Bidding for methane projects delayed

Ika Krismantari, The Jakarta Post, Jakarta

The tender process for the exploration and production of coal bed methane (CBM) gas in Indonesia will be delayed until August following a request from interested bidders asking for more time to set up pilot projects in order to determine the project's economic feasibility, an official said.

The director of upstream oil and gas development at the Energy and Mineral Resources Ministry, Priyono, said recently that four out of six investors who planned to submit tenders had requested more time to develop pilot projects before officially submitting their bids.

"It will take almost three months to build such pilot projects," Priyono said.

CBM is a natural gas found in coal mines. It is formed by the activity of microbes during the coal-forming process and is eventually trapped in coal beds.

The first round of CBM tenders will be conducted on a direct offer basis, under which investors have the right to nominate the areas they are interested in and conduct preliminary studies. When the process opens, these investors will be given the chance to bid for the block.

However, Priyono said the government would offer two areas in South Sumatra and South Kalimantan in May to state owned oil and gas company Pertamina and PT Medco EP Indonesia, which have signed a memorandum of understanding to develop the areas.

The two concession areas in South Sumatra and in Barito, South Kalimantan, are believed to hold the biggest deposits of CBM in Indonesia, with estimated deposits of 183 trillion cubic feet and 101.60 trillion cubic feet respectively.

Indonesia has the largest CBM deposits in the world after China, with estimated total reserves of 453 trillion cubic feet, or the equivalent of about 81.5 billion barrels of oil.

Several investors have expressed interest in CBM projects in Indonesia, including Australian-based oil company Santos and Trans-Asia Oil and the Energy Development Corporation in the Philippines.

Many potential investors have conducted feasibility studies on CBM production in some areas of the country, including a joint study by Pertamina, Ephindo and Shell in South Sumatra and Jambi that commenced in late 2006.

Pertamina, together with the country's third largest oil and gas producer PT Medco EP and the government's oil and gas research and development center Lemigas, has signed a memorandum of understanding concerning a CBM pilot project, also in South Sumatra.

The government has drawn up a detailed plan for CBM exploration, setting out a production target of 1 billion standard cubic feet per day, or the equivalent of about 0.18 million barrels of oil, by 2025.

In the short term, the government hopes to attract up to US$2.5 billion in investments to develop 90 CBM wells that will be able to produce 100 million cubic feet of CBM per day by 2014.
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