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29 Jul 2013
Coal Bed Methane in Indonesia


Coal Bed Methane (CBM) is natural gas contained primarily (about 90% -100%) of methane (CH4) found in coal seams. Methane is also the major component in petroleum natural gas (about 70% - 90%) that is widely used today. CBM is generated from the microbiological process or thermal process in the coal seam and recognized as one of the cleanest fossil fuels. Before it is broadly exploited as an energy source, for many years methane from coal seam had been regarded as a problem since its nature of instigating greenhouse effect harming the atmosphere and it endangers coal mining activities due to highly explosive character.

The technique to exploit CBM is a quite new technology that is different with that applied to the fossil natural gas, while both share the common in terms of marketing and utilization. Simply, CBM is exploited by drilling shallow wells into coal seams, dewatering the seams, extracting the methane from the seams and finally compressing the methane. Different from a natural gas well which can reach peak revenue immediately after commerciality, in general a successful CBM well generates money years after commerciality and as a consequence, the exploitation of CBM generally employs higher investment and longer time compared to the exploitation of petroleum natural gas, while the risk is considerable.

CBM has been largely produced in United States, Canada and Australia since 1980’s and now the development and utilization of CBM has remarkably increased in many countries including China and India. In the early 2000’s, CBM has contributed approximately 7% to 10% of total natural gas production in United States. Utilization of CBM can give positive contribution to the economy as well as to provide alternative energy source which might resolve the shortage of energy supply in a country, particularly to meet the demand on natural gas. Exploitation of CBM from a coal seam does not reduce the quality of coal and accordingly the utilization of CBM may generate double economic advantages, one is economic value from the commercialization of CBM and the other is economic value from coal.

The Potency

It is mentioned that Indonesia has the 2nd largest CBM reserves. Total potential CBM reserve in Indonesia is estimated of about 453.3 TCF from 11 basins stretching out over the regions, which by far the commercial utilization thereof is still miles away from the expected level. That figure is much higher in number compared to the total reserve of petroleum natural gas which reaches 135 TCF for the proven reserves and 180 TCF for the potential reserves to be developed even such number has made Indonesia as one of the biggest producer (not biggest reserves) of natural gas in Asia Pacific today. Currently, several Production Sharing Contracts have been awarded by the Government to contractors.

Development of CBM is expected to provide gas supply to meet the natural gas demand especially in resolving the shortage of gas supply for domestic market. CBM can also be an alternative energy especially for the industries and power plants to substitute the use of oil fuel in the middle of the soaring up of its price or to replace coal fuel which has been alleged as not environmental friendly energy.

Legal Framework

The economic potency of CBM in Indonesia must be supported by well developed legal infrastructure. CBM falls into the oil and gas regulations regime due to its nature as a gas fuel. Currently, the specific legal basis for the exploration and exploitation of CBM is regulated by Minister of Energy and Mineral Resources No. 36 of 2008 on CBM Business Activities (CBM Regulation). This CBM Regulation is an implementing regulation of Law No. 22 of 2001 on Oil and Gas and Government Regulation No. 35 of 2004 on Upstream Oil and Gas Business Activities.

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