Conventional gas resources are declining. The demand for gas and energy will keep increasing. This will create big opportunities for the development of CBM in Indonesia.

KEE Yong Wah Deputy Executive Chairman NU ENERGY GAS

Indonesia’s stronger CBM market

May 18, 2018

Kee Yong Wah, the deputy executive chairman of NuEnergy Gas (NGY), talks to TOGY about the development of the CBM market in Indonesia and the potential of this sector. In April 2018, NuEnergy Gas extended the exploration period for its Muralim PSC by four years. SKK Migas granted the extension through December 2020. The same month, the company submitted its Tanjung Enim field development plan to SKK Migas.

On CBM requirements: “CBM will require our ability to be mobile and nimble to respond to any changes due to geological or subsurface heterogeneity as well as challenges on land access due to the requirement for more wells and to ensure efficient operations.”

On demand outlook: “Conventional gas resources are declining. The demand for gas and energy will keep increasing. This will create big opportunities for the development of CBM in Indonesia.”

On gross split: “This new government regulation allows a negotiation space between the contractor and the minister to achieve our economic requirements. We are hoping that the minister will maximise the use of this negotiation space to improve the economics of CBM project. This will be the main factor which will determine if the gross-split contract will really help the industry.”

Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Kee Yong Wah below.

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How do CBM operations differ from that of conventional oil and gas?
CBM will require the ability to be mobile and nimble to respond to any changes due to geological or subsurface heterogeneity as well as challenges with land access due to the requirement for more wells and to ensure efficient operations. One transformation of this philosophy is to bring fit-for-purpose equipment, contracts and services into the CBM operations.
For Indonesian CBM development, it is very important to understand this philosophy because Indonesia’s long conventional oil and gas experience may lead some people to think that conventional oil and gas equipment, contracts or services will work for CBM. This false thought has cost a lot in the early stage of Indonesian CBM operations. The regulations and policies to facilitate bringing in fit-for-purpose equipment, contracts and services for CBM remain a very critical issue for Indonesian CBM development at this stage. The Indonesian local equipment supplies and service capabilities will definitely be developed as the CBM industry grows.

What is the market status of CBM at the moment?
The markets for CBM in the USA, Australia and China have been well developed over the past 20 years. Indonesian CBM will soon enter a new chapter through the submission of our plan of development [POD] for Tanjung Enim, one of our PSCs.
As this is the first CBM POD for Indonesia, the Tanjung Enim POD preparation process will help SKK Migas and the government to establish the fit-for-purpose policies and guidelines which will work for CBM development. We have seen this happening and therefore we believe that CBM will transform the Indonesian gas market as the conventional gas supplies continue to decline. We also believe that SKK Migas and the government’s support during the Tanjung Enim POD preparation will boost market confidence for CBM in Indonesia. There will always be a learning experience the first time.

What are the opportunities for CBM?
The CBM resources in Indonesia are ranked fifth in the world. Conventional gas resources are declining. The demand for gas and energy will keep increasing. This will create big opportunities for the development of CBM in Indonesia. NGY is the operator of four co-located CBM PSCs in South Sumatra and is leading the Indonesia CBM industry in term of progressing into CBM development. We are preparing the submission of our first plan of development in Tanjung Enim at an expected production of 25 mcf [708,000 cubic metres] per day, which is roughly equivalent to 100 MW of power. Details of the plan of development, including the project schedule and milestones, project scope as well as potential buyers are being discussed with SKK Migas.

How do you see Indonesia growing in the CBM market?
Once we set up a benchmark with the first POD in Tanjung Enim, the CBM landscape in Indonesia will change entirely. In the Tanjung Enim working area, we have enough information from conventional oil and gas wells and seismic, coal mining wells and activities as well as our CBM wells. This information has provided us high confidence that the CBM development in Tanjung Enim will set the first benchmark on how CBM can work in Indonesia. Once the first benchmark is set, we believe that the CBM market will grow in Indonesia and new bid rounds for CBM permits will attract much more interest.

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