CBM Asia acquires interest in S. Sumatra CBM block

Canadian firm CBM Asia Development Corp. announced Monday that it has signed a Letter of Intent (LOI) with Batavia Energy Inc. to acquire 48 percent of South Sumatra Energy Inc. (SSE) which, together with PT Medco CBM Sekayu (Medco), holds Sekayu coal-bed methane (CBM) PSC a 58,349 hectare in the South Sumatra Basin.

Under the LOI, the CBM Asia will earn a participation interest in Batavia's 31.5 percent working interest in the Sekayu PSC, and has committed to exploration and appraisal expenditures over the next three years to determine the commercial feasibility of CBM production.

Closing of the LOI is subject to, among other things, completion of the company's due diligence review, execution of definitive agreements and applicable third party consents and approvals, the company said.

Awarded May 27, 2008, the Sekayu Block PSC marked the first time the Government of Indonesia awarded a PSC for the exploration and development of CBM Indonesia.

PT Medco Energi Internasional Tbk, operator of the Sekayu Block PSC, has forecast that the first commercial CBM production will begin in 2011 and peak in six years.

The South Sumatra Basin, the largest CBM basin in Indonesia, is estimated to contain in-place resources of approximately 183 TCF.

CBM Asia is an unconventional gas company with significant CBM exploration and development opportunities in Indonesia. The company has 24 percent net participation interest in a PSC for CBM on a 58,349 hectare block located in the South Sumatra Basin where initial exploration drilling of a production test well is scheduled to commence in the second half of 2009. The Company also has an 18 percent net working interest in a PSC for CBM on a 76,000 hectare block located in the Kutai Basin of East Kalimantan.

As geotechnical lead, the company is responsible for directing a US$5.6 million exploration and appraisal program over the next three years (to November 2011), to determine commercial feasibility of CBM production for the Kutai West PSC and submit a Plan of Development to the Government of Indonesia. The Company has 40 percent net working interests in a second 56,300 hectare block also in the prolific Kutai Basin. (alex)