A progress report on Indonesian coal bed methane development

Abstract

This article examines the progress made towards achieving material commercial coal bed methane (CBM) production in Indonesia during the period since the publication in 2010 of ‘Coal Bed Methane Development in Indonesia: Golden Opportunity or Impossible Dream?’ (2010 Paper; P Godfrey, Tan Ee and T Hewitt, ‘Coal Bed Methane Development in Indonesia: Golden Opportunity or Impossible Dream?’ (2010) 28(2) JERL 233–64) by the Journal of Energy and Natural Resources Law. Although blessed by favourable geology, and despite some quite extensive exploration activities, Indonesia has not yet seen CBM become a significant contributor to its energy supply mix. This is the case both in relation to domestic gas demand and in terms of contribution to spare capacity in liquefied natural gas export facilities. The Government of Indonesia has continued to use the production sharing contract (PSC) as the centrepiece of its regulation of the CBM sector. Except for the issue of a newish regulation on bidding for unconventional gas acreage, the regulatory regime pertaining to CBM exploration and production (E&P) has remained basically unchanged since 2010. Generally speaking, bureaucratic inertia at central and local levels of Government continues to be an unfortunate characteristic of the administration of the sector. However, at the same time, a lack of suitable specialized drilling equipment together with a lack of commitment by some CBM operators has also played a significant part in disappointing progress overall.