Coalbed Methane Prospects in Indonesia
This paper reviews the efforts to exploit CBM resources in Indonesia, the challenges these efforts have faced, and possible solutions that can make operations more efficient and profitable.
In 2005, two companies began studying the potential of seismic operations for the Kutai and South Sumatra basins (Fig. 1 above). However, the progress of coalbed-methane (CBM) operations has been slow for several reasons. This paper reviews the efforts to exploit CBM resources in Indonesia, the challenges these efforts have faced, and possible solutions that can make operations more efficient and profitable.
Despite the current industry climate, operators in Indonesia continue to pursue CBM production opportunities. The Indonesian government has stipulated in its contracts with these companies that current operations must yield production within a set time frame, highlighting the importance of making such operations cost-effective.
Currently, many methods are available to drill CBM wells. In early efforts to exploit CBM wells, contractors used conventional methods to drill a well at a target depth of 500 to 800 m at a high operational cost, but time frames were not met. Of 51 exploration contract areas involving CBM in Indonesia, only 17% of these have fulfilled their commitment. Obstacles that prevent success in these endeavors are often nontechnical in nature, including organizational difficulties (suboptimal financial conditions of operators), land- and permit-acquisition issues, challenges in community relations, gaps in the supply chain, and problems with access and infrastructure. Standard operating procedures (SOPs) are difficult to formulate and implement under these conditions. The CBM well must follow industry operational standards, which, when compared with standards involved in the mining industry, for example, involve a higher level of technology and the need for more permits and, thus, a greater cost.
Indonesia CBM Contract Area
Indonesian unconventional prospects are essentially divided into two areas, Sumatra and Kalimantan. These areas contain the most abundant coal-seam prospects. However, proved resources do not equal the estimated resources calculated more than a decade ago.
Geologically, target coal seams in the Sumatra and Kutai basins differ only in their depth. The target coal seams in Sumatra are shallower than those in the Kalimantan region. In both basins, the cost per well is high.
However, the Indonesian government, in conjunction with operators, has achieved a number of technical, financial, and regulatory breakthroughs in facing these obstacles, making the government an effective stakeholder. Since 2016, the Ministry of Energy has become more involved in regulation standardization to accelerate CBM operations. The procurement process has been simplified, with facilities being shared and the transfer of material assets being managed better. To build better SOPs, rules for drilling CBM wells have been standardized and simplified. Differences in the processes of drilling conventional and nonconventional wells are described in Table 1. Finally, other changes have been implemented that emphasize stronger local development; for instance, operator SKK Migas uses only products of Indonesian origin to bolster the process of building national economic capacity.
In addition to simplifying procedures, operators must optimize the cost-effectiveness of their drilling efforts. A strategy to increase cost-effectiveness might include the following steps.
- Thoroughly review the prospect area to be drilled
- Complete a strategic plan before executing the project
- Perform batch drilling (massive operation) in the highest-prospect area
- Create an integrated-project-management contract
- Simplify well design to match simplicity of, for example, a coal-mining well as much as possible
- Use hydraulic drill rigs with minimum operational horsepower
- Use water-based-mud-type potassium-chloride polymer with minimal chemicals added
Low cost is the most significant element of this strategic plan, which relates to the operator’s financial state. The production of methane gas is the purpose of the project, which, once it is produced, must be evaluated for the possibility of commercial development. Once the commercial viability of the CBM area is proved, the operator must perform the pilot-project drilling then sign the necessary government contracts.
This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper SPE 186343, “Review of Coalbed Methane Prospects in Indonesia,” by C. Irawan, D. Nurcahyanto, I.F. Azmy, J.A. Paju, and W.M. Ernata, SKK Migas, prepared for the 2017 SPE/IATMI Asia Pacific Oil and Gas Conference and Exhibition, Bali, Indonesia, 17–19 October. The paper has not been peer reviewed.