Indonesian CBM potential overlooked by investors
Indonesia's coal-bed methane (CBM) potential has been largely overlooked by investors, leading one prominent unconventional gas consultancy to describe it as a "stealth sleeper play"
That could be about to change with
Santos, a major Australian CBM developer, picking Indonesia for its first overseas investment in the unconventional sector, Scott Stevens, senior vice president of Advanced Resources International (ARI), told the 2013 Association of International Petroleum Negotiators conference.
The Indonesian CBM play offers excellent geology, good market conditions, as well as government support, said Stevens, who is also chairman of Indonesian-focused explorer CBM Asia.
Indonesia's CBM deposits are characterised by high gas saturation and permeability, like the US and Australia's prolific CBM reservoirs.
Stevens believes that the development of Indonesia's CBM sector will be similar to Australia's, which saw a wave of consolidation once the plays were proven, and the subsequent formation of large joint ventures designed to export the CBM as liquefied natural gas (LNG) to Asia.
In Australia, CBM production is more than 600 million cubic feet per day (cf/d) after eight years of development and the sector has seen more than A$30 billion ($28.5bn) worth of mergers and acquisitions. It is likely to surpass the US by 2020 as the world's largest CBM player.
Although still in the very early stages, Indonesia's potential is huge. CBM reserves are estimated at 453 trillion cubic feet (cf), the sixth-largest in the world.
The archipelago's three largest CBM basins have estimated potential reserves that individually match or exceed the nation's known - and proven - total conventional gas reserves of about 107 trillion cf.
The sector is likely to benefit from the fact that Indonesia has a very active conventional gas sector. There is already a critical mass of companies emerging as a land grab and early exploration gets underway. BP, Eni, Total, ExxonMobil, as well as smaller independents, such as Dart Energy, Medco Energi, Nu Energy and CBM Asia are all exploring.
The independents, which include smaller explorers, such as local players Ephindo Energy and Star Energy, will be important in unlocking the resources, says Stevens, whose ARI consultancy's studies are sponsored by the US
Energy Information Administration (EIA). "I think this will be the last good CBM play in the world and potentially provide large future supplies for north Asia," Stevens told the conference.
There are a number of companies, including several state-backed north Asian LNG players, that are considering the Indonesian CBM sector, but they are not quite ready to commit yet, he added. "It's pretty embarrassing for government companies to drill dry holes. They like to wait till it's proven, just like how they entered the Australian CBM sector from 2005 to 2008, it could be repeated."
However, the sector will be slow to get off the ground. Indonesia's national oil company, Pertamina, as well as local independent Medco, are waiting for foreign firms to introduce the technology and prove it's viable. But the foreign independents are small and not very well capitalised. Favourable fiscal terms and rising gas prices should help.
Vico, a joint venture between BP and Eni, gets around $7.50 per million cf of gas sold to utilities, slightly higher than conventional natural gas prices. And prices are increasing as Indonesia is expected to start importing LNG, which would eventually see global prices reflected in the market.
Vico, the first CBM-focused company to produce CBM commercially, has been exporting CBM to Japan from the Bontang LNG plant since March 2011. It is the first venture to export CBM as LNG.
The Indonesian government's national energy policy calls for gas to make up at least 30% of the energy mix, with a prominent role in power generation, and it is hoped CBM will account for 3% of that mix by 2025.
To meet the goal, Jakarta has set a CBM production target of 500 million cf/d by 2015, 1bn cf/d by 2020 and 1.5bn cf/d by 2025.
comments powered by Disqus.