Govt to hold first tender for CBM gas

Ika Krismantari / The Jakarta Post - 2007-02-09 11:14

Jakarta, February 9, 2007 (The Jakarta Post) - The government will hold its first-ever tender for the exploration and production of coal-bed methane (CBM) gas in March to meet the growing demand for gas for both local use and exports.

The Energy and Mineral Resources Ministry's director of upstream oil and gas development, R. Priyono, said Thursday that the government would put on the table concessions in two areas that are believed to hold the biggest deposits of CBM — one in Sumatra that is estimated to hold 183 trillion cubic feet (tcf) and the other in Barito, South Kalimantan, estimated to contain 101.60 tcf.

The tenders would be conducted on a direct offer basis. "Currently, there are six investors interested in bidding," Priyono said, adding that among them were state oil and gas firm Pertamina and Australian oil and gas company Santos.

He said that the government was in the process of resolving all matters associated with the tenders, including arranging much-needed incentives to overcome the high cost of exploiting CBM deposits.

"We are also considering how to overcome potential conflicts with coal miners," he said.

CBM is a natural gas formed by the activity of microbes during the coal-forming process, which then becomes trapped amid coal beds.

Indonesia has total estimated CBM deposits of 453 tcf, or about 81.5 billion barrels of oil equivalent, which are the world's second largest after China.

However, many investors have expressed doubts about putting their money into CBM as the government has yet to issue the necessary regulations or give details of the promised incentives.

Upstream Oil and Gas Executive Agency (BP Migas) chairman Kardaya Warnika said last month that the government was considering offering a split of 70 percent to 30 percent in favor of the investor.

This would be much more favorable than the split in the case of regular gas production, which is 35 percent for the investor and 65 percent for the government.

Under its blueprint for the development of CBM, the government is targeting the production of 1 billion standard cubic feet per day (bcf), or about 0.18 million barrels of oil equivalent, by 2025.