Indonesia to offer shale gas blocks to contractors

By Amahl S Azwar | Source: ANN

Indonesia, currently a net importer of both crude oil and its refined products, will start offering shale gas blocks this year in a bid to unearth the potential of unconventional gas in Southeast Asia’s largest economy.

The Energy and Mineral Resources Ministry’s director general for oil and gas affairs, Edy Hermantoro, told The Jakarta Post on Tuesday that the government would start offering around four working contracts to develop shale gas this year.

State-owned oil and gas firm PT Pertamina, he said, would become the first firm to start the project in its working area in North Sumatra. Pertamina’s contract will be signed in May this year.

Indonesia was also expecting foreign firms from countries such as Australia and Canada to obtain around four contracts this year, he said.

Potential investors are currently conducting joint studies before they tap into the tender process to win contracts on working areas around the northern and central parts of Sumatra.

Shale gas is a natural gas produced from shale rocks and other geological formations by injecting water and chemicals into the rocks through a technique known as hydraulic fracturing.

Last year, the Energy and Mineral Resources Ministry announced that Indonesia had estimated shale gas resources of around 574 trillion cubic feet (tcf) throughout Sumatra, Kalimantan, Papua and Java

Sumatra supposedly had the largest shale gas reserves of around 233 tcf, particularly in the central region, where approximately 86.9 tcf of shale gas resources could be found, according to the ministry’s geological bureau.

Kalimantan had an estimated 194 tcf of shale gas reserves, the ministry said, followed by Papua Island (90 tcf) and Java Island (48 tcf), while the remaining 9 tcf was spread across other parts of the archipelago.

Shale gas is becoming an important source of natural gas, particularly in the United States and Australia, where stories on the shale gas boom dominated news headlines last year.

The shale gas boom in the US is expected to make the country one of the world’s largest gas exporters, although the country currently restricts shale gas exports due to domestic needs.

Indonesia, the third-largest exporter of conventional liquefied natural gas (LNG) behind Qatar and Malaysia, is keeping an eye on unconventional gas such as shale gas and coal bed methane (CBM).

Most of the LNG produced in Indonesia has been exported mainly to countries such as Japan in long-term contracts despite the needs of the nation’s industry sector as well as state utility firm PT PLN.

Recently, Rudi Rubiandini, head of the country’s upstream oil and gas regulatory special task force, SKKMigas, said Indonesia would likely start importing LNG in 2018 to meet the swelling domestic demand.

Rudi, who is also a former deputy energy minister, said that Indonesia’s natural gas production was also unlikely to increase in the near future amid aging hydrocarbon fields.

Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said the government would likely use shale gas to fulfill domestic needs with Sumatra as the pilot project before expanding to other parts of the country.

US-based giant Chevron, which is currently eyeing shale gas potential in Australia and US-based ConocoPhillips, according to Susilo, have expressed its interest to develop shale gas potential in Indonesia.

ChevroFn Pacific Indonesia’s vice president for government policy and public affairs Yanto Sianipar, said the company was open to the possibility of developing shale gas in the country.

“The era of easy oil has passed and the future of energy will look very different. Chevron believes that expanded investment and production is needed across all energy resources to support Indonesia’s economic growth,” he said.

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