27 March 2020 (closed)
USD/IDR (16,230) -98.00 -0.60%
EUR/IDR (17,920) +122.83 +0.69%
Jakarta Composite Index (4,545.57) +206.67 +4.76%
Production of coalbed methane (CBM) in Indonesia will most likely not meet the government's target of 500 million standard cubic feet per day (mmscfd) in 2015. Coalbed methane, an environmental friendly fuel, is a form of natural gas that occurs in coal beds. Although the production of CBM is a complementary aspect of coal mining, it has only started to gain attention in recent years. CBM reserves in Indonesia, estimated at 453 trillion cubic feet (tcf), are among the world's largest CBM reserves (6 percent of total global CBM reserves).
Since 2008, Indonesia has begun to take CBM production seriously as it intends to uplift the role of renewable sources in the country's energy mix towards the future. Currently, the country is too dependent on oil as a source for energy generation, particularly as domestic oil output has been in a state of decline for over a decade. CBM exploration in Indonesia started in 2008 when seven production sharing contracts were signed, followed by 13 contracts in 2009, 3 in 2010, 19 in 2011, and 12 in 2012. Furthermore, the government has set ambitious targets. In 2015, the CBM production target was set at 500 mmscfd, increasing to 1,000 mmscfd in 2020, and 1,500 mmscfd in 2025.
However, the latest statements from Indonesia's Ministry of Energy and Mineral Resources indicate that the first target (2015) will most likely not be achieved and thus puts all other targets in jeopardy. According to Upstream Oil and Gas Regulatory Special Task Force (SKK Migas), the current CBM production rate is only 0.5 to 0.7 mmscfd. This low figure is caused by the lack of wells and rigs. Contrary to conventional gas, each CBM well can only produce about 0.2 to 0.3 mmscfd (conventional gas can reach up to 10 mmscfd per well). As such, a large amount of wells is needed as well as equipment. Reportedly, Vico Indonesia has ordered rigs with new technology that can drill at several wells at the same time but the need for many more investors is apparent.
One way to stimulate CBM production is to provide incentives to investors. Soon, the Ministry of Energy and Resources will discuss this topic with SKK Migas and Indonesia's Finance Ministry. One example is to provide tax holidays for imports of technology needed for CBM exploration and production. Another incentive can be the exemption for contractors from needing to arrange an authorization for expenditures.