Interesting reading this latest article refernce E & P article
I can see why large OIL AND gas or O & G co's and others are chasing the untapped hugh potential still even after other co like where SHELL started there are still hugh reserves...
QPN?We all know they have top management,good investors,stakeholders etc and money to drill!!!
Anyway I am not stating the below,it only what was from this article.
Good luck to PQN investors when QPN do spudd or if they have already!
Happy reading reference HART ENERGY 1616 S. Voss, Suite 1000, Houston, Texas 77057-2627 Tel: +1.713.260.6400; Fax: +1.713.840.8585
With its estimated CBM reserves ranking it No. 6 in the world, this slumbering Southeast Asian conventional oil and gas giant is picking up the development pace of its unconventional resources. 320 5435 close
Coalbed methane (CBM) has taken something of a global back seat in terms of publicity in recent years, with the North American shale boom dominating the headlines. But in Indonesia, it is this unconventional natural gas lying in coal seams that will largely help to fuel the country’s continuing efforts to ramp up its gas production, with shale for once being the resource told to wait its turn.
This disparate Southeast Asian country remains geologically blessed with considerable unconventional and conventional hydrocarbon resources and is still a leading exporter of natural gas. According to the US Energy Information Administration, the country’s gas production has risen approximately 25% since 2005.
But with Indonesia’s crude oil production continuing to fall while domestic energy demand continues to shoot upwards, an energy shortage is being forecast by 2022.
The exploration and development of unconventional hydrocarbon resources is seen as the key to bridging this potentially damaging supply-and-demand gap. Gas has been specified by the Indonesian government’s national energy policy to make up at least 30% of the energy mix, especially for power generation purposes, with CBM in particular to make up 3% of that mix by 2025.
Although the CBM industry in the country is still very young, the total CBM reserves there are huge, currently estimated at a minimum of 453 Tcf. To put that in perspective, the country’s conventional natural gas deposits are estimated at 190 Tcf. image- Indonesia’s three largest CBM basins
Indonesia’s three largest CBM basins have estimated potential reserves that individually nearly match or surpass the country’s current known – and proven – total conventional gas reserves of approximately 107 Tcf, while total potential CBM reserves for the whole country are put at nearly four times as much. (Image courtesy of CBM Asia Development Corp.)
Indonesia ranked No. 6 for CBM reserves
According to recent figures from consultancy Advanced Resources International, Indonesia is ranked sixth in the world for potential CBM reserves, with South Sumatra alone estimated to hold around 183 Tcf.
As a result, the country’s government has set a CBM production target of 500 MMcf/d by 2015, 1 Bcf/d by 2020, and 1.5 Bcf/d by 2025.
Overall in 2012 Indonesia officially approved 274 contractors’ work plans and budgets (conventional and unconventional oil and gas) to help it achieve this ambition, according to Energy and Mineral Resources Minister Jero Wacik. He said this would equate to total oil and gas investment in the country of more than US $26.2 billion in 2013.
A total of 74 of those approved work plans were for projects in the production phase, according to SKMigas, an upstream regulatory body. Formed as a temporary unit by the Ministry of Energy and Mineral Resources in 2012 to replace the recently disbanded BPMigas unit, SKMigas has been made a permanent fixture.
SKMigas is on a ministry-backed mission to drive new investment throughout its upstream sector, not only in unconventionals but also in its significant offshore shallow and deepwater sectors.
The regulator forecasts that the 74 projects in the production phase will result in up to $23.5 billion in investments during the course of 2013 alone, with the money outlined to be spent as follows:
* $14.7 billion on production activities; * $5 billion on development projects; * $2.3 billion on exploration; and * $1.5 billion on general administration.
With the total work plan for these 74 projects estimated to include up to 1,200 development wells, 1,100 workover wells, and 100 exploration wells, this is a true statement of intent by Indonesia to raise its game.
The remaining 200 work plans were submitted by companies for projects still in the exploration phase and are expected to result in around $2.7 billion of investment. That will involve 75 conventional exploration projects and more than 80 CBM exploration probes.
By August 2012 there were a total of 50 CBM working areas, according to SKMigas, with the government targeting a total of 210 by 2025. These are likely to be spread wider than just South Sumatra, as major basins exist elsewhere: Barito (101.6 Tcf), Kutai (89.4 Tcf), Central Sumatra (52.5 Tcf), North Tarakan (17.5 Tcf), Berau (8.4 Tcf), Ombilin (0.5 Tcf), Sulawesi (2 Tcf), and Bengkulu (3.6 Tcf).
Indonesia’s CBM resources place it No. 6 in the world rankings, although activity is still largely in the exploration and appraisal phases. (Image courtesy of International Gas Union)
Very much part of this strategic gas push by SKMigas is state-owned Pertamina. Apart from its internal drive to help raise Indonesia’s declining oil production levels to 1 MMb/d by 2014 from 865,000 b/d in 2012 (down from 898,000 b/d in 2011), the company also has a clearly stated ambition to make CBM one of its main gas production priorities.
Pertamina allocated $437 million in 2013 toward the exploration and development of its CBM assets. The company already has spudded the first of those wells in a production-sharing contract (PSC) area in Sumatra and is on the search to source up to 30 drilling rigs for its CBM exploration plans. The company has 14 CBM PSCs in Sumatra and Kalimantan – the two main coal-producing areas in Indonesia – on which it intends to focus its strategic exploration efforts.
The goal for the company is to achieve a production target of 500 MMcf/d by 2025, and it reached a landmark goal in this strategic push by achieving production from its first operated CBM well at year-end 2012. The ME-IIICBM-001 well in Muara Enim, South Sumatra, is operated via its subsidiary Pertamina Hulu Energi. The company said the well is forecast to produce for at least 30 years. Up to eight wells will be drilled in the block at an estimated cost of around $2 million per well.
The operator’s senior vice president of Upstream Strategic Planning and Subsidiary, Rony Gunawan, said, “In the future, conventional oil and gas reserves will be harder to get, and CBM is the alternative energy for Indonesia.”
Sanga-Sanga is a world first
There are currently four commercially producing CBM blocks in Indonesia, including the most well-known, Sanga-Sanga, as well as Sangatta and Sekayu.
In the high-profile Sanga-Sanga CBM PSC in the Kutai basin, East Kalimantan, BP and Eni have been exporting CBM from Bontang as LNG since March 2011. This was the world’s first CBM-to-LNG project.
A consortium led by VICO – the joint venture (JV) between BP and Eni that operates the project – signed a PSC for the exploration and development of CBM resources from the 1,700-sq-km (656-sq-mile) block in November 2009. The CBM license overlays the same acreage as the already existing conventional PSC held by the same companies, which has been producing conventional gas from the block for more than 40 years.
Sanga-Sanga as a whole delivers around 13% of the gas that feeds the Bontang LNG plant in Kalimantan, one of the world’s largest LNG plants. BP’s technical knowhow gained in the pioneering development of CBM technology in the San Juan Basin in Colorado and New Mexico in the US, where the company has more than 30 years of operating experience, has been crucial to its rapid progress in Indonesia.
A thorough appraisal process in 2010 and 2011 as part of an initial $38 million work program commitment to determine the production capacity of the block has been an outstanding success. Cautious estimates by BP for the CBM reserves in the PSC area were initially put at 4 Tcf when the PSC was signed. Eni estimated the contract area holds as much as 13 Tcf in CBM resources alone.
The speed of Sanga-Sanga’s CBM development has been helped by the simple fact that the PSC already had extensive gas production infrastructure in place with access to markets via the Bontang LNG plant as well as local customers. This existing infrastructure allowed BP and its partners to rapidly and cost-efficiently develop the block’s additional reserves.
Other companies large and small that are at the forefront of Indonesia’s CBM drive include majors such as ExxonMobil; independents like Dart Energy, Medco Energi, and VICO; and smaller local players like Ephindo Energy and Star Energy.
Other players moving in
Others also have seen the potential, like Total, which has been in Indonesia’s conventional oil and gas sector for several decades. The company made a strategic decision to take its first-ever CBM block anywhere in the world in March 2011 – coincidentally the same month BP and Eni’s Sanga-Sanga began producing – when it acquired a 50% stake in a PSC for the Kutai Timur block in the Kutai basin in East Kalimantan.
Dart Energy is expecting first commercial production from its Sangatta West CBM permit in East Kalimantan during 2013 while also recently being awarded the Bon-tang Bengalon CBM PSC.
The Sangatta West (Sangatta I) block covers 1,168 sq km (451 sq miles) and is just 50 km (31 miles) north of the Bontang LNG plant. Dart farmed into the block in early 2009 for a 24% interest and joint operatorship with domestic player Ephindo, with Pertamina holding the remainder. The company said that the results from its wells in a southeast sub-block have been encouraging so far, with surface facilities and infrastructure deployed as part of a long-term production test. A pilot-to-power project enables early gas commercialization and the small-scale supply of gas to the nearby town of Sangatta along with ensuring its own project power supply. The long-term strategy is to transport gas to the Bontang LNG plant.
Sangatta I was the first CBM PSC in Indonesia to have publicly certified reserves and resources. Dart has put recoverable reserves at around 38 Bcf (proven, probable, and possible) and contingent resources of 273 Bcf (2C recoverable) in the 78-sq-km (30-sq-mile) southeastern sub-block. The larger western sub-block area is estimated to have prospective resources of 192 Bcf (best estimate, recoverable).
Cost-effective operations are key
In CBM activities, cost-effective operation and process flexibility generally separate the winners from the losers. Most companies involved admit that CBM projects cannot afford long timeframes and large scales like more conventional oil and gas projects.
Drilling needs in the CBM arena include the requirement for shorter procurement processes and closer collaboration with service companies to create fit-for-purpose equipment, according to statements from Ephindo. “Now we are paying a lot of money for using equipment that is not fit-for-purpose because we don’t have many choices,” said Ephindo CEO Sammy Hamzah in a recent corporate interview on the company’s website.
“The other challenges [are] land access, terrain, and how to lower our cost in drilling site preparations,” he continued. Although Ephindo is not yet commercially marketing CBM gas, it is in the process of trying to sell gas on a smaller scale. Hamzah added, “Gas has slowly become the prime commodity for energy, and this will greatly help CBM become commercially viable.”
Ephindo leads a consortium that was awarded the Sekayu II CBM PSC last year. Sekayu II is located in South Sumatra and covers an area of 451 sq km (174 sq miles) contiguous to the Star Energy-operated Sekayu CBM PSC, in which it already holds a 21.5% interest. Ephindo is the operator of the Sekayu II PSC, in which Star holds the remaining 26% interest.
The companies’ three-year firm commitment consists of geological and geophysical studies, one core hole, and the drilling of one exploration well with a production test. The official cost is estimated at $3.35 million.
Ephindo now holds interests in seven PSCs, four of which it operates and two that it operates jointly, with its total Indonesian CBM net acreage now standing at 2,915 sq km (1,125 sq miles).
Why Indonesian CBM?
The well costs stated in several of the examples mentioned previously show why CBM activity in Indonesia holds such interest for the increasing number of companies studying it.
The relatively low cost compared to conventional wells and the good level of available control data from the long-term conventional activity carried out in the established basins are two key factors, according to Canada-based CBM Asia Development Corp. The CBM-focused independent outlined in a recent presentation that with an optimum well depth range of 200 m to 1,000 m (656 ft to 3,281 ft), current drilling costs run at approximately $1 million per well based on the use of 500-hp to 750-hp rigs. In addition, drilling costs are expected to fall sharply, the company added, as lower horsepower-dedicated CBM rigs and slimhole mining rigs are deployed. These drilling costs compare favorably to onshore conventional drilling costs in Indonesia of between $10 to $30 million per well.
The company’s own 2013 work program is expected to achieve first commercial gas flows, with two production pilot programs planned – one in the Barito basin, the other in Central Sumatra – as well as dewatering activities at the Sekayu PSC and the Kutai West PSC. The Barito basin program will see one core well drilled on the Kuala Kapuas I PSC and one five-well production pilot, with negotiations on rig deployment well advanced and drilling planned to get under way in June 2013.
The central Sumatra basin work program calls for one five-well production pilot, with negotiations on rig deployment again well advanced, according to CBM Asia in its latest activity update. Drilling will start in October 2013.
‘Largest and best’ CBM play in the world
The Barito basin is the “largest and best” CBM exploration play in the world, in CBM Asia’s opinion, with an industry gas-in-place estimate of 102 Tcf. This is why the company agreed to a major farm-in JV deal with ExxonMobil in December. The final terms and conditions of the farm-in remain subject to further negotiation and execution of formal agreements between the companies as well as government approval. But if it goes ahead, the estimated $15 million deal will see CBM Asia acquire a 35% to 37.5% participating interest in four existing PSCs (Banjar I PSC, Banjar II PSC, Barito I PSC, and Tapin PSC) in the Barito basin. The company will also gain rights to farm into additional PSCs in the Kutai basin, in which CBM Asia and ExxonMobil would hold equal ownership stakes.
Indonesia’s unconventional gas resources will play a major part in the country’s drive to secure its future energy needs without relying on imports. According to the current plans in place, CBM gas will lead the way, while shale is for once the resource that will have to take a back seat, at least for now.
QPN Price at posting:
0.5¢ Sentiment: Buy Disclosure: Held