Tue, 02 Aug 2011

From: The Jakarta Globe
By :Ririn Radiawati Kusuma

The government listed for sale on Monday nine resource blocks in Kalimantan, including eight with coal-bed methane gas, in the latest effort by the country to boost development of alternative energy.

“We are offering eight CBM blocks and one oil and gas block as we are boosting our oil and gas production,” Evita Legowo, director of oil and gas at the Energy Ministry, said on Monday.

The eight CBM fields are located separately in East, Central and South Kalimantan, while the oil and gas block is located in Central Kalimantan. Evita did not provide an estimate of the value of the new blocks.

Indonesia has been struggling to reverse declines in oil output, and it hopes to extract CBM - natural gas that is trapped in seams of coal - from below the seafloor and use it as an alternative to the expensive crude oil that currently fuels power plants and factories. The nation’s reserves of coal-bed methane are estimated at 453 trillion cubic feet, more than double the amount of natural gas, according to Energy Ministry data.

Evita said the government would offer a new split in profits from CBM blocks as an incentive for development. Companies will get 45 percent of the profit, while the government will keep 55 percent. That compares favorably to other forms of energy. For conventional gas, which is extracted from oil and gas blocks, companies get 30 percent of the profit, while in oil, their share of the profit is set at 15 percent.

Investors will also be required to pay at least $1 million each in signing bonuses for seven of the eight offered CBM blocks. Those seven blocks are Bangkanai I, II, III, IV, Kuala Kapua’s I and II, and West Sanga-Sanga I.

Investors interested in bidding for the Tanah Laut block should be prepared to pay a signing contract bonus of at least $1.5 million, Evita said.

Since the government started offering CBM blocks in 2008, 32 contracts have been signed at a total value of $213 million.

Energi Pasir Hitam Indonesia (Ephindo) is the pioneer in the CBM business and received a contract last week from the government to develop a CBM block in East Kalimantan in cooperation with US conglomerate General Electric.

The block will fuel a 1.5-megawatt power plant that will be able to electrify about 680 households in East Kalimantan.

Sammy Hamzah, president director of Ephindo, has said the CBM-fueled plant’s electricity price would likely be above the average of the state utility’s rate, which is Rp 900 to Rp 1,000 (11 to 12 cents) per kilowatt hour.