Economics of Coalbed Methane Field Development: A Case Study of Jatibarang Field

Abstract

Coalbed methane is a new energy resource that has not been developed in Indonesia. The reserve is estimated about 213 Tcf and spread over 16 basins. The utilization of this new energy resource will undoubtly contribute the industrial development in the country. This paper focuses on the technical and economic aspects of coalbed production in Jatibarang field, West Java. The methane reserve in this West Java area is 21 Tcf, and the location is quite strategic due to its proximity to the highly viable market of growing industrial nearby area. This paper presents a proposal of CBM development in Jatibarang field. The result shows a very lucrative return for the investment on the project based on production sharing agreement.

Coalbed methane development in Indonesia: Design and economic analysis of upstream petroleum fiscal policy

“…Research on CBM in Indonesia dates back to the early 1990s. Nugroho and Arsegianto (1993) did an economic analysis of CBM development in the Jatibarang Field and estimated that Indonesia had 213 TCF of CBM reserves, spread over 16 basins. The authors further noted that Jatibarang Field, located in West Java, is the best prospective area because of its established facilities and infrastructure, and the high demand for gas around the area.…”

“…CBM Asia (2012) has produced a document on the five phases of the development of CBM projects as well as some cost issues associated with CBM projects. In particular, the critical determinants of the economics of CBM projects include coal basin characteristics, gas price, infrastructure availability, competition from production of conventional gas, waste water disposal options, and ease access to gas markets, among others (Chakhmakhchev 2007;Nugroho andArsegianto 1993 andKurnely et al 2003). By combining a range of these widely acceptable CBM development causers, we include an economic analysis of the effects of fiscal features, especially incentive regime, on the attractiveness of the CBM PSC regime.…”

“…For example, Stevens and Hadiyanto's (2004) work which is currently the most complete review of CBM in Indonesia, and has been used as references for many Indonesian CBM research, undoubtedly fails to account for the current state of CBM development. Nugroho and Arsegianto (1993) 2013), Indonesia has enormous potential for CBM, but to unlock this, the fiscal environment needs to provide greater incentives and operational flexibility to investors. In this study, an optimal PSC regime that better supports Government's objective to attract investment to develop CBM in Indonesia is explored.…”

“…Whereas Nugroho and Arsegianto (1993) focus was on the effects of peak production, production decline rate, and flow efficiency rate, we believe that market factors as well as geology, and operational factors such as costs, and methods of depreciation of investment and reserves do have implications for the economics of CBM development. We therefore consider all these factors as well as the optimality of fiscal incentives to reach a conclusion in this research.…”

“…For this reason, DCF approach together with Factor Analysis (FA) and Parameter Sensitivity Analysis, was deemed sufficient for investigating the present research. In particular, The data analysis method is based on Nugroho and Arsegianto's (1993) approach. The difference between the present study and their study is the decision stages involved in each of the methods and the critical decision factors considered to arrive at the conclusions.…”