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POTENCIES AND CONSTRAINTS OF SHALE GAS AS A LOW


COST ENERGY WHICH TRIGGER INDUSTRIAL
REVOLUTION IN INDONESIA

Yusuf Anugerah
1
, Jeanett Nadia
2

Geological Department, Faculty of Earth Science and Energy, Trisakti University
Kyai Tapa St. No. 1 Grogol, West Jakarta, Indonesia


ABSTRACT
Energy is a fundamental need in globalization era besides foods, clothing,
and residences. With sufficient number of low-cost energy, generally industries
will be more advanced. Although that does not lower the price directly, but at
least it decreases national energy scarcity which causes dependency to other
nations. In the center of competition of conventional energy in Indonesia which
production is decreasing day by day, there are some inventions of unconventional
energy, one of them is shale gas. Shale gas is a natural gas which is contained in
shale and is generally far away below the surface. Shale gas is taken by using
horizontal drilling and hydraulic fracturing in the present day. In spite of its
advantages like smaller amounts of carbon emission compared to coal and its
occurrence in Indonesia which is estimated as high as 574 TSCF, shale gas also
has disadvantages such as difficult production methods which lead to ground
water pollution unless it is handled properly.
Keywords: shale gas, energy, industrial revolution, low-cost

SARI
Energi merupakan suatu kebutuhan yang sangat mendasar di era
globaliasasi ini selain kebutuhan sandang, pangan, dan papan. Dengan
ketersediaan energi yang murah serta berlimpah maka suatu industri pada
umumnya akan lebih maju. Meskipun hal tersebut tidak langsung dapat
menurunkan harga, tetapi setidaknya dapat mengurangi kelangkaan energi dalam
negeri yang menyebabkan ketergantungan dengan luar negeri. Ditengah
persaingan energi konvensional di Indonesia yang produksinya semakin hari
semakin menurun, hadir suatu inovasi energi non-konvensional, salah satunya
adalah shale gas. Shale gas merupakan gas alam yang terkandung di dalam batu
serpih yang umumnya berada jauh dibawah permukaan. Shale gas saat ini secara
potensial di ambil dengan menggunakan teknik horizontal drilling dan hydraulic
fracturing, yaitu perekahan buatan dengan menggunakan air sebagai media
pendorong. Meskipun memiliki keunggulan emisi karbon yang lebih sedikit
dibandingkan dengan batubara serta ketersediannya di Indonesia diperkirakan
mencapai 574 TSCF, shale gas memiliki kelemahan dari sisi teknologi produksi
yang sulit sehingga dikhawatirkan akan mencemari lingkungan apabila tidak
ditangani dengan baik.
Kata kunci: shale gas, energi, revolusi industri, murah
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INTRODUCTION

Energy is a fundamental need
in globalization era besides foods,
clothing, and residences. With
sufficient number of low-cost
energy, generally industries will be
more advanced. Although that does
not lower the price directly, but at
least it decreases national energy
scarcity which causes dependency to
other nations.
In the present day,
unconventional energy has been
developed in some countries. It is the
result of conventional energy
scarcity as well as the success story
of the United States in developing
the unconventional energy.
Unconventional energy will be
discussed in this paper is shale gas.
Shale gas is a natural gas which is
contained in shale and generally,
shale gas is contained far away
below the surface.
In the present day, shale gas
is produced by using hydraulic
fracturing method and horizontal
drilling method. Hydraulic fracturing
is a synthetic fracturing using water
as a propellant. This method is used
because shale gas is contained in
shale, a sedimentary rock which has
fine grains and low permeability.
Besides hydraulic fracturing, shale
gas is produced by using horizontal
drilling method, unless using
hydraulic fracturing method; shale
gas cannot be potentially produced.
Shale gas has been
developed in the United States since
1821. It was the first year of
developing shale gas. But,
economics and technology
conditions became very expensive
then stopped the development of
shale gas. In 1973, the United States
got oil embargo which was done by
the Middle East. Oil embargo then
triggers the research of the
unconventional energy.
Successful development of
shale gas in the US created an
impact; the price of natural gas goes
down as a result of abundant
production of shale gas. That triggers
industrial revolution in the US, low
cost energy makes investors
interested in investing stocks in
industrial sector.


RESEARCH METHOD

This research was conducted
by collecting shale gas data, both
globally and regionally. These data
compared to get conclusions.
Hypothesis of this research is the
industrial revolution of Indonesia can
be triggered by potential of shale gas.


FORMING OF SHALE GAS

Shale gas is formed in shale,
a rock that contains high organic
matters. Shale gas can be formed if
the shale is located in a deep depth
so the temperature is high enough to
form gas (Figure 1). Shale is a
sedimentary rock which consists of
clay and silt grain size characterized
by planar lamination (Potter, 1981).
Gas that is contained in shale is
divided into two types; those are
sorbed gas and free gas (Farizi,
2014). Sorbed gas is a gas that is
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absorbed in organic matters, free gas
is a gas trapped in cracks or pores.
Permeability of shale is very low,
which is <10 mD.

Figure 1. Graph that shows
relationship between petroleum
elements with depth and temperature
(after Conrford, 1998).

Based on shale gas research
done in North Sumatra, shale gas-
bearing shales are deposited during
transgression phase in euxinic to
pelagic environment (Ruswandi et al,
2011).


POTENTIAL SHALE GAS
BASINS IN INDONESIA

In Indonesia, shale gas is
contained in conventional oil and gas
basins shale gas and conventional oil
and gas have same petroleum system
concept. A thing that differs between
them is, in shale gas system, the
source rock is always shale (Figure
2).

Figure 2. Location of natural gas
occurrence (Pearson et al., 2012).

Some shale gas potential
basins in Indonesia are Central
Sumatera Basin, South Sumatra
Basin, West Java Basin, East Java
Basin, Kutei Basin, Barito Basin, and
Tarakan Basin. Beside basins, there
is a non-basin formation which
contains abundant shale gas, the
Klasafet Formation. The age of shale
gas bearing formations are generally
from Late Oligocene to Late
Miocene. In those ages, tectonics are
developed in Indonesia so they
become position determinant of shale
depth that forms shale gas in high
temperature. The occurrence of shale
gas in Indonesia is estimated reaches
574 TSCF (Table 1).

Table 1. Table of shale gas potential
in basins of Indonesia (BPPT, 2013).

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SHALE GAS PRODUCTION
TECHNIQUES

Shale gas can be produced
potentially and economically using
the technique of horizontal drilling
and hydraulic fracturing (Figure 3).
These things need to be done
because the permeability of shale is
<10mD, its very small value of
permeability (Figure 4). Based on
this if it is done by the vertical
drilling, quantity of production is not
economic. Therefore its necessary a
technique that aims to increase the
value of permeability. According to
Fontaine (2008) the material
contained on hydraulic fracturing
technique are 98-99% of water, 1-
1.9% of proppant, 0.025% of friction
reducer, 0.005-0.05% of disinfectant
(biocide), and 0.2-0.5% of corrosion
inhibitor. The mixing material
injected in bore hole with high
volume and resulting fracture of
shale rock.


Figure 3. Technique of horizontal
drilling and hydraulic fracturing for
production of shale gas (King, 2012).

Figure 4. Permeability range of
producing formations and where
fracturing is required (King, 2012).


THE ECONOMIC VALUE AND
INDUSTRIAL REVOLUTION

One of implications of shale
gas production in Indonesia is
reduction of conventional energy
import. Self-reliance in managing the
production of shale gas in large
amounts will foster industrial sector
in the country. That is because
abundance of energy reserves in the
country that led to increasingly large
amounts of energy prices in the
country. Low-costness that energy
would have utilized by industrial
sector.
Based on data courtesy of
Agency for Assessment and
Application of Technology (BPPT),
final energy consumption (including
biomass) in the span of 2000-2011
increased from 764 million-BOE in
2000 be 1044 million-BOE in 2011
or increased an average of 2.87% per
year. The final energy consumption
was not considering other petroleum
products in the industrial sector.
Users of final energy consumption in
2000 were households sector
(38.8%), industrial sector (36.5%),
transportation sector (18.2%),
commercial (3.2%), and others
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(2.4%). During the period 2000-
2011, transportation sector had the
largest rate of growth per year
reaching 6.47% per year, followed
by commercial sector (4.32%),
industrial sector (3.05%), and
households sector (0.7%). While the
others sector declined with rate of
decrease -1.47% (Figure 5).


Figure 5. Final energy consumption
per sector (BPPT, 2013).

Final energy consumption by
type for the year 2000-2011 still
dominated by fuels (avtur, avgas,
gasoline, kerosene, diesel oil, and
fuel oil). During the period, total
fuels consumption is relatively
constant with a range of 312-364
million-BOE, but having a different
composition from one type of fuels
with other fuels types.
In 2000, diesel oil was the
largest consumption (42%), followed
by kerosene (23%), gasoline (23%),
fuel oil (10%), and avtur (2%). But
in 2011 the order turns into diesel
and biodiesel oil (46%), gasoline
(42%), avtur (6%), kerosene (3%),
and fuel oil (3%).
Coal consumption increasing
rapidly from 36.1 million-BOE in
2000 became 144.6 million-BOE in
2011 or increased an average of
13.4% per year. All the coal
consumption used to meet the energy
needs of industrial sector, primarily
by cement industry and the industry
that diversifying energy along with
more expensive the price of fuels.
These industries include textiles,
paper, and more.
Consumption of natural gas
increased relatively limited during
that time. Natural gas in a clean and
low-cost energy as well as badly
needed by the industrial sector.
Limitations of gas transmission and
infrastructure in the country cause
supply of natural gas to meet the
needs of industry are limited.
Production of natural gas is currently
still serve as the mainstay of the
national export. While consumption
of electricity during the year 2000-
2011 experienced an average growth
of 6.5% per year, still lower than
coal (13.4%) and Liquefied
Petroleum Gas/LPG (14.6%).
National electrification ratio in 2011
reaches 73% and electricity
consumption per capita in 2011 is
still low (about 660 kWh/capita)
(Figure 6).


Figure 6. Final energy consumption
per type (BPPT, 2013).
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With the ever-increasing
population growth that are
experiencing growth rates ramps
(Figure 7), then it should be
supported by an increase in energy.
Unconventional energy is one of
alternatives for keeping the stability
of national energy supply. Currently
with abundant supplies of shale gas
when it produced in large, shale gas
economically worth and it is cheaper
than fuels. This thing will result in
changes to the balance sheet in the
industrial sector with energy
consumption amounted to 37.2% and
will continue increase. The greatest
consumption in biomass and fuels
will turn to shale gas.


Figure 7. Population and gross
domestic product of Indonesia
(BPPT, 2013).

The potential reserve
unconventional oil and gas Indonesia
according to Ministry of Energy and
Mineral Resources (ESDM) are 1037
TSCF. The reserve are derived from
shale gas amounted to 574 TSCF and
CBM 453 TSCF. While conventional
oil and gas at this time according to
British Petroleum (BP) statistical
review of world energy in 2011,
Indonesias crude oil reserve
(potential and proven) declined about
19% from 9.6 billion barrels in 2000
to 7.8 billion barrels in 2010. While
the amount of proven reserve is 4.2
billion barrels in 2010, down 17%
from 2000. Natural gas reserve
(proven) are 108.4 TSCF, increased
approximately 14% from 2000.
Based on these data it can be
concluded the national energy
security depends heavily upon the
unconventional oil and gas if doesnt
want to import (Figure 8).


Figure 8. Indonesian Import Energy
(KESDM, 2012).

Seen from the perspective of
price, domestic fuels price relatively
increase per year (Table 2), that may
cause by reducing production from
year to year (Figure 9), also
following the global oil price. In
LNG (Liquefied Natural Gas), the
price is generally different in every
region. Asias LNG price generally
associated with the price of JCC
(Japan Crude Oil), the difference
with Europe that followed the price
of crude oil Brent or US whose
depend on natural gas trade which
takes place at Henry Hub (Figure
10). When compared with the
average selling price of domestic
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gas, the global gas price tend to be
50-60% more expensive (KESDM,
2013). In coal, the prices tend to rise
(Figure 11). These prices are very
dependent upon the needs of global.
While the price of shale gas that non-
conventional energy is cheaper than
Japan LNG and global crude oil
(Figure 12).

Table 2. Table oil price in 2011
(KESDM, 2012).



Figure 9. Domestic oil production
(KESDM, 2012).


Figure 10. World gas prices in 2000-
2011 (KESDM, 2012).


Figure 11. Indonesia coal price
reference (KESDM, 2012).


Figure 12. Natural gas prices in four
cases shale gas resources (US Energy
Information Administration, 2012).





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SHALE GAS DEVELOPMENT
CONSTRAINTS IN INDONESIA

Some of obstacles that faced
by Indonesian Government and
investors to develop shale gas in
Indonesia, such as:
1. Technology, to be able to
produce shale gas advanced
technology is needed so that
the amount of production is
in economic value.
2. Environment, production of
shale gas in prediction can
pollute ground water caused
by hydraulic fracturing
technique, because this
technique uses a mixture of
chemicals and fresh water in
large amount.
3. The low price of natural gas,
this factor is a major
constraint when not taken
into account carefully. With
low natural gas prices, shale
gas production would not
provide a significant
reduction of natural gas price.
4. The parties which do
monopoly in oil, gas, and
coal sector. This constraint is
one of most influential
factors when looking to
develop shale gas. With the
rise of shale gas oil, gas, and
coal commodities will
experience a declining in
price and the graph might
always goes down, while
production of shale gas is
increasing. That makes the
regulation of shale gas is
complicated.

CONCLUSION

Some of conclusions that can
be explained from this paper, such
as:
1. The permeability of shale is
very low (<10 mD),
therefore, drilling techniques
should be done are horizontal
drilling and hydraulic
fracturing, so that the
quantity of shale gas taken is
economic.
2. A shale gas-bearing shale is
deposited in euxinic to
pelagic environment.
3. The age of a shale gas-
bearing formation is about
Late Oligocene to Late
Miocene in Indonesia.
4. In the present day, it could be
said that shale gas is already
needed in Indonesia because
the demand of energy is
increasing while production
of conventional energy is
ever decreasing, also
compared to fuels, shale gas
costs much lower so
Indonesia can stop
dependency of fuels import,
but the environment of shale
gas production is feared to
pollute ground water. Before
making decision in using
shale gas as an alternative
energy, the techniques to
overcome the bad effects
should be learned first.




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