27-06-08 On the same day the government awarded two companies with coalbed methane (CBM) contracts, a seminar revealed the price of the commodity was still not attractive enough to lure more investment.
Ridlatama Mining Utama won a contract to extract gas from coal seams in a block in East Kalimantan, while Samantaka Mineral Prima will develop a block in Riau province.

R. Priyono, chairman of oil and gas regulator BP Migas, said the companies would spend a combined $ 13 mm to develop the areas over the first three years. Ridlatama will keep 45 % of its revenue from CBM sales, while Samantaka will take 40 %, with the government pocketing the remainder, Priyono said.
Indonesia has one of the largest coalbed methane reserves in the world, boasting a potential of 453 tcf of the commodity, or double the country's natural gas reserves.

CBM is formed at great depths under the Earth's surface, where immense pressures compress methane into a near-liquid state, allowing it to be absorbed by coal. Coal reservoirs can store as much as five to six times more gas than those formed of regular rock.
Once it has been mined, CBM is refined into natural gas. However, due to high extraction costs, CBM development remains slow in Indonesia, the seminar was told.

Budi Basuki, president director of domestic oil and gas company Medco Energi International, said at current global prices contractors made only minimal profits or just broke even.
"CBM has great long-term prospects due to its huge reserves, but players also look at the price," he said during an international CBM conference in Jakarta. "I'd say if CBM, which has the same end product as natural gas, is priced at $ 5 (per mm Btu) at wellhead, it will be more interesting," he said.

Medco, in partnership with local company Ephindo, won the first CBM tender in May to operate on its own oil and gas field in South Sumatra. All of the produce from the site will be sold on the domestic market, at a lower price than if it were exported.
Natural gas designated for power and industrial plants in South Sumatra sells at between $ 2.5 and $ 3 per mm Btu, while that piped to power plants in Java is priced at between $ 3.5 and $ 4 per mm Btu. However, a field in Natuna, Riau Islands, operated by PremierOil, sells the commodity to a power plant in Batam at $ 5 per mm Btu, but fetches $ 11 per mm Btu for exports via pipeline to Singapore.

Liquefied natural gas sold to Japan, Korea and Taiwan from Bontang, East Kalimantan, is priced at between $ 9 and $ 10 per mm Btu.
The international futures price for natural gas is at $ 12.7 per mm Btu.