IndoGAS 2015 Presentation - Progressing CBM Development in Indonesia - An Industry Perspective by Mohd Radzif Mohamad

Progressing CBM

Development in Indonesia

- An Industry Perspective -

Mohd. Radzif Mohamed VICO CBM Commercial Manager

IndoGAS Conference

27th – 29th January 2015

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VICO Overview

• VICO is a 50:50 JV between BP and ENI

• VICO has operated the Sanga Sanga conventional oil

and gas PSC since 1968 with first LNG in 1977

• CBM PSC awarded November 2009 for 30 years

• Sanga Sanga CBM PSC has met all PSC

commitments & spent $250m to date

• Exploration complete, appraisal in progress

• First CBM rig & horizontal wells in Indonesia

• First CBM gas delivery to Bontang in 2011

• First CBM Gas Sales delivery to PLN in 2013

• Conventional & CBM PSC share infrastructure

SEM 201

MWP #1

Exploration Wells

Appraisal Programme

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Coring (Using Conventional Wells

2010 2011 2012 2013 2014

Resource Appraisal

PSC signed

Re-completed Mut 78 (old oil well)- first CBM well

Drilling MWP#1, first purpose drilled CBM

wells

Micro-seismic on MWP#2 fracs

First LRP

First Hydraulic rig on MWP#3

CBM to Power

Mut 205 Well Head Compressor Trial

First CBM horizontals in Indonesia

VICO CBM Achievements

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Indonesia CBM Resources

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• Resource potential in Indonesia estimated at over 450TCF

• 54 CBM PSC’s awarded since 2008 with 22 in Sumatra and 34 in

Kalimantan

• SKKMigas estimate and using latest data from operators, resource base of

130 to 140 TCF for CBM in Indonesia in licensed PSCs (more in unlicensed

areas)

NOTE – Conventional Proved Reserves for Indonesia approximately 100 TCF

(2014 BP statistical review)

Energy Demand/Supply

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• Strong GDP growth is driving increased domestic demand in

Indonesia but domestic production is falling - decline in

conventional oil & gas production

• Likely that Indonesia will become a net importer of gas - CBM

production could help fill the demand gap or imports will increase

CBM In Indonesia

• Has CBM been successful in Indonesia?

– Initial GoI CBM Roadmap? 500 100 8.9 MMSCFD

– Many have left – BP, Exxon, Total, Santos, etc

– Current investor sentiments at a low – No recent CBM PSC

awards

– Well behind on Exploration Commitment – less than 20%

– Regulatory and fiscal environment unsuited for CBM

– Good CBM potential but still needs to prove produceability

and commerciality

How do we make CBM a SUCCESS

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Indonesian CBM industry is still in its infancy M

atu

rity

Exploration time to commercialisation

UNITED STATES • Resources: 700 TCF

• Main Basin: San Juan,

Black Warrior

• Annual Production: 1.65

TCF (2012)

• Start exploration: 1950’s

• Commercialisation start:

1980’s

• Wells drilled: 30,000

• Cost per well: US$ 200-

300 Thousand

252

BCF/

Year

UNITED STATES • Fiscal incentives:

• Unregulated selling price

• Tax credits (initial stage)

• Land owner royalties

• Light handed regulation

AUSTRALIA • Resources: 250 TCF

• Main Basin: Bowen, Surat

• Start exploration: 1950’s

• Commercialisation start: 1990’s

• Wells drilled: 1,300 (2010)

• Cost per well: US$ 1.2 Million

• Fiscal incentives:

• Favorable fiscal regime

• Unregulated selling price

• Government mandates Power

Companies to utilize power

generated from gas

CHINA • Resources: 1300 TCF

• Produced basin: Qinshui

• Annual Production: 21 BCF (2012)

• Start exploration: 1990’s

• Commercialisation start: 2009

• Wells drilled: 2,000

• Fiscal incentives:

• Price reforms

• Preferential power tariff

• Tax reliefs

• Low government take

INDONESIA • Resources: 140 TCF

(based on active

working areas)

• Main basin: Kutai,

South Sumatera

• Annual Production: 450

MCF (2013)

• Start exploration: 2008

• No Commerc. yet

• Wells drilled: 84

Annual Production

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ADVISORY BOARD

EXECUTIVE DIRECTOR

Work Group Fiscal

Work Group Technology

Work Group Policy &

Regulations

ESDM LITBANG

LEMIGAS

Ministerial

Policy Brief

& Model

Agreement

3Q 2014 1Q 2015 1Q 2015

Government & Industry

Initiative

INDUSTRY

Government

of Indonesia

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Led by

Mohd Radzif

Mohamed

What Does Indonesia Need

• Consider aggressive short term incentives.

• Access to the high value gas market in Indonesia,

consistent with Domestic LNG Price

• A significant reduction in the overall regulatory regime

• Fiscal policy for the support of CBM.

• A “one stop shop” in the Government for all permitting

• Improved POD requirements for CBM

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~ Terima Kasih ~

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