Potential for Indonesia in CBM Industry
Indonesia is Southeast Asia's biggest oil and gas producer and may become the largest producer of unconventional gas in the region, Wood Mackenzie Research Consultancy said in a report.
Indonesia could potentially produce gas lodged in crevices of coal deposits at an initial rate of 22 million cubic feet a day by 2013 and boost it to 900 million in 2020 and 1.3 billion in 2025, said Edinburgh-based Wood Mackenzie. "As conventional domestic gas supply starts to decrease around 2020, the leading coal-bed methane players should be well positioned to take advantage," Jamie Taylor, an energy analyst, said in the report.
Indonesia expects to produce a small amount of coal-bed methane for the first time next year, which will be used to generate electricity, an Energy Ministry official said last month. CBM is natural gas trapped in seams of coal that may require large quantities of high-salinity water in extraction, but Indonesia is hoping to tap alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil. Indonesia is struggling to reverse declines in oil output over more than a decade and wants factories and power plants to switch to gas from oil-based fuels.
The nation's reserves of coal-bed methane are estimated at 453 trillion cubic feet, more than double the amount for natural gas. Deposits in Sumatra have access to markets in West Java, Batam and Singapore because of an existing pipeline, said Graham Tyler, head of Wood Mackenzie's South East Asia Gas & Power service.
Unconventional gas from the Kutei Basin can be exported in a liquefied form because of the capacity at the Bontang liquefaction plant in East Kalimantan, he said. Separately, Essar Energy, part of the Indian conglomerate Essar Group, plans to bid for coal-bed methane and shale gas blocks in Indonesia next month, the Business Standard wrote on Wednesday, quoting a company official. "This would be our first international foray into unconventional resources," the newspaper quoted S.R. Agarwal, director and chief executive, Essar Exploration and Production India, as saying. Essar will also bid for similar assets in China at the end of this year, the paper said. Essar Energy has five CBM blocks in India.
The report outlines the challenges which will impede large-scale CBM developments in the next 10 years. These include uncertainties in fiscal terms for CBM production, a slow approvals process, lack of clarity on ownership rights where acreage overlaps with coal concessions, the environmental impact of operations and the high costs of CBM production under current contract terms. There will also be significant competition from conventional gas.
Still, coal-bed methane may "eventually" account for 15 percent of Indonesia's gas supply, the energy consultant said. There are 20 active coal-seam gas production-sharing contracts across Sumatra and Kalimantan. National gas development suffers from a slow approval process, lack of clarity in ownership rights where gas areas overlap coal deposits and uncertainties in fiscal terms, Tyler said.