Certainly looks like the new bandwagon, what with the token silvery and all. Whatever next? The US Supreme Court has ruled that seabird victims of Exxon Valdez will have to pay compensation.
A revision to a ministerial decree on coalbed methane (CBM) mining to be signed tomorrow promises more certainties to investors, but more issues need to be followed up, a minister says.
Director of Oil and Gas at the Energy and Mineral Resources Ministry Luluk Sumiarso said the new regulation would allow new investors the chance to bid for mining rights, which are currently exclusive to contract land owners.
"The rules make it clear that natural resources belong to the country and not to the contractors," Luluk said on the first day of an international conference on CBM in Jakarta on Wednesday.
CBM is a form of natural gas extracted from coal beds, which can be used as a source of energy for electrical generation by burning it as a fuel in a gas turbine or steam boiler.
Previously, interested CBM investors had to ask coal, oil or gas companies operating on the land for permits. This has resulted in a laborious application process and has given existing operators leverage to charge dividend payments without offering investment in return.
For companies seeking to conduct a government-assisted study of a potential CBM block, priority will be given to any operator that has been operating in the area for three years, Luluk said.
The company that conducts the study will be refunded under a government cost recovery program when production begins.
If the companies choose not to conduct the exploration, a study proposal can be submitted on a first-come-first-serve basis.
Areas found to be able to support CBM mining will then be offered in an open tender.
Existing operators or companies that have conducted the study will have the right to match the highest bid, Luluk said.
Under the new regulation, CBM operators must allocate 25 percent of output to the domestic market.
As with oil and gas operators, CBM operators are subject to tax holidays and cost recovery.
Last month the government increased CBM operators' profit sharing to 45 percent, higher than the 15 percent to oil operators and 30 percent to gas operators.
Indonesia has the world's second-largest CBM reserves after China, with a total potential reserve of 453 trillion cubic feet.
Businesses said the changes were positive, but questioned if the government had plans to counter problems endangering CBM industry growth, including difficulties in acquiring land rights, unclear provisions on waste management and overlapping central and regional regulations.
"Even today we have conflicts in our day to day (coal mining) operation," said Chris J Phillips, the president and CEO of Vico Indonesia, which operates coal mines in East Kalimantan.
CBM mining risks serious social and environmental impacts, and thus require careful and firm governmental regulation.
Mining for the fuel can require an operator to drill hundreds or thousands of times in a single mining block, with the risk of producing large amounts of toxic residual water.
CBM has so far attracted a lot of interest in Indonesia. The first project was given to joint-venture PT Medco E&P Indonesia and PT Ephindo last month.
Two more projects will be signed Thursday, while five more are undergoing joint evaluation and another is undergoing a joint study. Forty-five more applications are undergoing government review. (mri)
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