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The entry of multi-national oil companies looks set to boost its economic prospects further - and visionary Indonesian outfit Ephindo is also keen to play its part Indonesia is the world’s second largest exporter of coal and LNG and has the world’s largest geothermal resources, as well as an estimated 453 trillion cubic feet of coal bed methane (CBM) – which has a lower exploration risk and significantly lower per well activity than oil or gas.
Energy experts predict that CBM has the potential to create a new, global energy frontier, especially following recent trends in the five coal-mining states of the northeast United States by Exxon Mobil, BP and Total, trends which look set to propel CBM exploration into the limelight.
The CBM industry is lucky to have a government which has been active in assisting its development and helping players like Ephindo.
Understandably, the government has exercised caution in introducing new laws relating to CBM as they are still testing the water on whether CBM can be a meaningful contributor to Indonesian energy.
One of the greatest challenges that the CBM industry faces is land access.
However, at this stage, not all CBM players are fully aware of this challenge.
Unlike previous years in which contractors must “take it or leave it”, the government will now allow bidders to propose their own estimate of the sharing split for the government.
In this case it was just a matter of explaining how CBM can fill the gap in supply and stop electricity shortages within 1-2 years.
Of course, some companies have been actively warning the government about this challenge and I believe it just takes one company to successfully unlock the play and this will convince government to move in terms of land regulation for CBM.
The immediate challenges are at the moment slightly different to those faced by the oil and gas industry which has been in the firing line for the last few years with issues such as cost recovery and environmental lobbying against the impact of oil and gas production.
Furthermore, Indonesians are highly conscious of developments occurring in Latin America and have seen what happened in Argentina in the last few days with the nationalization of YPF.
There are many pressures emerging in public sentiment towards the oil and gas industry, which are not yet faced by the CBM industry but since CBM is governed under the Oil & Gas regime, ultimately these challenges will be faced by the CBM players.