In about March of 1967, we approached Sinclair. Larry Barker—and at that time, we were somewhat involved with Natomas; and Natomas had some oil trading business with Sinclair, and they suggested that we go talk to Sinclair. We’d already talked to one—to Signal Oil & Gas and they’d turned us down. And anyway they went to New York and talked to Sinclair, and Sinclair asked for a 90-day option for them to review everything, not only the geology, but the politics and everything. And in May of 1967, they—early May they sent a team of about half a dozen people, geologists, lab people, people, and others to go over everything in Indonesia; and then on the 1st of June or at the end of May, E. L. Steineger, who was then Chairman of the Board and CEO of Sinclair, came; and we sat in my office. They all sat around and Bob Ellston, who was President of Indonesia foreign of some kind, was against it. But Bernie...?
who was the chief geologist was there. Bernie was probably in his sixties and slopped over his ties and like. A nice guy. But and he’s half asleep most of the time, but he was a good friend of Steineger’s and Steineger says to him, “Bernie, what do you think?” And Bernie looks up at him and he says, “Drill it.” And Steineger says, “It’s a deal.” And on—so on June 1 it was announced that Sinclair was a partner. And I took this Bob Ellston and Doug—let’s see, who was there? Doug Carver and Larry Barker and I and Bob Ellston went to meet all of the—at that time they—Indonesia had vice presidents, four or five vice presidents. We had to go meet them all. And we got to one of them and one of them says, “We’re gonna see this deal canceled.” And Bob Ellston went back and he tried to talk Steineger into reneging on the deal, and teineger looks at him and says, “Bob, a deal is a deal. For better, for worse, we’re partners.” So and anyway, so you know by this time, I'm not spending much time on my drafting board. I can’t do much geology because I've got all this other stuff to keep track of and keep friends with the Indonesians. So we had sold Natomas a 5 percent interest in IIAPCO, and this how Natomas happened to get into it. And the chairman of Natomas—all these names I know and can’t think of—had started Amenol.
He had been a vice president—he had been a vice president of Standard of California in marketing; and he started Amenol; and then he got pushed out of Amenol.
And he happened to be serving on a board—on a hospital board with Doug Carver who was one of our partners, and Doug was telling him our problems of the government trying to—or of the majors trying to bust our contract, and that’s how Natomas happened to get involved.
And we sold Natomas a 5 percent interest and I pocketed $50,000—the first real money I had ever seen in my life.
Paid my mother off money my father had leant me ten years earlier before he died.
Anyway, so as we started doing the seismic work and the first brute stacks that would come in, we were seeing we were getting good section and good rollovers.
And we were rapidly running short of cash, us little guys; and that’s how Natomas got involved and decided they wanted to merge; and we merged with Natomas.
We merged with Natomas for a block of stock each and then if we got production in a certain length of time of a certain amount, we would double it; and of course we did that.
We did that.
After we started the seismic work, we had to go back to Singapore with the seismic ship for reason; and as we went back, we decided to turn the sparkers on as they were going across to the west of the Thousand Islands.
And lo and behold, there’s a good section there. And so we thought, boy. So we went after a second area.
And Sinclair wanted to pretend like—by this time, it wasn’t the good guys at Sinclair. It was somebody else who was trying to tell us what to do.
Anyway, Sinclair said, “Well, we’re not gonna join you on this area.” And so the General said that’s okay. And that was in a meeting with the General. And he said, “That’s okay.”
So we got it all by ourselves. And so we ended up with two areas that amounted to 72,000 square miles, about the size of the state of Oklahoma.
We took Arco on as an operating partner on the 1st of June of 1967, but it was a year later when they took over. They started moving in their first people in January/February.
I stayed there primarily to help them get acquainted with the Indonesians which we’d spent so much time getting acquainted with and teaching them how to—or trying to tell them how we thought that they could get along best with the Indonesians and what they had to do.
And so I didn’t leave until June of 1968 when we did turn all the operations over to them.
The seismic work began in July ’67 on the offshore northwest Java with the early brute stacks showing good turnover and all.
When Sinclair sputtered their fifth test, it had a blowout which flowed a substantial amount of oil in December of 1968.
In February of 1969, the well tested at accumulative flow rate of 4600-50 barrels of oil per day plus 23 million cubic feet gas.
I happened to be in Singapore at the time when they doing—when the first drill stem test were taken.
The first drill stem test was just a few hundred barrels on a shallower zone. And there happened to be a Phillips geologist there, and I was so excited that we got some oil, and he says, “Forget it.”
He says, “I spent two years studying this area. You don’t have a good area.” He says, “It’ll never make it.”
And of course, the well was completed as a good one, and it turned out—it turned out that my son, Jordan, went to work for Phillips later and he met this guy.
And this guy, he says, “I'm so embarrassed.” Ha says, “I’ll never do that again.”
Anyway, they weren’t as romantic as me. I named our fields in the Sunda Basin, I named it after daughters of Indonesian friends.
They just called them A, B, C, D, and E. Anyway, the E field was developed and they had a 2.5-mile step out and it was good but they didn’t want to start production until they had at least 25,000 barrels a day capacity.
And we knew that the Indonesians wanted to start it up for their own ego and for the people of Indonesia, but we couldn’t convince Arco that that’s what they should do.
IIAPCO sputtered the Sinta well on August 10, 1970. Sinta was to be our second well, but because the water was 10 feet deeper than the rig we had to wait and take the rig back to Singapore to get an extension on the legs. So it was put off to about the eighth or the ninth well.
So we—anyway, we sputtered the—on August 10, and we reached the TD on August 26. Substantial flows were tested in three separate zones, prompting an installation of Indonesia’s first offshore platform.
We had built—on speculation, we had built a one-man platform and left it in Singapore.
And after this discovery, we floated it down to the location and set up this little, tiny, one-well platform and moved in a 35-ton little oil barge to use for testing.
Anyway, on October 23, I was in the U.S. then and I got word and I stopped and I flew back over, and I stopped in Tokyo.
We had Saito as a partner at that time. And I stopped in and told—invited them to come along because we were going to open up the—Indonesia’s first offshore production.
And I got to Indonesia and I went to General Ibnu and I said, “Maybe you could talk President Suharto into coming out to this.”
And we did. And we thought that Suharto’s wife and the General’s wife were going to come, but because one of them couldn’t, they didn’t come.
And my wife and our manager’s wife were gonna come, but then we told them you better not come because the other women aren’t coming.
But my wife met Suharto as they landed on a little island in his helicopter to get on his boat. And my wife was there with him and he said, “Come on with me.”
And so here comes Suharto with my wife and manager’s wife sitting beside him. We’re on the platform and here they come.
So they're the only two women on this thing. Anyway, so we had a nice ceremony, and Suharto made a speech, and I made a speech, and he opened the valve.
And our last flow test before—we flowed 50,000 barrels of oil into this barge in the first 15—I think it was 15 days of testing on various size chokes and the last test was 7,728 barrels of oil per day.
Anyway, we were off and running. We were very excited.
At the time of my resignation with—in February 1971—I might add as you can tell from my previous talks, I'm really an independent, didn’t work well in a corporate environment.
But at the time I resigned, Arco had eight oil fields and three gas fields in the first are; and IIAPCO had two oil fields in the second area.
As the original IIAPCO contract changed hands—let’s see, it first went to Maxxis. Maxxis then sold it to the Argentines.
The Argentines merged with a Spanish. The Spanish sold it to the Chinese. And anyway, as time went on, they don’t know how I am. I don’t know who they are and I have lost day-to-day contact, good research contract.
But it is interesting that in 2000, the USGS wrote a report on this. It’s over on the table over there—on the two areas.
And accounting on their maps, it looks like there’s a couple of hundred oil and gas fields in the contract area.
In the area, by 2000, I had figured it produced over 3 billion barrels. I don't know what it’s produced now.
And about that time in late January or early February, I viewed Trend Explorations’ presentation on shore in the Salawati Basin in Irian Jaya in extreme eastern Indonesia; and I wanted IIAPCO to take a piece.
It was an area I had reviewed two years earlier after reading a Shell report discussing the two—their two pre-war, low gravity, tertiary fields and their assessment of the—of the basin potential.
I had decided then not to pursue it. But Norm Foster’s photo anomalies in this dense, tropical forest outlined apparent deeper basin reefs; and as a long time believer in good photo anomalies, I was completely sold.
Natomas’ geologist, Keith Davis, turned IIAPCO’s request to join Trend down saying “it is very easy to succumb to the luxurious idea that production would be the same as the Sirt Basin pinnacle reefs in Libya which produced in 30,000 barrel of oil per day range.”
The next day I resigned and personally committed to Tom Jordan to take a 10 percent interest becoming Trend’s first partner.
At that time, Trend had presented their project to almost 60 companies and all of them had declined to participate.
Not too long after, within the month after we first committed, I think that Trend had sold most of it.
Anyway, a week or so after I had committed, I called Larry Barker, who was still president of IIAPCO, and asked him if he would finance a second 10 percent and if he’d find that second 10 percent, I’d go promote it and get somebody to carry us for our 10 percent; and he did do that.
Anyway, the seismic anomalies proved to be—proved to be recent. Trend’s very first well was completed flowing 26,000 barrels of oil per day.
The second reef discovery was completed flowing 31,800 barrels per day and produced a million barrels in the first six months.
As you can see, I've lived under a pretty good, bright star.
And even I had a telegraph from Pertimina congratulating me on our third—on my third find in Indonesia for the first two areas and then with Trend.
But I have been long disassociated with the day-to-day activity of the two contract areas and with the Trend area.
So all I know is I had the pleasure of really starting it or being on the start and being at least partly responsible for the discovery of a major oil.
It wasn’t like starting a business next door to somebody else in the same business and running them out of business. I was—we were adding brand new reserves to the world.
Interviewer: I’d like to ask you another question. Were there any changes or paradigm shifts that occurred during your involvement with the Indonesian government?
Were any of these changes especially in the contract that came along?
Yes. There definite changes. The original contract was a 65/35 split where the government of Indonesia had 65 percent and we 35 percent which included our taxes.
And out of of 40 percent, out of the first 40 percent of oil produced, we were to recover our costs. All of this—all of this was to change.
They also, at that time in the U.S. they imposed the first Windfall Profits Tax, and with a lot of support from U.S. people, the Indonesians decided, hell, if they can do it, we can do it. It wasn’t Ibnu. It was the government.
So they imposed the Windfall Profits Tax on us there. That was before they changed the contract. Then while I was a partner with Trend—when I was a partner with Trend, they had gotten a lot of the—there had been a lot of pressure against the 65/35 split, claiming that we were getting too big a cut.
So the government wanted to put in an 85/15 split. And by this time, Ibnu had been pushed out completely; and I had talked to Ibnu and he says, “Tell them to go to hell.” And of course I didn’t have much of a say of anything anymore.
And it turned out that after the first company gave in, everybody had to give in. And again, we didn’t have any support from our—on our side from the U.S. Government.
But in my opinion and in General Ibnu’s opinion, a contract is a contract. He always dealt harder. Each—everybody that came in wanted a new contract, he got a little bit stiffer and a little bit stiffer, a little bit stiffer; but he never went back on his word on a contract. And as result of that, I was a little bit peeved with—I was a lot peeved and I never really wanted to go back and see another contract. Although it’s been a moneymaking contract for all, it hasn’t been what it started out to be.
The other thing that Ibnu wouldn’t—part of the reason that he got pushed out was that he didn’t believe in a contact change but he also had borrowed something like $350 million without government or IMF approval and that didn’t go over very well.
They once—somebody once said, “Pertimina acts like—and General Ibnu act like a government within the government.” And he really did. He really did what he wanted to do.
Interviewer: If I remember right, you were called back by the Indonesian government to get a very special award?
I was invited back in 1985. It was a 100 years of Indonesian oil, and they were having a ceremony. I only had about 10 or 12 days notice, and part of that was because unless they allowed Ibnu to be part of it, they weren’t gonna—they weren’t gonna do it.
And Ibnu came out. They forgave Ibnu for all of his sins or whatever. And I was invited over and I had even—I had even made arrangements for a hotel.
And when I landed, I expected nobody there, but when I landed here’s this big welcoming group for me.
And got my wife into the car and started heading for the Hilton, and I said, “No, no, we’re at this hotel.” “Oh, no, no, the General’s got a room for you over at the Hilton.”
And he owned the Hilton. And so we arrived there. He was waiting dinner for us. There was maybe 10 or 12 people there. He’s waiting dinner for us.
And I—as we registered, I looked at this thing and here in Indonesia this was a $1,000 room. This is 1985.
And I thought, “Oh well, what the hell?” And every huge, huge, huge—several rooms full of chocolates, flowers, everything, and up on—way up on the top floors.
It was the President’s Suite. Anyway, I thought what the hell? I saw the price tag on the back of the door and I thought, what the hell?
Anyway, when I went to checkout, they said, “Oh no, this is on the General.”
So I came over for this ceremony. And I forget how many—there were about three or four Americans; Roy Huffington, myself, Harold Hutton, who was one of the early people of Northern Sumatra, and a Caltech man; and then there were several Indonesians, a couple of Japanese.
There were eight or ten of us, and we were represented these medals and this was my medal. Solid gold, 100 percent gold.
Anyway by this time, they had produced their 500 millionth barrel or more. And I wish I’d—a year ago I tried to find out an up-to-date on all the areas that I was involved in what the production was and I even went through the U.S.—tried to go through the U.S. Embassy, but I didn’t do any good.
I want—and so I don’t really know what the production has been, but I do know it’s over 3 billion barrels in our areas.
But this is the ceremony. It says here “Based on his experience as a geologist, in 1964, he was successful in convincing the Indonesian oil experts that both oil onshore and offshore areas of the northern part of West Java had a significant oil and natural gas potential reserve.
His pioneering and success as the first production sharing contract between Pertimina and IIAPCO in 1996 in the Indonesian offshore areas of the northern part of West Java pushed the efforts for the exploration of oil and natural gas in other offshore areas which in a relatively short period of time proved to be able to increase the Indonesian oil and natural gas production.”
You know within a few years, 80 percent of the GNP of Indonesia was coming out of oil efforts. Within that many years.
I think that you learn—as a geologist, you have to learn how to be wrong and smile; and you have to learn how to win and not let it go to your head.
I'm sure it goes to everybody’s head a little bit, but be careful.
Interviewer: Well, I'm certain with this next question of the answer based on your—on our questions here and your story today, but your most important career success would probably have to be the development of the production sharing contract with Indonesian government?
Yes, no question. My biggest pitfall—and I had to learn this the hard way—is no deal was ever any better than your partners.
And seek good partners, good, honest partners, good, hardworking partners. And be fair with them and you’ll be—and have them be fair with you.
The production sharing contract became the worldwide model and although I didn’t draw the initial one, I negotiated the first one and signed the first one and feel very, very humble and proud that I really was part of that.
And I had to give up—I had to give up my drafting board for quite a bit of that time to do all of this, but it was fun, and it was an exciting time in my life.
Interviewer: Finally, what advice would you give to the young geologist today entering the business, especially during times of low product price?
Well, I say, low crude prices—low crude prices. When I first went to Indonesia, their crude was selling at $1.23 a barrel.
I suppose had I been a realist, I never would’ve considered Indonesia. And I can remember when oil was $2.30 in Montana and really made ends met but we really weren’t setting the world on fire.
In 1973, when I became a partner with Trend, we received $6 a barrel, the highest price worldwide that had ever been paid. The price just kept going up and up.
Crude is a finite product and will continue to be in demand for a long, long time.
I think we need to be concerned with poor politics, with low crude prices; but we need to first look at the geology.
If the geology is good, the other things might change and certainly crude prices are gonna rise again.
I began my career in an industry downturn in 1950. I've witnessed many industry downturns since.
None have been pleasant, but they eventually turned better and this time it will turn better again.
There’s not a more rewarding or exciting profession than the game of guessing where Mother Nature hid her mineral wealth.