BP Makes Headway in Indonesia for CBM-to-LNG Production

Location of the Tangguh LNG Project
(Click to Enlarge)

BP announced that a consortium led by its joint venture VICO -- owned jointly by BP and ENI -- has signed a production sharing contract (PSC) with the Government of Indonesia for the exploration and development of coalbed methane (CBM) resources on the Sanga-Sanga block in East Kalimantan, Indonesia. VICO has been producing conventional gas resources from the Sanga-Sanga block for over 40 years, and the signature of this PSC is expected to mark the first significant development of CBM in Indonesia.

Indonesia has extensive coal reserves which have been estimated to hold up to 450 trillion cubic feet of coalbed methane. As yet there is no commercial CBM production in the country.

Andy Inglis, BP's chief executive of exploration and production, said, "BP is committed to bringing our technology and experience to help unlock Indonesia's great coalbed methane potential. Alongside the Tangguh LNG project in Papua, this important new access to Sanga-Sanga's CBM resources will allow BP to continue to grow our LNG production in Indonesia and underlines Indonesia's continuing significance to BP."

The PSC covers an area of around 1,700 km2 in the Kutai Basin, East Kalimantan. Preliminary studies on the block suggest it has a CBM resource potential of at least 4 trillion cubic feet of gas - further appraisal will closer define this potential. The PSC overlays the same acreage as the existing Sanga-Sanga conventional PSC, which has extensive gas production infrastructure already in place with access to markets internationally through the Bontang LNG plant as well as to local customers. This existing infrastructure is expected to allow rapid and efficient development of CBM to production.

BP Indonesia President William Lin said, "Combining BP's deep CBM expertise with VICO's long experience will open a new chapter for Sanga-Sanga, translating its significant CBM potential into material levels of gas production. With VICO's existing knowledge and infrastructure, we expect production to begin rapidly -- in a very few years -- and its supply to Bontang will enable Indonesia to become the world's first CBM-to-LNG producer."

BP is a global leader in the technology, development and production of CBM. It has over 30 years of operating experience in major CBM projects, primarily in the San Juan basin in Colorado and New Mexico, USA, where the company currently produces around 650 million cubic feet of CBM a day.

The Sanga-Sanga CBM PSC was awarded to a consortium comprising VICO (7.5 percent and operatorship), BP (26.25 percent), ENI (26.25 percent), VIC (15.625 percent), Opicoil (20 percent) and Universe Gas and Oil (4.375 percent). VICO and VIC are joint ventures owned 50:50 by BP and ENI, giving each company a total 37.8 percent interest in the contract.

The award of the contract follows two years of joint efforts by VICO and its partners, including a joint study of the PSC area. An appraisal program will determine the CBM production capacity of the block. The consortium will pay a signature bonus of US $4 million, and will now start work towards delivering the US $38 million work program commitment.


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