Dart Energy updates Indonesia CBM ops
Wednesday, October 27 2010 - 11:31 AM WIB
Indonesia market overview
Indonesia has Asia?s third largest population, and in areas of high population density (especially the island of Java) there is an energy supply-demand imbalance, with domestic oil and gas demand growing strongly but production declining. In other areas, significant gas intensive industries exist, such as the Bontang LNG plant in Kalimantan, which is amongst the world?s largest LNG production facilities.
The Bontang LNG plant is currently operating significantly below capacity due to shortages of gas feedstock. The estimated gas shortfall in Indonesia is c.900 mmscf/day. Accordingly, Dart Energy believes that Indonesia has a significant and growing market for natural gas, including CBM, although a specific plan needs to be developed for each Indonesian ?sub-market?, given that Indonesia is geographically comprised of many islands, and each has unique gas demand, supply and infrastructure considerations.
Indonesia has vast coal deposits and there are many areas with potentially large gas and CBM reserves, scattered across the entire Indonesian archipelago. Gas supply prices in Indonesia have increased sharply over the last few years but still remain at levels about one third that of oil-price equivalent.
Indonesia CBM market overview
Indonesia is considered to be one of the most CBM resource rich countries in Asia. Estimates of resource base vary, although a government estimate of 453 Tcf is often quoted.
Dart Energy has focused its activities in Indonesia in two regions -South Sumatra and Kalimantan- which Dart Energy consider to represent the best prospects for establishing a successful CBM business in Indonesia. These Two regions are estimated to account for 60% of Indonesia?s CBM resources.
They also have developed gas infrastructure and established local and export gas markets and are, for different reasons, experiencing gas supply-demand imbalances.
South Sumatra is proximate to Java, the main population centre of Indonesia (over 120 million people), which is energy and gas short. Pipeline infrastructure already exists to transport gas from South Sumatra to this market.
East Kalimantan is short of gas. In particular, the Bontang LNG plant is operating at well below capacity due to declining conventional gas supply. Kalimantan has highly developed coal infrastructure as well as gas pipeline infrastructure, primarily servicing the Bontang LNG plant.
Dart Energy?s strategic themes for Indonesia
Dart Energy?s Indonesia strategy has the following primary themes:
- a focus on two specific regions of Indonesia with extensive coal resources and attractive technical and business characteristics for CBM, being the South Sumatra and Kalimantan regions;
- a focus on establishing and maintaining partnerships with major oil, gas and coal companies who can deliver in-country expertise and assist with access to tenements;
- in Kalimantan, an LNG focused strategy given the principal user of gas in that region is the Bontang LNG plant;
- in Sumatra, a local and West Java market focused strategy where there is considerable supply/demand imbalance; and
- a tong-term strategy to be an industry consolidator given the relatively high number of smaller CBM blocks awarded and the widely dispersed current ownership of those blocks.
Sangatta West PSC
The Sangatta West block covers 77 sq km and is located in Kalimantan, Indonesia, approximately 50km north of the Bontang LNG plant. There are a number of active coal mines in proximity to the PSC area. The block is subject to a 30 year PSC under which Sangatta West CBM Inc will explore the block for CBM. Under the PSC, SWCI has a 48% participating interest in the block and is the operator with PT Pertamina (Persero) holding the remaining 52% participating interest.
Dart Energy has farmed in to the block by acquiring a 50% equity interest in SWCI, such that Dart Energy has a 24% underlying interest in the Sangatta West project. The balance is held by Ephindo-llthabi CBM Holding Inc, a privately held Indonesian CBM company. Dart Energy and Ephindo are jointly operating the block through their joint ownership of SWCI, with Dart Energy having primary responsibility for technical and operating issues.
Exploration drilling on Sangatta West commenced in late 2009. To date, three exploration wells have been drilled and initial technical results have been encouraging. Dart Energy and Ephindo are currently evaluating a number of options to establish a pilot to power project, which would lead to early commercialisation of the resource on the block. Dart Energy is targeting reserve certification at Sangatta West during 2011. Ultimately, should there prove to be a resource of sufficient scale, export of the gas to the Bontang LNG plant would create considerable upside in both offtake volumes as well as pricing. Pertamina has estimated there will be as many as two trains of latent LNG capacity at the plant in the coming years.
The Sangatta West block currently has 0.59 Tcf of gross OGIP and 0.31 Tcf of gross 2C resource as certified by Netherland, Sewell & Associates Inc.
Tanjung Enim PSC
Dart Energy holds a 45% participating interest in the Tanjung Enim PSC in South Sumatra, over an area of approximately 308 sq km, together with partners PT Bukit Asam, a local coal mine owner and operator (27.5%) and Pertamina (27.5%). Dart Energy is the operator. The block has good gas prospects and is close to the main South Sumatra pipeline. All parties to the PSC are currently finalising the joint operating agreement.
Dart Energy plans to commence a six well exploration drilling program at Tanjung Enim during the latter half of 2010.
The Tanjung Enim block currently has 0.47 Tcf of gross OGIP and 0.3 Tcf of gross prospective resource as certified by Netherland, Sewell & Associates Inc.
Indonesia business development activity
Dart Energy is pursuing a number of business opportunities in Indonesia that include applications for new PSCs and farmin agreements.
A joint evaluation study of the Kebur block, covering 1,250 sq km in South Sumatra, was completed in the first half of 2010. This study was undertaken with Medco Energy, an Indonesian oil and gas company, and a PSC application has been made to the Indonesian Government which is currently pending.
Dart Energy expects to be awarded the PSC licence for the Kebur block, and is targeting this to occur by the end of 2010.
In South Kalimantan, Dart Energy conducted a joint evaluation study with PT Adaro covering over 3,000 sq km for three blocks - Tanjung-1, Tanjung-2 and Tanjung-3 - which overlap and are adjacent to the Adaro coal mining areas. An application for up to three PSCs covering these areas been submitted and is pending approval from the Indonesian Government.
Dart Energy expects to be awarded all or some of these PSC licences, and is targeting this to occur by the end of 2010. (end of excerpt)