Another explorer followed, Aeilko Jan Zijlker (1830-1890), who in 1880 visited a plantation in Sumatra as part of his duties as manager of the East Sumatra Tobacco Company. During the visit, he was shown a substance used in torches in the plantation and he recognized that substance as kerosene. He got an oil concession from the local Sultan of Langkat, and oil exploration soon began with a sponsorship of the Dutch government (owners of the colony) in the Telaga Said area of the Northern Sumatra. In 1884 Telaga Tunggal-1 in Northeast Sumatra was successfully drilled. In September 1890, the Royal Dutch (company for exploitation of oil resources in the Netherlands Indies) received a concession for the area instead of Aeilko Jan Zijlker. A.J. Zijlker died in December 27, 1890, and he did not live to see the successes that followed and Royal Dutch formed the key in the establishment of the Royal Dutch Shell.

          In February 1907, the Royal Dutch, which had oil fields and refineries, merged with Shell, a British company which had tankers and also the ability to market the oil, into a new company called the Royal Dutch Shell. A subsidiary company was then founded, the Bataafsche Petroleum Maatstchappij (BPM), to run the operation.

          An American oil company, the Standard Oil of New Jersey, established a branch office in the Netherlands, which, later on in 1912, created an oil company in the Dutch Indies, called the Nederlandsche Koloniale Petroleum Maatschappij (NKPM). In September 1933, the operation of NKPM was merged with the Standard Oil of New Jersey, into a joint venture company named the Standard Vacuum Petroleum Maatstchappij, which later on in 1947 became the Standard Vacuum Company (STANVAC).

          Another American company, the Standard of California, in 1930 established a branch company in the Dutch Indies, named Nederlandsche Pacific Petroleum Maatschappij (NPPM). Furthermore, in the same years, the Standard of California worked together with Texas Company (TEXACO), so that in effect, the NPPM was owned by these two companies. Later on, NPPM was known as the California Texas Oil Company (CALTEX). At the end of the 19-century, 18 companies were already operating under concession in a country by virtue of the 1889 Nederlandsche East Indies Mining Act. Under this Act, a concession would be granted, which gave the concessionaire the mineral resources in an area of land defined and the concessionaire had direct control over the resources mined.

          Even though Indonesia had proclaimed its independence on the 17^th August 1945, and the Dutch government recognized the sovereignty of the Republic of Indonesia, foreign oil companies’ petroleum activities were still based on the Indische Mijnwet (the valid mining law during Dutch Indies) when they returned to Indonesia in 1949 to resume their operations. It was Teuku H. Moehammad Hasan, an Indonesian lawyer and a former Governor of Sumatra, who was well aware of this problem. In June 25, 1951, he filed a motion to replace the Indische Mijnwet with a National Mining Law and urged the government to postpone the issuance of new concession and exploration rights. His efforts was not fully successful at that time, but history has carved his name as the pioneer who opened the way that Article 33 Sub-articles 2 and 3 of the 1945 Constitution would be applied in Indonesia. Therefore, the status of foreign mining companies, especially those active in oil operations, was later on changed from concession holders to contractors.

          The first Minister of Basic Industry and Mining (Deperdatam), Chairul Saleh, had to finalize the National Mining Law, because up to 1960 the parliament was unable to formulate it. The Government Regulation on oil and gas mining, Law No.  44 Prp 1960 was accepted by President Soekarno and completely replaced the Indische Mijnwet. As a follow up to this regulation, the Government formed three state oil companies, namely PN PERTAMIN (Indonesian State Oil Mining Company), PN PERMINA (National State Oil Mining Company), and PN PERMIGAN (State Oil Mining Company). With the promulgation of the Law No. 44 Prp 1960, the Government succeeded in 1963 in persuading the existing three foreign oil companies, i.e. SHELL, CALTEX and STANVAC, to co-operate in the form of Work Contracts with those three state oil companies.

          In 1966, PN PERMIGAS was dissolved, and its assets were handed over to PERTAMIN and PERMINA. Based on the Government Regulation No. 27 Year 1968, these two companies were then merged to become PN PERTAMINA (National State’s Oil and Gas Mining Company), which, later, based on the Law No. 8 Year 1971, became PERTAMINA (the State’s Oil and Gas Mining Company) with the task to carry out the exploration and production of petroleum resources throughout Indonesia.

          Since 1966, the Production Sharing contract (PSC) concept has been the principle form of cooperation with foreign oil companies for petroleum exploration and production in Indonesia. The oil exploration activities increased after the PSC was introduced. On the other hand, the terms of concessions were also revised, granting the government control over a portion of production in addition to a share of profits on oil produced by contractors. The new production-sharing contract guaranteed the government 85 percent of oil production after the foreign company recovered costs.