COALBED METHANE APPLICATION

AN INDUSTRIAL PERSPECTIVE

Jakarta, Depok, 14 March 2010

Energy from Nature. For Nature

Agenda

Prospect
Utilization & Technology
Medcos CBM in Indonesia Progress and
Challenges
Conclusion
Q& A
Prospect
Introduction

Today CBM has become a commercially important energy source. In the US, CBM
production is now about 5.0 bcf/day, accounting for approximately 10% of the
domestic gas production and proven reserves. .
Both Canada and Australia have growing commercial CBM production. Other coal-rich
areas, such as China, India and Europe are evaluating CBM potential with the active
support of the local and central governments.
Globally, it is widely believed that around 1,000 tcf of coalbed methane is recoverable.
Canada, South East Asia, and the Russia/FSU region hold over two-thirds of the
resource potential. The US, Australia, and Europe also have significant potential.
In Indonesia, third party studies have conducted that there is an estimated 450 tcf of
CBM resources.
For reference, 1 tcf of gas is sufficient to meet Indonesias current domestic gas supply
needs for 250 days.
CBM World Wide
 DEPARTEMEN

ESDM

SUMBERDAYA GAS METANA-B DI INDONESIA

NORTH
TARAKAN
BASIN
CENTRAL (17.50 TCF)
SUMATRA
BASIN KUTEI BERAU
(52.50 TCF) BASIN BASIN
(80.40 TCF) (8.40 TCF)
OMBILIN
OMBILIN
BASIN
BASIN BARITO
(0.50 TCF) BASIN
(101.60 TCF)
SOUTH SOUTHWEST
SUMATRA SULAWESI
BASIN PASIR AND
BASIN
(183.00 TCF) ASEM ASEM
(2.00 TCF)
BENGKULU BASINS
BASIN (3.00 TCF)
(3.60 TCF) JATIBARANG
BASIN
(0.80 TCF)

Jumlah Sumberdaya = 453.30 TCF Jumlah Cekungan GMB = 11

(Advance Resources Interational, Inc., 2003)

DJMIGAS 040709
 CBM Medco Area

KALIMANTAN ~10.9 TCF

Nunukan Bengara
~9.1 TCF
Simenggaris
Tarakan ~1.1 TCF
KEBUR ~5.4 TCF

PETAR NURTALINA ~2.5 TCF Senoro-Toili Yapen

TANDING-IBUL ~1.5 TCF
Lematang SULAWESI
SUMATRA Rimau
SS Extension/7 - 8 TCF SEKAYU ~3.4 TCF PAPUA
PANGLERO ~0.12 TCF
Jakarta
JAVA

RIMAU ~ 2.7 TCF

Jeruk
LEMATANG ~4.4 TCF
Brantas

Medco holds ~40 TCF CBM Resources

 DEPARTEMEN

ESDM
KONTRIBUSI MIGAS TERHADAP PENERIMAAN NASIONAL
Triliun Rp.
TAHUN
2004 2005 2006 2007 2008

1. PENERIMAAN MIGAS 108,2 137,7 191,7 186,6 304,4

2. PENERIMAAN PERTAMBANGAN UMUM 9,0 17,7 29,8 37,3 42,7

3. PENERIMAAN LAIN-LAIN 0,2 0,3 0,6 1,2 2,4

TOTAL 117,4 155,6 222,1 225,2 349,5
PENERIMAAN NASIONAL 403,1 495,2 659,1 708,5 962,5

% KONTRIBUSI SEKTOR ESDM 29,1% 31,4% 33,7% 31,8% 36,3%

% KONTRIBUSI PENERMIAAN MIGAS 26,8% 27,8% 29,1% 26,3% 31,6%

TAHUN 2008
Kurs (Rupiah/US$) 8.724 9.657 9.119 9.125 9.691
ICP (US$/barel) 37 52 65 72 101
Lifting (ribu bph) 1.036 1.003 957 898 931

Migas
Penerimaan dari Penerimaan sektor 31,6%
sektor lain ESDM
63,7% 36,3%
Pertambangan
Umum
4,4%
Lain-lain
0,3%
DJMIGAS 040709
 DEPARTEMEN

ESDM
TARGET OF ENERGY MIX
(Presidential Regulation No. 5 of 2006)

Primary Energy Mix 2006 Energy Mix 2025

Hydro Power
3.11%
Geothermal Oil
Gas & CBM
1.32% 20%
Gas 31%
Biofuel 5%
28.57%

Geothermal
RE,16% 5%
Biomass, Nuclear,
Hydro Power, Solar,
Oil
Wind Power 4%
51.66%
Liquefaction Coal
Coal 2%
15.34%
Coal 33%

Energy Elasticity = 1,8 Energy Elasticity < 1

NON FOSSIL ENERGY < NON FOSSIL ENERGY/
5% New & Renewable Energy : 16 %

DJMIGAS 040709
9
Utilization & Technologies
 Typical Gas and coal Analysis needed in CBM

Desorption Test:
Measured gas content
Calculated lost gas & measured residual gas
Calculated total gas content (SCF/Ton)
Gas compositional data
Adsorption / Isotherm Test:
Measure maximum gas content (SCF/Ton)
Adsorption / isotherm with methane or CO2
Adsorption / isotherm at Reservoir Pressure & Temperature
Calculate position of Reservoir on desorption curve
Calculate critical pressure when reservoir starts to drain
Coal analysis - proximate, ultimate, coal petrography:
Moisture content
Ash & Volatile Matter
Fixed Carbon content
Hydrogen, Oxygen, Sulfur & Nitrogen content
Vitrinite reflectance
Coal maceral content
Core Sample Gas Desorption - Field Gas Desorption - Lab

Analysis Drilling & Completion

450
400 Residual
Residual Gas
350 Gas
Analysis
Gas Content, (SCF/Ton, Air-Dry)

300
250 Measured Gas
200
150
100
50
0 Lost Gas
-50
-100 Long term
-150 desorption
-200 terminated
-250 ; sample
Lost Gas Gas Composition Analysis crushed to
Lost Time 60 mesh
Gas 0.0 0.5 1.0 1.5 2.0 2.5 3.0 40.0 40.5
Analysis Square Root Elapsed Time, ( Hours)

Compression
Production
 Regulatory Requirement for CBM Development in Indonesia

Manfaat CBM & Reservoir Batubara

Dijual
Energi langsung
Lokal
Ekspor Industri; BBG;
Rumah Tangga
CH4
Nilai +
Metanol
Pupuk

CO2 Sequestration
Carbon Trading

Presented to MIGAS, Jakarta 19 July 05_K.Sani

 Regulatory Requirement for CBM Development in Indonesia

Konsep Energi Listrik Skala Kecil

Electric Power
Option is replaced with

Air
CO2 Separator
110 MW CO2 CH4

Methane Gas Engine CO2

Compressor
or Turbine
CO2 & NO2
ECBM

CH4 CO2:
CH44
CO2
CO 2 CH
4 CH4 CO2
CH4 Replacing
Coal CH4
2
CH4
Seam CH4 H 22
CO COCO2 2 4 CO2
2
CH4
NO2:
CO2 Fixed Replace
Stripping

Presented to MIGAS, Jakarta 19 July 05_K.Sani

(Sumber: Sojitz, 2003)
 Regulatory Requirement for CBM Development in Indonesia

CO2 Sequestration
CO2 Capture
CO2
technology Injection
from fuel gas CH4

Well
Well
Recovery well
Power
Plant CO2
CH4
Utilize
Of CH4

Use of Coal mine

Equipment abolished
Coal Seam

Presented to MIGAS, Jakarta 19 July 05_K.Sani

(Sumber: JCoal, 2004)
 There is potential for using CO2 and/or H2S for pressure
maintenance to enhance the rate of recovery of the methane and
potentially increase the ultimate recovery of methane.

CO2
Gas Content

Methane

Reservoir Pressure Psi

 Regulatory Requirement for CBM Development in Indonesia
Develop Low-CO2 CBM Jointly with High-CO2 Conventional Gas

PIPELINE

! Blend Low-CO2 CBM With High-CO 2

Conventional Gas Stream

CBM
CONVENTIONAL CO2 PRODUCTION LOCAL
GAS WELL INJECTION WELL NICHE
CH4 WELL MARKETS

CH+
4
CO2 CO2 CO2
REMOVAL
0

CO2 CH4

! Test CBM Reservoir CBM CO 2 CH 4

Properties TARGETS
5,000 FT
CH+ CO2 ! CO2 Disposal
4
! Enhanced CH4 Recovery

CONVENTIONAL GAS TARGETS 10,000 FT

JAF01850.CDR

Presented to MIGAS, Jakarta 19 July 05_K.Sani Advanced Resources International, Inc.

Gas Sensing Technology

MEDCO E&P 2009 All Information are Confidential

Gas Sensing Technology

MEDCO E&P 2009 All Information are Confidential

Gas Sensing Technology

MEDCO E&P 2009 All Information are Confidential

Gas Sensing Technology

MEDCO E&P 2009 All Information are Confidential

Fundamentals of LNG Project
LNG Price Trends

After: Asia Pacific Monthly, Aug 09

Opportunities in LNG

Indonesia reportedly revised downwards its 2009 production plans for the Bontang LNG project to
297 cargoes from 307 cargoes previously. Despite being a net exporter of gas, gas and LPG deficits
exist in some Indonesian provinces. As such, the reduction in LNG production could free up gas for
use as feedstock in the domestic fertilizer industry while liquefied petroleum gas (LPG) could be
supplied to provinces in Java island. The governments fuel switching program to encourage
replacement of kerosene (for cooking) with LPG has resulted in an exponential increase in LPG
demand (after: Asia Pacific Monthly, Aug 09)

Giving Kalimantan has a tremendous CBM resources which is waiting for being proved, that CBM
could be a significant alternative gas source for LNG gas feedstock and as a result in the long run
Bontang LNG plant and Donggi-Senoro LNG (DSLNG) might take benefits from

In order to fulfill gas demand for electricity in West java and North Sumatra, a development of LNG
Receiving Terminal is required to increase LNG supply along with Bontang LNG plant and from other
new area such as Masela blok and natuna. The gas supply for electricity in East java and Bali will be
fulfilled from Kangean block in 2011 (after Directorate General of Oil and Gas)
Medcos CBM in Indonesia
Progress and Challenges
 Indonesia Gas Balance 2010-2025
(Existing Supply + Project Supply vs Contracted Demand + Committed Demand)

Sources: Ministry ESDM, 2010

Horizon to Develop CBM
Vision
Be a leading CBM company Current Status
Mission
- To search for and develop alternative energy resources
as part of the government energy mix policy - Drilling 1 exploration well complete
- To increase stakeholders value in accordance with the - Gas and coal analysis complete
highest ethical and environment standard - PSC proposal to MIGAS on SSE-1 Block is in
Key Issues progress
- To protect existing PSC oil & gas Operations - Continue to pursue CBM resources outside
- New CBM Law Permen 36 (2008) Medcos Area: Central Sumatra, East &
- Possibility to favourably adjust fiscal key terms if Pilot Central Kalimantan
Stage results marginally or has a little success

2010 2011 2012 2013 2014

Finalize exploration, 1st commercial gas Complete reserve Complete EPC & GSA Full dev. of CBM
delineation & POD Production from certification & gas for Sekayu Sekayu
preparation in CBM Sekayu marketing for Sekayu Complete EPC of Kebur Full dev. of Kebur
Sekayu Complete partial Complete gas Complete gas mkt & Ramp-up
JE and Obtaining PSC in development of Kebur marketing & reserve reserve cert. for LMT & production from
Kebur to allow 1st production certification for Kebur Rimau LMT & Rimau
JE in Simenggaris Finalize JE study for Propose, negotiate, Complete partial dev.of Complete partial
Finalize exploration for Rimau, Lematang, and obtain PSC terms LMT & Rimau to allow development of
Kebur Simenggaris, Bengara for Rimau, Lematang, 1st production Simenggaris,
and Tarakan Simenggaris, Bengara Finalize exploration, Tarakan, Bengara
and Tarakan delineation for to allow 1st
Simenggaris, Bengara commercial gas
& Tarakan production
Progress current and planning
It is relatively easy to drill hundreds of CBM
wells in overseas
What about is in Indonesia??
Hilly landscaping, many villages - people, tropical forests,
regulations of central vs. local government
Vertical vs Horizontal Well
Footprint Comparison
 JALUR PIPA GAS
PLN: PL Borang
16 BBTUD
Rimau Area (80 MW)
Sungai lilin

Bengin Teluk Rawa Ramba

T. Laban
Kerang
Tabuan Rimau Block
Rombongin-1 Babat S. Tabuan
Kaji Langkap
Semoga
W. Iliran Betung
PLN: PL Keramasan
Pk Balai
Sekayu
Ma lakitan Matra 22.3 BBTUD
Tl kelapa
(100 MW) PLAJU Mariana
PALEMBANG

Ma kelingi South Sumatra PUSRI

Extension Area IPP: PL Gn Megang 45 BBTUD
South Sumatra Petar
Tugumulya SembatuExtension Block 14.5
Talang AkarBBTUD
Abab
Muarabeliti Musi MEB: 3 BBTUD, u/
Jene
(80
Ibul MW) Gelumbang Inderalaya
kelistrikan industri
Panglero
di sekitar Pendopo
Sir. P. Padang
daerah
Pian penghasil gas
Benakat
Kungku-1 Hijau Raja Kayuagung
Tg batu
Temelat
G. Kembang Teras
Buka G. Megang
Reno Kembar Rambutan Prabumulih PLN: PL Indralaya
Muara kuang
Soka
Sukarama
Fariz
19 BBTUD
Lagan
Serdang Lematang (72 MW) Muara kuang
Koneng
Singa Block
Harimau
Muaraenim Muara kuang
Bunga mas Arahan Beringin
Bukit Asam Cepaka
Lahat Tg. Enim
Pagar Dewa:
Pendopo Lematang
Pasokan gasPeninjawan
untuk PLN di Jawa
Muara pinang 0 25Area 50 KM
- Dari Lematang: 49 BBTUD
- Dari SSE: 20 BBTUD
 JALUR PIPA GAS
SUMATERA SELATAN DAN JAWA BAGIAN BARAT
PLN PL Borang
Rambutan 16.0 BBTUD (80 MW)
Pertamina
Musi Blok Teras Prabumulih Simpang Y
PUSRI
PTMN 180 BBTUD
Rambutan MEDCO 45 BBTUD
Station
Note:
Medco sharing pipa dengan IPP PL Gn.Megang PLN PL Indralaya PLN PL Keramasan
14.5 BBTUD (80 MW) 19.0 BBTUD (72 MW) 22.3 BBTUD (100 MW)
Pertamina Gas
Pipa Medco
10 x 17km PTMN: 250 BBTUD u/ PGN
Pipa Pertamina EP - PPGS
PTMN Receiving
Station Pagardewa

PGN Receiving
Singa Station: Station Pagardewa
Pasokan Gas untuk PLN di Jawa
12 x 45 km
49 BBTUD (dari Lematang) SSWJ II
+ 20 BBTUD (dari SSE) SSWJ I 32 x 431km
32 x 450km 1.050 psig
450 psig

Bojanegara, Cilegon Muara Bekasi

Rambutan - Powder River
Lemigas Pilot on
Powder River
Rambutan area
Depth (m) 45 700 300 1,500
Coal Thickness (m) 1 118 1 25
Permeability (mD) <1D 2.7 9.7
CBM in place (tcf) 39 183
Est. rec. reserves (tcf) 9.3 N/A
Gas Content (scf/t) 1.1 81.2 (avg 25) 7.8 206.2

Vitrinite Reflect. (%Ro) > 0.3 0.4 < 0.31

Coal Rank Lignite to Sub-bituminous Lignite

Number of Wells 1,400 prod. wells 1
344 BCF from approx. 12,145 wells Produced small volume of
Cumulative Production
(2003) methane after ~6 months
Williams, 2001
Sources Lemigas
Rudy E. Rogers et al (2007)
 Regulatory Requirement for CBM Development in Indonesia

Typical CBM Economics

Economic evaluation of CBM projects follows the same
methodology as for conventional oil and gas, although the
input variables can differ significantly.

Conventional Oil & CBM Nominal $ CBM Real $

Gas

Sales Revenues Sales Revenues

+ + + Sales Revenues
- - -
Drilling Compression
Gathering
Drilling Investment Drilling Compression
Gathering

CBM economics are particularly affected by the time value of money

(revenue delays) due to dewatering process, longer time for reaching
peak gas production and low gas rate for each one CBM well compared to
conventional gas
Presented to MIGAS, Jakarta 19 July 05_K.Sani Advanced Resources International, Inc.
The Fiscal Terms.

Main issues:
No Cost Recoverable from Government ; Economic Split Factor ; Roles of BPMIGAS
in taking control of Cost & Budget ; Is tenders / biddings process getting simpler? ;
Any room to favorably adjust key terms if pilot stage results marginally?
Environment Challenges
Challenges
Groundwater table draw down due to
pumping of large quantities of
groundwater
Disposal of large volumes of produced
water
Methane contamination of shallow
groundwater
Noise pollution from compressors and
other sources
Air pollution from compressor exhaust
gases, methane leakage and dust
Surface disturbance from construction
of roads, pipeline, and facilities
Deforestation
Mitigation Plans
Reduced Presence
Surface disturbance (construction of
roads, well pads, pipelines, facilities)
Pitless Drilling
Enhanced Reclamation
Noise (operation of pumps,
compressors, machinery)
Emission Control
Air pollution (compressor exhaust
gases, methane leakage, dust)
CO2 sequestration
Outcrop Seep (uncontrolled release of
gas due to drawdown of shallow
groundwater
Management of Produced Water
Discharge
N/A
Some lesson learnt Pitless

Traditional Pits
South Sumatra typical condition

One of the CBM Well at Rambutan Field ..

Surrounded by Tropical Forests

One of the Medcos Oil & Gas

Adjacent to Kampoongs
Station
 As a newly business, CBM has many challenges

Reservoir analysis:
coal as a reservoir, permeability, porosity, gas flow, reserve analysis (gas in place, decline
curves), well spacing & drainage area, possibility of enhanced recovery (CO2, bacteria,
etc)

Well Construction:
drilling (bits, fluids), cementing (foam, lightweight additives), vertical vs. horizontal, cost

Formation evaluation:
borehole environment, tool measurement response in coal (gamma ray, SP, resistivity,
micro-resistivity, nuclear, acoustic, magnetic resonance, electrical imaging), wireline log
evaluation of CBM wells (coal identification, coal tonnage, proximate analysis, gas content),
gas in place calculation, recovery factor, drainage area calculation, natural fracturing &
stress orientation, mechanical rock properties.

Completions:
open hole vs. cased hole, single vs. multizone completions

Hydraulic Fracturing of Coalseams:

Is it necessary?, problems in fracturing coals (fines, fluid damage, excessive testing
pressure, leakoff), type of fracturing fluids for coal (gel, water, foam, proppant), in-situ
conditions (rock properties, stress value)
 As a newly business, CBM has many challenges

Water Production and Disposal:

Water production rate (initial rate, water decline rate, anomalous water production rate),
chemical content, environmental regulations (local and national), water disposal techniques
(surface-stream disposal, injection wells)

Supply Chain techniques and strategy:

Massive land clearance, contracting strategy, services & materials procurement techniques
(drilling rig & accessories, well head, pump, flow lines, compressor)

Data integration and management:

data gathered from many wells, data communication, data integration, CBM simulation
software

Synergies with oil/gas facilities:

cost allocation calculation, cost recovery from GoI, SHE and environment responsibility

Local security issues:

Many wells, many supporting facilities (pumps, compressors), data gathered instruments

Economics of coalbed recovery:

taxation, costs structure (drilling & completion, water disposal, finding costs), Sensitivity
(gas content, permeability, spacing, fracture length)
Lemigas Project Study
Rambutan CBM Wells

540 m

530 m
640 m
Rambutan Station

Jalur pipa
690 m
Rambutan
Station

Jarak CBM SE-03 ke Stasiun ~ 320 m

Energy from Nature. For Nature
Conclusion
 Conclusion

The potential of CBM as an energy sources is promising and this will increase national gas
reserve and contribute for energy back up in the near future.
GOI has initiated the first pilot project for CBM exploration in Indonesia in order to catalyse the
development and utilisation of CBM in Indonesia
Five pilot CBM wells have been drilled and tested to demonstrate the potential and
commerciality of CBM.
As new energy sources CBM is expected to contribute around 1- 2% of the total energy in the
year 2025
CBM is generally a sweet gas that consists of more than 95% methane, with small amounts of
carbon dioxide and nitrogen.
CBM is cleaner, safer, more environmentally friendly fuel than many other energy resources,
including conventional natural gas (Go Green Issues)
According to Directorate General of Oil and Gas, CBM production of the two regions
(Kalimantan,Central & South Sumatera) is expected to begin in 2012, at rate of 10 MMSCFD
and increased up 600 MMSCFD in 2020
The biggest challenges are getting right fiscal terms for both Government & Investors and
Environmental Impact Challenges
 What it takes .

It takes more than

A piece of pipe
A valve
A piece of coal

It takes
The right piece of coal
In the right place
With the right history

Developing the right

piece of coal takes
The right people
Doing the right things
from beginning to end
Thank you