Indonesia signs four contracts for unconventional oil and gas exploration

Map of indonesia
Source: DollarPhotoClub

On Friday, Indonesia – which exited OPEC in 2009 due to its declining oil production and rising domestic demand – signed twelve oil and gas cooperation contracts; four of them for unconventional oil and gas, the portal Natural Gas Asia reported.

The government in Jakarta is hoping to kick-start shale exploration to boost natural gas production in order to meet its energy export obligations and earn revenues through international market sales. Despite ranking as the 13th largest holder of proven natural gas reserves in the world, natural gas shortages caused by production problems and rising consumption forced Indonesia to buy spot cargoes of LNG to meet export obligations in recent years.

To expedite shale exploration, the Indonesian government initiated four shale gas study projects in 2012.

By December 2013 two shale gas PSCs for the Sumbagut block in North Sumatra were awarded, both to the state-owned oil and natural gas company Pertamina. The Sumbagut block is estimated to contain about 19 Tcf of potential shale gas resources. This was followed in the summer 2014 by the entrance of New Zealand Oil & Gas along with Canada’s Bukit Energy and Pacific Oil & Gas Ltd into Indonesian shale market, when the consortium won the tender to explore the Kisaran block in North Sumatra.

Also, it was reported that to secure natural gas supply, Pertamina is planning to buy into shale deposits in the USA, Canada and South America, as well as in LNG producing assets in Australia, East Africa and Asia. Pertamina’s stake in upstream shale companies would have the additional benefit of giving the company access to the necessary know-how that could be used to develop unconventional gas reserves in Indonesia.

EIA estimates that Indonesia possesses 46 Tcf of total recoverable shale gas resources. It is, however, estimated that drilling for shale in Indonesia can be as much as four times more expensive than in the U.S. because the deposits are far from demand centres and infrastructure needed to transport the gas. This was deemed a serious obstacle to exploration even before low crude oil prices made even easier accessible resources uneconomical.

Despite this unfavourable situation, Indonesian government estimates that commercial shale gas production will become a reality by 2018.

The contract for the four unconventional working areas are:

 1 MNK Kisaran Riau – North Sumatera Konsorsium Pacific Oil & Gas (MNK Kisaran) Limited –
Bukit Energy Resources Barumun Pte. Ltd. – NZOG MNK Kisaran PTY  Limited
 2 MNK Sakakemang South Sumatera Selatan Konsorsium Bukit Energy Resources Sakakemang Deep Pte. Ltd. –
PT. Pertamina Hulu Energi MNK Sakakemang
 3 MNK Selat Panjang Riau Petroselat NC Ltd.
 4 MNK Palmerah South Sumatera Konsorsium Bukit Energy Resources Palmerah Deep Pte. Ltd.–
NZOG MNK Palmerah Pty. Limited –PT. Surya Selaras Sejahtera MNK Palmerah –

Source: Natural Gas Asia, Energy Information Agency

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