A Sydney woman arrested in Bali when drugs were allegedly found at her villa may have been dealing, police say.

Police say they found MDMA, marijuana and hashish at a villa in North Kuta where Leeza Tracey Ormsby, 37, was staying.

According to a police document seen by Fairfax Media, Ms Ormsby was allegedly found with a joint inside her bag.

When police later searched the villa, they say they found 27 grams of hashish and 132 grams of MDMA. An electric scale, tape and plastic wrappers were also allegedly found at the villa.

A police source said it was possible she was dealing in drugs.

"Judging from the evidence, it's possible she's dealing. If [she's] just a user, why do you need a scale?" the source said.

It is understood Ms Ormsby lives in Paddington, Sydney. According to her lawyer, Ary B. Soenardi, she is unemployed and arrived in Bali just a few days before she was arrested on February 12. She was in Bali to visit a friend, he said.

Ms Ormsby, also known as Leeza Morrison, describes herself on her LinkedIn profile as a fitness trainer in the Sydney area and "owner of Shakedown street Espresso".

Ms Ormsby, who was born in Rotorua, New Zealand, was arrested at a North Kuta village in Denpasar for possession, Denpasar drug squad chief Agus Tri Waluyo said.

Major Waluyo said police received information there would be drugs at a party in the villa.

"We made the ambush on Wednesday around 8am," he said. "In that location, we found the evidence."

According to a statement given to investigators, Ms Ormsby admitted that, some days before the raid, a drugs party had taken place with five of her friends, who had then returned to their home countries.

Police say Ms Ormsby has not yet been charged.

Denpasar police said on Thursday they were still investigating the origin of the drugs, if anyone else was involved and the possibility Ms Ormsby was "more than just a user".

"No other arrest has been made other than the suspect Leeza Tracey Ormsby," spokesman Ida Bagus Sarjana said.

The chief of police in Denpasar will hold a media conference on the arrest on Friday morning.

Indonesia is renowned for heavy penalties for drug use.

Ross Bell, from the New Zealand Drug Foundation, said it was well known that drug laws in south-east Asia were some of the toughest in the world and Indonesian laws were some of the most "draconian in that region".

Cannabis is classed as a Group One drug in Bali, which means it is considered highly addictive and therefore dangerous.

Those found in possession of a Group One drug in Bali could receive a penalty of life imprisonment. Trafficking a Group One drug could lead to the death penalty.

Ms Ormsby was arrested only two days after convicted drug smuggler Schapelle Corby was released on parole after spending nine years imprisoned in Kerobokan prison.

The New Zealand Ministry of Foreign Affairs and Trade was aware of the arrest, a spokesman said.

"The consul from the New Zealand embassy in Jakarta is providing consular support and has visited the New Zealander," he said.

The embassy's role was to monitor her welfare and ensure that she had the same rights as other detainees in Indonesia, he said.

The ministry could not comment on the investigation or interfere in the judicial proceedings of another country.

- with Fairfax NZ and Amanda Hoh