Business players are calling on the government to lend more support to coal bed methane (CBM) development in the country, specifically by smoothing the land acquisition process as well as ensuring that the market will absorb their products.
Australia-listed Dart Energy Ltd.’s country manager, Unggul Setyatmoko, said business players needed to know the market potential before commencing CBM development.
“CBM is a capital-intensive process with low output at the beginning. That’s why we need to have market certainty. Production development can only be done if the market and price are suitable,” Unggul told an audience during a presentation on the last day of the IndoCBM 2014 event in Jakarta on Wednesday.
Upstream director at state-owned oil firm PT Pertamina, Muhammad Husen, had also said previously that the price of CBM was now a critical issue in its development. Pertamina, through its subsidiary, PT Pertamina Hulu Energy, possesses several CBM production-sharing contracts (PSCs) in Sumatra and Kalimantan.
Apart from market certainty and pricing, Unggul said the CBM industry also needed easy access to land along with government policies to support the industry.
Indonesia is estimated to have 453 trillion cubic feet (tcf) of CBM resources. Since 2008, the country has granted 54 working areas for CBM development, primarily in Sumatra and Kalimantan.
However, the complexity of the development and a number of other issues have hampered work on the projects.
Of the total 54 working areas, 24 still face land-acquisition issues, while the development of another 22 is being hampered by permit issues.
Despite the issuance of a number of PSCs, the country’s CBM output this year is expected to reach only 0.625 million standard cubic feet per day (mmscfd), far below the target set in the country’s long-term production road map.
The Upstream Oil and Gas Regulatory Special Task Force’s (SKKMigas) acting head, Johannes Widjonarko, said earlier that the CBM production target for 2015 had been lowered to 8.9 mmscfd from the previous target of 500. Under the new CBM production road map, the country is expected to see CBM output of 23.9 mmscfd by 2020.
Virginia Indonesia Co. (VICO Indonesia) launched last year the supply of CBM to a power plant in East Kalimantan operated by state-owned electricity firm PT PLN.
The supply level had reached 0.36 mmscfd and could produce up to 1.9 megawatts of electricity, according to PLN’s general manager for East Kalimantan, Machnizon Masri. Under the contract, VICO Indonesia has agreed to supply up to 0.5 mmscfd.
Meanwhile, Ephindo Energy Private Ltd.’s president and CEO, Sammy Hamzah, said the company had signed an agreement to supply PLN with CBM at an agreed price of US$7.9 per one million British thermal units (mmBtu).
