Task and Functions of Natural Gas Business Service Section
The Natural Gas Business Service Section has the duty to compile materials, analyze, prepare, and evaluate the execution by the recommendation of natural gas development and utilization.
Indonesia Coal Bed Methane Contract Area Map
CBM is natural gas trapped in coal. For its early operational activity, it needs quite a large cost considering its different characteristic with conventional natural gas. Through certain drilling, the CBM is extracted from the coal layer. This process will not reduce the coal deposit because it only takes the trapped CBM.
In an effort to attract funds into the CBM sector, Indonesia announced in November 2007 it would offer investors a 45 percent production split for coal bed methane contracts. Since then, several successful contracts have been taken up.
The government would have signed a CBM contract with PT Medco Energi Internasional Tbk, for the South Sumatra area. Then Ephindo and McLaren Resources Inc - under the flag South Sumatra Energy – together with Medco E&P, signed a CBM (Coal Bed Methane) contract with BPMIGAS in May 2008, witnessed by the Minister of Energy and Mineral Resources, Republic of Indonesia. The signing marks the first CBM Contract and signifies the beginning of CBM industry in Indonesia.
In June 2008 the government awarded two companies with coalbed methane (CBM) contracts; PT Ridlatama Mining Utama won a contract to extract gas from coal seams in a block in East Kalimantan, while PT Samantaka Mineral Prima will develop a block in Riau province.
The Government of Indonesia awarded a production sharing contract (”PSC”) to CBM Asia Development Corp which announced in November 2008 for the development and production of coalbed methane on a portion of the Company’s Kutai Block located in eastern Kalimantan Island of Indonesia. The PSC covers an area of approximately 760 square kilometres in the Kutai basin of Indonesia and has been granted to Kutai West CBM Inc. (”Kutai West”), a consortium established by the Company and its joint venture partners, and Newton Energy Capital Inc.
Coal Bed Methane Resources in Indonesia
Dr. Evita, the Director General Oil & Gas at Indonesia’s Energy Ministry had just announced that the Indonesian government is now looking on implementing of further incentives for companies that develop CBM projects in the country, all in a drive to attract more investment into the sector. The incentive scheme being explored will include a tax facility system in which every oil and gas activity in the country is exempted from import duties for exploration equipments, and value-added tax.
In order to push CBM development, Evita explained, the Government has prepared some incentives. Among such are by giving an interesting production sharing for investors, which is 55% for the Government and 45% for the investor. It is the biggest CBM production sharing compares with oil and gas. For petroleum, the production sharing composition is 85% for the Government and 15% for the investor. As for gas, the share is 70% for the Government and 30% for the investor. Evita said that besides production sharing, we are also discussing tax dispensation as another incentive.
CBM projects in Indonesia enjoy a relatively better production split oil and gas projects. CBM operators’ profit share is 45 percent – much higher than the 15 percent and 30 percent that oil operators and gas operators get respectively. Under its blueprint for the development of CBM, the government is targeting production of 1 billion standard cubic feet per day, or about 0.18 million barrels of oil equivalent, by 2025.
Gas production from CBM is expected to help Indonesia boost its declining gas output as Indonesia has the world’s second largest CBM reserves after China, with total potential reserves of 453 trillion cubic feet.
Studies have shown that the country has over 453 trillion cubic feet of CBM, twice the resource of natural gas. But due to a quirk in Indonesian law, the CBM potential has yet to be tapped. Indonesia differentiates between subsurface rights for coal and those of gas/oil hence would be CBM operators have to deal with both the owner of the coal rights and the owner of the gas/oil rights. In the confusion, nothing was accomplished.
In the future, the gas and oil people have preference and anyone wanting to drill for CBM will deal with them and will not have to deal with both them and the coal people. As such, for a foreign company, it’s a giant step forward because it cuts the number of people involved in the deal in half.
Indonesia`s CBM potential is quite large; around 453 TCF, spread in the areas, especially Southern Sumatera and East Kalimantan. For the details: North Sumatera for 52,50 TCF, Ombilin 0,50 TCF, South Sumatera 183 TCF, Bengkulu 3,60 TCF, Jatibarang 0,80 TCF, Kutei 80,40 TCF, Barito 101,60 TCF, Pasir dan Asem-Asem 3 TCF, Tarakan Utara 17,50 TCF, Berau 8,40 TCF and Sulawesi 2 TCF.
Offering CBM Procedure
CBM business activity under Oil and Gas Regime.CBM business activity under The State and Government as owner of the CBM Concession.Minister of Energy & Mineral Resources offer and stipulate CBM new Acreages for tender (Direct Proposal Tender and Regular Tender)
Direct Proposal Tender ->Joint Study for open and Joint Evaluation for existing acreage ( oil & gas working acreage/ coalmining).
Regular Tender -> prepared by Migas
Direct Proposal Tenders are conducted by Joint Study for Open Area and Joint Evaluation for existing Oil & Gas Working Area/ Coal Mining. First Priority for CBM new acreages is given for:
- Existing Oil & Gas Working Area has been fulfill firm commitment ( 3 years exploration commitment).
- Existing Coal Mining has been minimum 3 years exploitation activity.
- Oil & Gas Working area will have first priority if the proposed area is overlapping with Coal Mining.
(1) Coal Mining Concession Work Agreement Contractor or Coal Mining Authorization Holder who wants to manage Coal Methane in Work Field as mentioned in Article 14 point (1), may propose Coal Methane concession to Director General.
(2) Based on the proposal as referred in point (1), Director General shall announce to Oil and Natural Gas Contractor about Coal Methane concession plan by Coal Mining Concession Work Agreement Contractor or Coal Mining Authorization Holder, and ask for clarification to Oil and Natural Gas Contractor regarding its intention to have Coal Methane concession.
(3) In case the Oil and Natural Gas Contractor does not propose a concession in 6 (six) months commenced from the date of announcement as indicated in point (2), the first chance of Oil and Natural Gas Contractor shall be invalid and the proposal of Coal Mining Concession Work Agreement Contractor or Coal Mining Authorization Holder can further be processed in accordance with law and regulation.
Director General shall give Joint Study approval as indicated in Article 10 or Joint Evaluation as indicated in Article 11, Article 13, and Article 14, after making clarification to Regional Government and/or related unit to inventory Oil and Natural Gas Work Field boundary coordinate points, Coal Mining Concession Work Agreement Area and/or Coal Mining Authorization Area and its concession status inside the Joint Study proposal or Joint Evaluation area.