Though development of the industry is riddled with near term challenges, CBM could eventually account for 15% of Indonesia's gas supply and the country could prove to be the largest source of unconventional gas in Southeast Asia, WoodMac said in a report titled "Making the case for Indonesian CBM."
Indonesia could be producing 22,000 Mcf/d of CBM by 2013, ramping up to almost 900,000 Mcf/d by 2020 and 1.3 Bcf/d by 2025, Jamie Taylor, upstream analyst at WoodMac, said. Indonesia currently has no commercial CBM production.
"In practice, production growth will be slower than this, although the long-term prospects remain attractive," Taylor said, adding that as conventional domestic gas supply starts to decrease around 2020, the leading CBM players should be well positioned to take advantage.
There are substantial, long-term market opportunities for CBM, Graham Tyler, head of WoodMac's South East Asia Gas & Power service, said.
"Sumatra CBM has access to a range of markets, with pipeline access to West Java, Batam and Singapore. West Java and Singapore are particularly attractive, given their dependency on LNG supply in the long-term. Exporting CBM as LNG is an option from the Kutei Basin, given the capacity expected to be available at the Bontang liquefaction plant," Tyler said.
The challenges facing CBM's growth, according to WoodMac, include: uncertainties in fiscal terms for CBM production; a slow approvals process; lack of clarity on ownership rights where acreage overlaps with coal concessions; the environmental impact of operations; and the high costs of CBM
production under current contract terms.
There will also be significant competition from conventional gas, Tyler said.
"In the short-term, CBM drilling is scheduled based on the requirements of sales contracts, and development will be constrained by limited pipeline infrastructure and competition from other supply sources," Tyler said.
In the medium to long-term, however, CBM could alter the dynamics of the Indonesian gas market by providing volumes to meet Java and Sumatra demand, Tyler said.
"This would reduce the need for LNG via the domestic market obligation, under which gas producers must allocate at least 25% of new production for local needs. Other new Indonesian gas suppliers would also benefit by being able to target the wider Asia Pacific market," he added.
There are now 20 active CBM production sharing contracts across four main areas in Sumatra and Kalimantan, operated by companies of different stature, WoodMac said.
China Chemical Weekly: http://news.chemnet.com/en/detail-1411716.html
