BP, Eni JV to develop coalbed methane in Indonesia

A consortium led by Vico—a joint venture of BP PLC and Eni SPA—has signed a production-sharing contract with Indonesia for the exploration and development of coalbed methane resources on the Sanga-Sanga block in East Kalimantan, Indonesia.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Dec. 2 -- A consortium led by Vico—a joint venture of BP PLC and Eni SPA—has signed a production-sharing contract with Indonesia for the exploration and development of coalbed methane resources on the Sanga-Sanga block in East Kalimantan, Indonesia.

According to BP, Vico has been producing conventional gas resources from Sanga-Sanga block for more than 40 years, and the signing of the PSC is expected to mark “the first significant development” of CBM in Indonesia.

The Sanga-Sanga CBM PSC was awarded to a consortium of operator Vico 7.5%, BP 26.25%, Eni 26.25%, VIC 15.625%, Opicoil 20%, and Universe Gas & Oil 4.375%. Vico and VIC are joint ventures owned 50:50 by BP and Eni, giving each company a total 37.8% interest in the contract.

“With Vico's existing knowledge and infrastructure, we expect production to begin rapidly—in a very few years—and its supply to [the Bontang LNG plant] will enable Indonesia to become the world's first CBM-to-LNG producer," said BP Indonesia Pres. William Lin.

Analyst BMI said while Indonesia’s medium-term oil reserves trend is clearly downwards, with little scope for a reversal, there are new and substantial gas resources to be exploited.

BMI said it expects Indonesia’s proven gas reserves to decline slightly towards 2.74 billion cu m by 2014, and that the development of CBM gas could provide “upside potential” to its forecasts over the longer term.

“With [Indonesia’s] gas production forecast to rise to a peak of around 89 billion cu m by 2012, before settling back at 84 billion cu m in 2014, gas production from CBM could also offer upside potential in the longer term, depending on how long it takes companies to bring production onstream,” the analyst said.

The PSC covers an area of 1,700 sq km in East Kalimantan’s Kutai basin, where preliminary studies suggest the block has a CBM resource potential of at least 4 tcf of gas—subject to further appraisal.

BP said the PSC overlays the same acreage as the existing Sanga-Sanga conventional PSC, which has extensive gas production infrastructure already in place with access to markets internationally through the Bontang LNG plant as well as to local customers.

“This existing infrastructure is expected to allow rapid and efficient development of CBM to production,” BP said.

In September, the Department of Energy and Mineral Resources said the Indonesian government would for the first time auction areas later this year for exploring CBM.

It noted that Barito block in South Kalimantan, Rengat block in South Sumatra, and Sanga-Sanga block in East Kalimantan would be offered to companies via open auction, while the Langgak production area in mainland Riau would be offered only to state-owned companies.

The department said bids would be accepted from Sept. 28 to Nov. 11 and the winners of the auctions announced Nov. 26. The government hopes to sign deals on the blocks in December, it said.

In August, Indonesian mining service contractor PT Petrosea said it signed a new contract worth $200 million to develop a coal mine in Sanga Sanga owned by PT Adimitra Baratama Nusantara.

Under the 5-year contract, work was due to start in August to remove the overburden in the mine which is estimated to have a reserve of 14 million tons of coal.

Contact Eric Watkins at hippalus@yahoo.com.

More in Home