Pertamina signs country?s first shale gas contract

State owned oil and gas firm PT Pertamina signed on Wednesday a production sharing contract (PSC) to explore and develop shale gas potentials in northern Sumatra, making the firm the pioneer in the shale gas industry in the country.

The shale gas PSC, the country?s first, was signed during the annual 37th Indonesian Petroleum Association (IPA) conference in Jakarta.

The PSC covers a vast area in Northern Sumatra, familiarly known as Sumbagut.

Pertamina?s President Director Karen Agustiawan said in a statement the decision to invest in shale gas was made by the firm following a joint study conducted by the firm since 2011 together with a governmental team.

The MNK Sumbagut block is believed to hold 18.56 trillion cubic feet (TCF) of shale gas), while Indonesia is estimated to hold 574 tcf of shale gas. The block will be operated by PT Pertamina Hulu Energi (PHE) MNK Sumbagut. MNK, an Indonesian acronym, stands for ?migas non konvensional? or non-conventional oil and gas.

Pertamina targets maiden production to occur in the seventh year operation or six years after exploration with a production rate of 40-100 mmscfd.

?Pertamina is committed to investing US$7.8 billion through the MNK Sumbagut contract period,? Karen said.

Editing by Johannes Simbolon