Indonesia energy: Turning unconventional with shale gas

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pertaminaIndonesia is following the US’s footsteps to begin utilising revolutionary, yet controversial, techniques to exploit large unconventional gas deposits that could wean the country away from dependence on fossil fuels.

Shale gas and coal-bed methane, two forms of hard-to-extract natural gas that require capital-intensive technologies, are replete across the Southeast Asian archipelago.

While half of Indonesia’s current fuel mix derives from coal, with over 20 per cent coming from conventional gas, recent commitments to begin exploring unconventional deposits could dramatically alter the country’s energy composition by opening up avenues to potential shale gas reserves of about 574 trillion cubic feet and coal-bed methane reserves of 453.3 trillion cubic feet, compared with proven conventional gas reserves of 153, according to Indonesian geology surveys.

Stunningly, these estimates come close to the US potential shale gas reserves at 665 trillion cubic feet, according to the Washington D.C.-based Energy Information Administration.

An added lure to begin unconventional exploration, the approximately 60 basins that have been located across the country – namely in Sumatra, Kalimantan, Java and West Papua – are just 1,000 to 1,300 feet below the surface, compared to conventional reserves, which average at 6,500.

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Spearheading ASEAN’s first major venture into the shale arena, Indonesian state-owned oil and gas firm Pertamina signed the country’s first shale gas exploration contract in May, offering two other shale gas blocks for tender. The energy giant has earmarked $28.4 million to begin exploring shale gas in the Sumbagut block in North Sumatra, investing some $7.8 billion into the project after the exploration phase with a target of 40 million standard cubic feet per day from the estimated reserve of 18.56 trillion cubic feet. Production could be begin in 2018.

Indonesia will draw on industry experts in the West for technology and skill transfer, such as Talisman Energy, a Canadian energy firm that has a long track record in Indonesia; moreover, Chevron Pacific Indonesia, ConocoPhillips, ExxonMobil, as well as several Canadian and Australian oil companies have all signaled interest in exploring contracts.

Partnerships could also come from the US, who organized a workshop with Indonesia recently, highlighting the opportunities and benefits that could be shared by the two countries.

Earlier in March, it was announced that Indonesia would be opening up its first coal-bed methane plant to feed the Sangatta natural gas facility in East Kalimantan. Virginia Indonesia Co. (VICO), a joint venture between British giant BP and Italy’s ENI, which operates Sanga-Sanga block, will provide 500,000 standard cubic feet per day from 15 coal-bed methane wells, enough to provide electricity for 4,000 households in the energy insecure part of Borneo.

Yet in employing hydraulic fracturing – as known as fracking – is not a solution void of environmental costs.

Fracking requires pumping chemical-laced water at high levels of pressure deep into the earth’s crust to release gas from shale rocks or coal bed seams, at times worryingly close to underwater reservoirs. Deposits close to the surface, especially in porous sediment, can also dramatically affect topsoil.

If Indonesia is to avoid controversy while exploring in this pioneering field, outside investment into new technologies will be needed in spades.

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Reading Time: 3 minutes

Indonesia is following the US’s footsteps to begin utilising revolutionary, yet controversial, techniques to exploit large unconventional gas deposits that could wean the country away from dependence on fossil fuels.

Reading Time: 3 minutes

pertaminaIndonesia is following the US’s footsteps to begin utilising revolutionary, yet controversial, techniques to exploit large unconventional gas deposits that could wean the country away from dependence on fossil fuels.

Shale gas and coal-bed methane, two forms of hard-to-extract natural gas that require capital-intensive technologies, are replete across the Southeast Asian archipelago.

While half of Indonesia’s current fuel mix derives from coal, with over 20 per cent coming from conventional gas, recent commitments to begin exploring unconventional deposits could dramatically alter the country’s energy composition by opening up avenues to potential shale gas reserves of about 574 trillion cubic feet and coal-bed methane reserves of 453.3 trillion cubic feet, compared with proven conventional gas reserves of 153, according to Indonesian geology surveys.

Stunningly, these estimates come close to the US potential shale gas reserves at 665 trillion cubic feet, according to the Washington D.C.-based Energy Information Administration.

An added lure to begin unconventional exploration, the approximately 60 basins that have been located across the country – namely in Sumatra, Kalimantan, Java and West Papua – are just 1,000 to 1,300 feet below the surface, compared to conventional reserves, which average at 6,500.

PowerPoint Presentation

Spearheading ASEAN’s first major venture into the shale arena, Indonesian state-owned oil and gas firm Pertamina signed the country’s first shale gas exploration contract in May, offering two other shale gas blocks for tender. The energy giant has earmarked $28.4 million to begin exploring shale gas in the Sumbagut block in North Sumatra, investing some $7.8 billion into the project after the exploration phase with a target of 40 million standard cubic feet per day from the estimated reserve of 18.56 trillion cubic feet. Production could be begin in 2018.

Indonesia will draw on industry experts in the West for technology and skill transfer, such as Talisman Energy, a Canadian energy firm that has a long track record in Indonesia; moreover, Chevron Pacific Indonesia, ConocoPhillips, ExxonMobil, as well as several Canadian and Australian oil companies have all signaled interest in exploring contracts.

Partnerships could also come from the US, who organized a workshop with Indonesia recently, highlighting the opportunities and benefits that could be shared by the two countries.

Earlier in March, it was announced that Indonesia would be opening up its first coal-bed methane plant to feed the Sangatta natural gas facility in East Kalimantan. Virginia Indonesia Co. (VICO), a joint venture between British giant BP and Italy’s ENI, which operates Sanga-Sanga block, will provide 500,000 standard cubic feet per day from 15 coal-bed methane wells, enough to provide electricity for 4,000 households in the energy insecure part of Borneo.

Yet in employing hydraulic fracturing – as known as fracking – is not a solution void of environmental costs.

Fracking requires pumping chemical-laced water at high levels of pressure deep into the earth’s crust to release gas from shale rocks or coal bed seams, at times worryingly close to underwater reservoirs. Deposits close to the surface, especially in porous sediment, can also dramatically affect topsoil.

If Indonesia is to avoid controversy while exploring in this pioneering field, outside investment into new technologies will be needed in spades.

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