KARYA TULIS ILMIAH

The Influences of Coal Bed Methane with the Reservoir

Quality to produce Oil and Gas in Indonesia

The Problem to Develop Coal Bed Methane in Indonesia as a Renewable Energy Source

Indonesias CBM reserves are among the largest CBM reserves in the world.
Currently, the country reserves are estimated to be around 453 trilion cubic feet (tcf) which is
equivalent to around six percent of total global CBM reserves (this estimate is an optimistic
one and the scientific basis is questioned). This figure also implies that indonesias CBM
reserves are more than double the countrys natural gas reserves. However, Indonesias
utilization of this energy resource remains low.

Indonesia largest CBM are located in :

1. South Sumatera
2. South Kalimantan
3. East Kalimantan

And some smaller basins can be found in :

1. Riau (Sumatera)
2. Bengkulu (Sumatera)
3. West Java (northern coastal area)

Indonesian CBM geology is distinct from all other CBM geologies. Indonesias CBM
basins are located in areas with dense population. In the US and Australia, the coal is a
Mesozoic sediment while in Indonesia it is tertiary sediment.

The most important thing to attract prospective investors is the geological prospect
and information of geological basins (Chatham House Royal Institutes, 2015). Geologically,
Indonesias CBM is attractive. The main potential CBM reserves in Indonesia have met the
CBM prospect evaluation criteria. First, Indonesia has thick, abundant and laterally continous
coal beds. Second, CBM in Indonesia is relatively shallow with an optimal depth 1000ft to
5000ft (Thomas,2013). The CBM reservoir depth in South Sumatera CBM Basin and East
Kalimantan, Kutai Basin are 2000ft and 1000-2500ft respectively (Thomas,2013). Third, the
coal rank in Indonesia mostly has a low rank. However, Powder River Basin has proven that
low rank of coal can be succeeded (Harrington,2016). Forth, Indonesias basins have
fracturing and faulting evidence in coal. Sixth, Indonesia has a coal bearing gas producing
field. Lastly, Indonesia has a good content in its main CBM basins.

Currently, Indonesias CBM projects are in exploration stage and there is no CBM
development yet due to fiscal regime therefore Indonesia needs to have a better fiscal regime
to support CBM development (Mohamad,2015).

The viability of CBM projects is not only influenced by the gas price. Anderson et al.,
(2003) wrote that there are several things that helps influencing the CBM project economy.
Cost efficiency is not the only thing that helps the project economy. The contractor needs to
consider technological advances for their drilling, completion, formation evaluation,
stimulation, production as well as reservoir modelling (Anderson et al., 2003). The gas
infrastructures and its accessibility have impacts on project viability. Other technical issues
that need to be considered are the low initial production rates, high water-production rates,
and disposal issues. The GOI targeted Indonesias CBM production would reach 500 million
standard cubic feet per day (mmscfd) in 2015 (Purwanto et al., 2016; Indonesia Investment,
2016; Harrington, 2016). In fact, Indonesia only produced 0.625 mmscfd in 2014 (Purwanto
et al., 2016; Indonesia Investment, 2016, Harrington, 2016). Indonesia CBM project is on
shore. Therefore CBM projects consider population in the area close to them. This situation
has complicated the CBM company in a process of water disposal (Cockcroft, 2008)

However, despite having ample reserves Indonesia has been slow to develop a
commercial CBM industry (compared to its regional peers). One factor that explains slow
development is uncertainty surrounding the legal and regulatory framework applicable to
mining in Indonesia and CBM exploitation spesifically. Currently, the indonesian
government uses a production-sharing contract scheme for CBM development that is similar
to the scheme used in oil and gas blocks. This has drawn criticism as the non conventional
blocks are seen to have different characteristics. Under this production-sharing scheme, the
nations oil and gas blocks are owned by the government while companies are under contract
to utilize the mineral resources. For the government this scheme is beneficial as all costs and
risks are borne by the contractors. Only if the project is a success, then expenditure will be
reimbursed (cost recovery system).