Gulf-Times: Indonesia looks to coal seams to boost gas output

Published: Monday, 9 April, 2007, 09:20 AM Doha Time

DOHA: Indonesia plans to sign production deals in the next two months with firms, including Royal Dutch Shell, to extract gas from coal seams that could double the nation’s output, Energy Minister Purnomo Yusgiantoro said.

He said yesterday the country would start up a $6.5bn liquefied natural gas (LNG) terminal around six months early in 2008 as it strives to stem a decline in its LNG exports.

Indonesia was the world’s largest exporter of the gas cooled to liquid form for years until last year, but as output from its ageing oil and gas fields declined, fast-developing Qatar snatched the top spot.

Production of coal seam methane could help Indonesia to boost its LNG exports and gas available for power generation.

“In the next couple of months we will sign production-sharing agreements with several companies,” he said, adding Shell was one of them.

“We would use CBM (coal bed methane) for domestic consumption, then we can export more natural gas. We hope CBM can double our domestic production.”

The gas, typically trapped in the cracks of coal seams, is relatively easy to produce as it is at shallow depths, and output could be ramped up quickly once the deals were signed.

It emits less greenhouse gas when burned than coal and has gained increased prominence as an alternative energy source.

Indonesia’s total gas production stood at around 8.5bn cubic feet per day, and could be doubled, he said. Yusgiantoro did not give a time frame for that increase, but said that the country’s total gas output could rise by 25% by 2010.

The Tangguh LNG project, developed and operated by BP, will boost Indonesia’s LNG output capacity by more than 30% to 31.5mn tonnes per year, from around 24mn tonnes now, Yusgiantoro said.

“We have accelerated the Tangguh project with the cooperation of the companies involved,” he said.

“Instead of coming on line by the end of the year in late 2008, it will come on line in the second quarter.”

Indonesia will export the gas to Japan, China and Korea.

State-owned Indonesia company Pertamina aims to bring on another, smaller 2mn tonne-per-year LNG plant at Sulawesi island by the end of 2009. Japan’s Mitsubishi is building that plant, Yusgiantoro said.

The country failed to export LNG at capacity last year, shipping around 22mn tonnes. Exports would fall around 5% this year, the minister added.

“That is because of depletion. We will do our best to fulfil our contracts but some fields are depleting faster than we expected,” he said.

Indonesia has struggled to meet contractual commitments to big Asian customers because of a slump in output and increased domestic demand.

The reduced supplies, together with rising costs, have helped to push LNG prices for future delivery to record levels.

Talks over raising the Tangguh gas price to South Korea are ongoing and Indonesia hopes to complete them by the end of the year, Yusgiantoro added.

Yusgiantoro was in Doha for a meeting of the Gas Exporting Countries Forum on Monday. Speculation has been rife that the meeting would agree to form a cartel along the lines of the Organization of the Petroleum Exporting Countries (Opec), although the idea has been dismissed by ministers.

Yusgiantoro questioned whether gas exporters had enough in common to form a cartel.

“The idea is not concrete. For an organisation like that you have to have a common objective between members. Do we have that? We will see if we have any common objective. Gas is not like oil, the market is usually regional.”

He said the market was fragmented and member countries were focused on supplying different regions.

For Indonesia, he said the forum would provide an opportunity to share expertise.
Indonesia is Opec’s second-smallest producer and aims to increase its oil and condensate output from around 1.06mn barrels per day (bpd) this year to around 1.1-1.15mn bpd by 2009-2010, he said. – Reuters

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