell has built a $60 million refinery in Singapore, and Esso is putting up another. An estimated 1,500 Americans have moved in, including the families of several executives who commute to Djakarta, 557 miles away.

More Untapped Riches. Exploration around Malaysia is also picking up. Gulf, Mobil and Amoco have received concessions off the west coast; Esso has drilled four wells off the east coast since last May and has found enough promising signs to call up another rig. Royal Dutch/Shell, which has the only offshore wells now producing in Southeast Asia, has brought a third rig from the U.S. to its site off Brunei. And half a dozen companies have begun surveys off southern Thailand.

Farther away, more untapped riches may lie under the shallow seas between Japan and Taiwan. After a recent survey, a United Nations commission reported that the area "may contain one of the most prolific oil and gas reservoirs in the world, possibly comparing favorably with the Persian Gulf." That prospect, which could start still another exploration boom in Asia, lends credence to Banker David Rockefeller's prediction that spending on the search for oil in the Far East will total $5 billion over the next dozen years.

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