CBM Asia Plans to Commercialize Resource in Kutai West PSC in Kalimantan

CBM Asia Development Corp. (CBM Asia or the Company), a Canadian-based unconventional gas firm with significant coalbed methane (CBM) exploration and development opportunities in Indonesia, announced Friday plans for the Kutai West Production Sharing Contract (PSC) development in Indonesia.

CBM Asia’s primary goal for 2014 is to commercialize the Kutai West PSC in East Kalimantan, Indonesia, located near the Bontang LNG (liquefied natural gas) export facility. Achieving early-stage commercial production will help unlock the value of this asset, which is situated close to high-priced Asian gas markets.

705 Bcf Near Bontang LNG Facility

CBM Asia holds an 18 percent working interest in the Kutai West PSC, representing 705 billion cubic feet (Bcf) of recoverable prospective resources net to CBM Asia from the total 3.9 trillion cubic feet (Tcf) estimated by an independent audit conducted in 2013 by Netherland, Sewell & Associates, Inc.* Kutai West is regarded as one of the best and commercially most advanced of the more than 50 awarded CBM blocks in Indonesia.

Kutai West is adjacent to the Sanga-Sanga PSC, where VICO (BP and partners) is commercially producing and selling CBM for power generation and gas to the nearby Bontang LNG facility. As VICO notes: “This is the first time in Indonesia that any CBM facilities have produced and sold gas and represents a major milestone in the exploration of CBM potential.”

Kutai West will produce from the same coal seams as at Sanga-Sanga. To date, the Company and its partners have drilled four CBM test wells on the block, verifying thick coal seams (average 105 feet) with high gas content (average 300 cubic feet/ton; dry, ash-free basis) and gas saturation (close to 100 percent), as well as 5-mD permeability.  The KWCBM-01 well is currently being dewatered, venting produced gas from the flare stack, which is a key first step towards larger scale production.

Management’s main focus this year is to initiate commercial gas production at Kutai West with a 5-well pilot, followed by a larger commercial scale 25-well development (total 30 wells). To this end we have reached consensus with our partners to sell the produced gas to locally installed gas engine power generation units selling power into the PLN grid and later to feed gas into the gas-short Bontang LNG export network. Anticipated gas prices are $8 per million cubic feet (Mcf) or higher. Bontang exports LNG to Japan and other Asian rim importers, which are critically short of natural gas.

Phase 1: Under Phase 1 four new CBM wells will be drilled near the existing KW-CBM01, forming an effective dewatering pilot on tight 40-acre spacing to accelerate gas production and demonstrate commerciality. Produced gas estimated at 2.0-2.5 million cubic feet per day, or MMcf/d (gross) would be sold to a power station developer/operator and PLN for on-site power generation at about $8/Mcf. The government of Indonesia strongly supports such commercialization prior to formal Plan of Development (POD) approval. Total capex for Phase 1 is estimated at $7.16 million, comprising four wells at $1.46 million/well cost (drilling & completion, water management, and surface facilities) plus $1.32 million in engineering and overhead costs. An additional $200,000 would be required for field operating expenses during the first year. CBM Asia’s share of the Phase 1 costs is estimated at $2.15 million.


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