By OGJ editors
HOUSTON, Sept. 16 -- The fledgling coalbed methane industry in Indonesia eventually could deliver as much as 15% of Indonesia's gas supply needs, a recent report from Wood Mackenzie Ltd. says.
The report’s most optimistic scenario sees Indonesia producing CBM at an initial rate of 22 MMcfd by 2013, ramping up to almost 900 MMcfd in 2020, and 1.3 bcf in 2025, as conventional domestic gas supply starts decreasing in about 2020. The report notes that in practice, production growth will be slower than this.
Indonesia currently has 20 active CBM production-sharing contracts in four main areas in Sumatra and Kalimantan. Medco Energi's Rambutan project is the most advanced CBM project in South Sumatra, WoodMac says. Other companies with CBM interests include Dart Energy Ltd, an Australian CBM company; VICO Indonesia, which operates in East Kalimantan; ExxonMobil Corp.; and small indigenous companies.
For marketing the CBM, the report says Sumatra CBM has pipeline access to West Java, Batam, and Singapore with West Java and Singapore being particularly attractive, given their dependency on LNG supply in the long term. Also exporting CBM as LNG is an option from the Kutei basin given that the Bontang liquefaction plant in Kalimantan will have available capacity, the report notes.
Challenges that may impede large-scale CBM developments in the next 10 years, according to WoodMac, 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 effect of operations on the environment, and the high costs of CBM production under current contract terms.
Jamie Taylor, WoodMack upstream analyst, explained: “In the short term, CBM drilling is scheduled based on the requirements of sales contracts, and development will be constrained by limited pipeline infrastructure and competition from other supply sources. However, in the medium to long term, CBM could alter the dynamics of the Indonesian gas market by providing volumes to meet Java and Sumatra demand.”
Taylor added, “This would reduce the need for LNG via the domestic market obligation, under which gas producers must allocate at least 25% of new production for local needs. Other new Indonesian gas suppliers would also benefit by being able to target the wider Asia Pacific market.”