Progressing CBM Development in Indonesia - An Industry Perspective - Mohd. Radzif Mohamad VICO CBM Commercial Manager IndoGAS Conference 27 th – 29 th January 2015 1
VICO Overview • VICO is a 50:50 JV between BP and ENI • VICO has operated the Sanga Sanga conventional oil and gas PSC since 1968 with first LNG in 1977 • CBM PSC awarded November 2009 for 30 years • Sanga Sanga CBM PSC has met all PSC commitments & spent $250m to date • Exploration complete, appraisal in progress • First CBM rig & horizontal wells in Indonesia • First CBM gas delivery to Bontang in 2011 • First CBM Gas Sales delivery to PLN in 2013 • Conventional & CBM PSC share infrastructure Exploration Wells SEM 201 Appraisal Programme MWP #1 2
VICO CBM Achievements Coring (Using Conventional PSC signed Wells First LRP CBM to Power 2010 2011 2012 2013 2014 Mut 205 Well Head Compressor Trial Resource Appraisal Micro-seismic on Re-completed Mut 78 First CBM horizontals in MWP#2 fracs (old oil well)- first Indonesia CBM well Drilling MWP#1, First Hydraulic rig first purpose drilled on MWP#3 CBM wells 3
Indonesia CBM Resources • Resource potential in Indonesia estimated at over 450TCF • 54 CBM PSC’s awarded since 2008 with 22 in Sumatra and 34 in Kalimantan • SKKMigas estimate and using latest data from operators, resource base of 130 to 140 TCF for CBM in Indonesia in licensed PSCs (more in unlicensed areas) NOTE – Conventional Proved Reserves for Indonesia approximately 100 TCF (2014 BP statistical review) 4
Energy Demand/Supply • Strong GDP growth is driving increased domestic demand in Indonesia but domestic production is falling - decline in conventional oil & gas production • Likely that Indonesia will become a net importer of gas - CBM production could help fill the demand gap or imports will increase 5
Can CBM fill Indonesia’s Supply Gap? West Java Supply/Demand 3,000 2,500 2,000 mmcfd 1,500 1,000 500 0 2013 2016 2019 2022 2025 2028 2031 2034 Diesel & Fuel Oil (Grid and Captive) LNG YTF Commercial and Technical Total Demand West Java Commerical Piped Gas Source: Wood Mackenzie If no CBM, Indonesia will have to fill the gap with LNG or high priced fuel oil. 6
CBM In Indonesia • Has CBM been successful in Indonesia? – Initial GoI CBM Roadmap? 500 100 8.9 MMSCFD – Many have left – BP, Exxon, Total, Santos, etc – Current investor sentiments at a low – No CBM PSC awards – Well behind on Exploration Commitment – less than 20% – Regulatory and fiscal environment unsuited for CBM – Good CBM potential but still needs to prove produceability and commerciality How do we make CBM a SUCCESS 7
Indonesian CBM industry is still in its infancy UNITED STATES UNITED STATES • Fiscal incentives: • Resources: 700 TCF • Unregulated selling price Maturity • Main Basin: San Juan, • Tax credits (initial stage) Black Warrior • Land owner royalties • Annual Production: 1.65 • Light handed regulation TCF (2012) • Start exploration: 1950’s • Commercialisation start: AUSTRALIA 1980’s • Resources: 250 TCF • Wells drilled: 30,000 • Main Basin: Bowen, Surat • Cost per well: US$ 200- • Start exploration: 1950’s 300 Thousand • Commercialisation start: 1990’s 252 • Wells drilled: 1,300 (2010) BCF/ • Cost per well: US$ 1.2 Million • Fiscal incentives: Year • Favorable fiscal regime • Unregulated selling price INDONESIA • Government mandates Power CHINA • Resources: 140 TCF Companies to utilize power (based on active • Resources: 1300 TCF generated from gas working areas) • Produced basin: Qinshui • Main basin: Kutai, • Annual Production: 21 BCF (2012) South Sumatera • Start exploration: 1990’s • Annual Production: 450 • Commercialisation start: 2009 MCF (2013) • Wells drilled: 2,000 • Start exploration: 2008 • Fiscal incentives: • No Commerc. yet • Price reforms • Wells drilled: 84 • Preferential power tariff • Tax reliefs • Low government take Annual Production Exploration time to commercialisation 8
Government & Industry Initiative ADVISORY ESDM LITBANG BOARD EXECUTIVE LEMIGAS DIRECTOR Work Group Work Group Work Group Ministerial Fiscal Technology Regulations Government Policy Brief of Indonesia INDUSTRY & Model Agreement 3Q 2014 1Q 2015 1Q 2015 9
What Does Indonesia Need • Consider aggressive short term incentives. • Access to the high value gas market in Indonesia, consistent with Domestic LNG Price • A significant reduction in the overall regulatory regime • Fiscal policy for the support of CBM. • A “one stop shop” in the Government for all permitting • Improved POD requirements for CBM 10
~ Terima Kasih ~ 11
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