Jamie Murphy, from Perth, was detained just after 1am on Tuesday morning, local time, after security guards at the Sky Garden club said they found the packet during a routine search.

He was escorted to a nearby police post where guards re-enacted the discovery of the substance for police.

During the re-enactment, a guard tightly grabbed the 18-year-old's face and neck, causing him to wince.

On Wednesday evening, management for Sky Garden apologised for the security guard's actions.

They said Mr Murphy's family and friends would be "relieved" to hear confirmation from Bali police chief Sugeng Priyanto that there was no trace of illicit drugs in the substance or in the teenager's system.

The substance was initially thought to be cocaine or heroin, but after testing ruled this out, authorities believe it is a mixture of pain killers, cough medicine and other substances.

Mr Murphy was expected to be released on Wednesday.

In a statement, Sky Garden's management said they received complaints about "the apparent rough treatment of Jamie by our security at the mobile police station".

"We would like to extend our sincere apology to Jamie, his family, and friends," the management said.

"Our company procedure is to simply hand over suspects 'peacefully' to police if we feel they've committed a crime at Sky Garden. We have reprimanded the security in question, and he will not be permitted to come back to work until he has completed and passed another round of police security training.

"We only want to add, that in his defence he was order to hold Jamie's face up so the police could take his photo related to the detainment; however, we too feel he used too much 'excessive force', which is clearly unacceptable under any circumstances."

The nightclub's managers also gave "special thanks" to Bali police for their investigation.

"We wish the local police great success in apprehending these 'bad people on the street' who've caused everyone such discomfort and inconvenience," they said.

Mr Murphy's lawyer Made Suarjana told media on Wednesday that the 18-year-old had never seen the small white package until it was removed from his bag.

"Suddenly the item was just there, when he was searched by the security," Mr Suarjana said.

"Because he was in a panic, he can't remember the incident in whole. He never said anything about buying it from a local man."

Mr Murphy's parents flew from Perth to Denpasar on Wednesday.