SPE-186343-MS

Review of Coal Bed Methane Prospect in Indonesia

C. Irawan, D. Nurcahyanto, I. F Azmy, J. A. Paju, and W. M. Ernata, SKK Migas

Copyright 2017, Society of Petroleum Engineers

This paper was prepared for presentation at the SPE/IATMI Asia Pacific Oil & Gas Conference and Exhibition held in Jakarta, Indonesia, 17-19 October 2017.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
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Abstract
Indonesia has began the unconventional operation since 2003, VICO and MEDCO as a pioneer in Coal
Bed Methane (CBM) working Area. Since 2005, two (2) big company has begun study and survey seismic
operation for Kutai Basin (VICO Indonesia) and South Sumatera Basin (MEDCO E&P). The results are
neededmore survey seismic and massive drilling well, which the needs of study and evaluation to get more
comprehensive calculation on gas methane reserves and the strategy of Exploration and Development phase
on each basin
The success ratio by numbers of drilling operation of CBM wells in Kutai Basin and Sumatera Basin
were not significantly good as early prediction. This condition made some CBM contractors working areas
has to leave and do farm out from the area. Nowadays, by counting the total of Unconventional Working
Area in Indonesia, the active operation area are around 40 places in Sumatera and Kalimantan.
The slow down activities of CBM operation are caused by the minimum number of success ratio to
discovery and to produce Methane Gas; challenge for the contractors to fullfill the commitment which where
list stated on Production Sharing Contract (PSC). Other obstacles are the permits, where contractors get
more difficulties to do all the activities, such as land acquisition permit (IPPKH if needed), environment
permit (UKL/UPL), Rig License permit, procurement process and else.
Nowadays, Government of Indonesia has given more simplication for contractors in Regulatory area,
Procurement Policy and Operating Procedure Guideline to do CBM activitiesin Indonesia.
With several breakthroughs have been taken by the Government of Indonesia, in future prospect CBM
activities will be expected back to normal with more efficient by collaboration of government and contractor
for technical and technology in exploration and drilling activities. By the results of Methane Gas discovery
increased the Total Reserves and Energy Resilience of Gas in Indonesia.

Introduction
At the moment, CBM activities in Indonesia are in slow down period caused by the impact of oil price. But
some Big CBM operator still do exploratory and corehole well. Several breakthroughs have been taken by
the Government of Indonesia, in future prospect CBM activities will be nothing if the operator were not
fulfill the commitment activities in next 5 years from now on. By the end of year 2017, some CBM working
area in Indonesia will have termination treat for 6 and 8 years contract if they don't fill the full commitment
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work. Which means that some CBM working area must be released or automatically terminated by the
government of Republic Indonesia.
Nowadays there are many ways to drill out the CBM well, from conventional method to the simplest one.
In early era of non-conventional energy (CBM for this moment), contractors are used standard conventional
drilling operationto drill a well at target depth of formation at 500 – 800 meter and highly operating cost.
Some obstacles are previously mentioned on abstract could be the main caused why the operator could not
full fill all the commitment work at exploration time. Below shows the CBM Working area conditons since
2003, unconventional operation in Indonesia. Whereas from 51 exploration contract area of CBM, only
17% contract area (figure 1) has fulfill the commitment others having some difficulties or challenges to do
the commitment. Those obstacles details can be shown on figure 4.

Figure 1—Non-conventional Contract Area Condition (SKK Migas, 2016)

Indonesia CBM Contract Area

Since 2003 the new era of non-conventional there are many contract area of non-conventional (CBM area)
has been signed by the operator and Indonesian Government. Indonesian non-conventional area prospect
divided by two (2) area, which are Sumatera and Kalimantan area (details on figure 2). Those areaa are the
most prospects of Coal seams that could be found, refer to previous well has been drilled. Nowadays, the
proven resources are to small value if compared to estimate calculation prospects that have been published
on 2003.
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Figure 2—Indonesian Basin Maps

Geologically, coal seam target in Sumatera Basin and Kutai Basin differences only the depth and target.
The target of coal seams in Sumatera are shallower than in Kalimantan area (see figure 3). By the operation
histories since 2003 from each area of those coal seams basin the cost per well are slightly high, it caused
the drilling method to drill the well using Oil & Gas well standard. It one of the challenges for the operator
to drill a new well on those areas of coal seams in Sumatera and Kalimantan.

Figure 3—Sumateraand Kalimantan CBM Potential Target and Cost per well (SKK Migas, 2016)

Obstacles
Operators of CBM Area are very difficult to fill some commitment which there are some obstacles finding
while they are preparing the operation. On figure 4 shows some obstacles which operator could not do the
operation, most of them are non-technical obstacles such as stakeholders, Internal management of Operator
and Money.
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Figure 4—Some Operator Obstacles and Challenges finding

From these obstacles, we were mapping the biggest factors or obstacles that operator could not do the
operation and fill the commitment. One of the biggest factor was internal condition of Operator where
financial is the most common thing. Others, Permit and social community took the second place for the
challenge of doing the CBM operation in Indonesia.
Since 2003 operation of CBM, the operator having problem with the SOP and regulation of doing it. The
challenges are the CBM well must follow oil & gas operation standard, which it high cost, high technology
and more permits must be done for requirement if compared using mining operation standard. It made the
operator of CBM area need more invest their money on those things.

Breaktrough
There are some good point and breakthrough from Government to minimize the obstacles, which has been
discused among CBM operators, Ditjen Migas and SKKMigas. The breakthrough are not only for technical
aspects, such as financial, procurement procedures and regulatory aspects have been made.
Since 2016, there are many things has been done by the government for CBM operation area in Indonesia,
like on regulation rules which Ministry of Energy has declare ministry regulation to accelerate the CBM
operation. On procurement process, SKK Migas has made a decision for the operator to use Indonesian
national products to increase the National Capacity building and it is a must. Other is the simplification
of procurement process and do shared facilities and material assets transfer management. On Standard
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operating procedure (SOP) side, there are some adjustment on technical operation and simplified the
rules to drill a CBM well. It can be shown on table. 1 the differences of drilling operation technology
between conventional and non-conventional (CBM) well, which has been reviewed by the expert on drilling
operation.below.

Table 1—Comparison Standard Drilling Operational Oil & Gas Well and CBM Well

Besides those simplified of Operation Procedure, the operator must do optimization for the cost and
effective of drilling operation in Indonesia. Some operator has been done for the strategy how made the
CBM project to be more efficient, such as:

• Review the most prospect area to be drilled and produced

• Do batch drilling (massive operation) in the most prospect area.

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• Do strategic plan before execute the project.

• Do IPM contract with lump sum type of contract.

• Use the low technology of material for Casing, Bit, etc.

• Simplified the well design as simply as coal mining well.

• Using the hydraulic drill rig with minimum Horse Power as required.

• Using Water Based Mud type KCl polymer with min. Chemical added.

By the list above, on figure 5 is a sample how the strategic plan to review the CBM projectbefore
execution. On the diagram can be shown that the low cost is the most important thing on this strategic plan,
which related to operator financial aspects. Besides that, massive operation could be the best practices once
the prospect area defined. It could made the operating cost cheaper than operating 1 (one) or 2 (two) well
in a project.

Figure 5—Operator Strategic Plan Be More Effective Project

The production of Methane gas is the purpose of its project, which once it produce, it must be calculated
does it commercially to be developed or not. Once the area of CBM commercially is proven, the operator
must do the pilot project drilling then sign the government to involve the project literally.
On figure 6 below shows the breakthrough has been made by the operator and government as a
stakeholder. As we can see there is a Ministry Regulation which has been declared to accelerate the CBM
operation. On Procurement side there is a breakthrough that operator must use National products to increase
the National Capacity Building, the procurement process has been simplified, and sharing facilities and
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material assets transfer. For the Standard Operating Procedure side which has been detailed on table. 1
which the CBM operation standard has been simplified than conventional way of drilling.

Figure 6—Some Breakthrough has been made for CBM Operation

Conclusion & Suggestion

Many CBM Area in Indonesia are highly prospect for methane gas to be explored which many of them were
not explored by the operator. Besides the production test are needed to know the flow rate and permeability
of the coal on each seams. And some breakthrough has been made by the operator and Indonesia government
to make the CBM exploration industries more challenges to be done. Here are some suggestion for the
operator who's almost not doing the operation or fill the commitment, are:

• Using the strategic plan to make the CBM project more efficient and effective.

• Using CBM operation standard instead conventional operation procedure.

• Simplified the procurement process.

• Using the sharing facilities and material asset transfer nearby the CBM Area Operation.

• Stakeholder to be involved to prevent any obstacles from government side.

• Use the best engineering practices to make the project more efficie
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Acknowledge
The authors wish to thank the management of SKK Migas for permission to publish this paper. The authors
also wish to acknowledge all the parties who kindly provide valuable works and contributions to support
the preparation and presentation of this paper.

References
Laporan Tahunan SKK Migas Tahun 2016. (2017, June 15). Retrieved June 15, 2017, from http://skkmigas.go.id/images/
upload/file/AR_SKK_MIGAS_INDO_2016.pdf
Permen ESDM - Tentang Percepatan Pengusahaan Migas Non KonvensionalNumber 38 (2015). Indonesian Minister for
Energy and Mineral Resources.
Presentation Material "Masa Depan Migas Non Konvensional Di Indonesia," presented at Sarasehan Migas Non
Konvensional, 18 November 2016, Bandung.