Playing the Long Game
    Category: Companies & People By : Adi Wicaksono Read : 947 Date : Friday, February 09, 2018 - 11:03:17

    Ahmad Zamroni / Forbes Indonesia

    Royal Dutch Shell is one of the world’s biggest energy companies, but few realize that Indonesia is the birthplace of the company. It was started in 1884 when Dutch national Aeilko Jans Zijlker discovered oil in Telaga Said in North Sumatra. After Aeilko got a license to pump oil, he named his oil company Royal Dutch Petroleum in 1890. “Shell’s historical links with Indonesia are strong because Shell was founded in Indonesia over 130 years ago. When you visit Shell headquarters in The Hague, Netherlands, you will see many photographs of Indonesian villages in the building. This indicates that Shell appreciates its historical ties to Indonesia, even though it has become one of the world’s leading energy companies,” says Darwin Silalahi, 55, the country chairman of the Shell companies in Indonesia and president director of PT Shell Indonesia. Darwin’s appointment in 2007 to head Shell is important, as he is the first Indonesian in history in these leadership roles in Shell’s Indonesian operations. Shell re-entered Indonesia’s upstream business in 2011 through participation in the Inpex-operated Abadi LNG project under the Masela PSC. Inpex holds a 65% stake and Royal Dutch Shell 35%. Participation in the Abadi field underpins Shell’s current growth strategy, especially in LNG. The development of the Masela block will reportedly cost well over $12 billion, and, when developed, promises to become Indonesia’s largest deepwater project. The Masela block is said to hold at least 10 trillion cubic feet of gas, and be capable of production that can last for over 20 years. In the retail sector, Shell first opened a gasoline station in Karawaci in 2005, now having grown that into a chain of 81 stations in greater Jakarta, Bandung and Sumatra. In lubricants, Shell operates the country’s largest lubricant blending plant in the country owned by an international oil company, with a capacity of 120,000 tonnes a year, located in Bekasi. Darwin recently talked to Forbes Indonesia about Shell’s “long game.”

    Forbes Indonesia (FI): What is your Indonesian strategy?

    Darwin Silalahi (DS): Our principle is to play a “long game.” We wish to avoid uncertainty. Shell wants to get involved where there are good regulations and open markets to allow us to make long-term investments.

    FI: What’s your view of the global energy industry?

    DS: The energy industry is experiencing a transition period. Digitalization and decentralization are causing disintermediation between the producer and buyer. Technological innovation is making possible cheaper prices. In the energy sector, prices have been affected by new energy sources, such as from fracking and shale oil. Other technologies are Enhanced Oil Recovery (EOR) that also reduces prices. Further down the line, renewable energy is on the rise, such as solar and wind power. These changes have all happened in the last decade, and the government needs to consider what energy policies to have in light of these new technologies. In Indonesia, Shell is focusing on gas resources because the known reserves of gas are bigger, while oil reserves are in decline.

    FI: What do you think about Indonesia’s oil and gas sector?

    DS: In the last five years, there has been a decrease in production due to unfavorable conditions, and there is now a lack of investment for exploration. This is a major issue. Indonesia should try to be able to better compete with other countries for investment in this sector.

    Read full version of the article