P

ertamina Hulu Energi (PHE), a subsidiary of state-run energy company PT Pertamina, is to hand over the operation of several of its coal bed methane (CBM) blocks to mining firm PT Sugico Graha due to efficiency considerations, said an official.

The hand over, however, needs approval from Pertamina, the sole shareholder of PHE, and the upstream oil and gas regulator SKKMigas, said PHE president director Ignatius Tenny Wibowo on Thursday.

'€œThe plan to transfer portions of participating interest in four of our CBM blocks to our partner [Sugico] is still pending the approval of the shareholder,'€ he said.

PHE has around 14 CBM working areas still in the exploration phase, all of which are expected to start producing in 2017. PHE'€™s working area in developing CBM includes Sumatra I and 4, Tanjung II and Subang I.

In addition, the firm also collaborates with British giant BP to develop South Kalimantan'€™s Tanjung IV block, in which Pertamina owns a 54 percent stake.

In a bid to develop the CBM blocks across the archipelago more efficiently, Ignatius said PHE would transfer the operations as well as portions of participating interest in four CBM blocks including Blok Air Benakat 1, Blok Air Benakat 2, Muara Enim 1 and Muara Enim 3.

PHE, however, would remain the majority stakeholder in the four blocks once the deals were sealed by holding 51 percent of participating interest.

'€œWe'€™ve decided to transfer the operations of several of our CBM blocks. If we continue with handling all of the CBM blocks ourselves then we will be overwhelmed,'€ he said.

In total, according to Pertamina'€™s data, the firm has potential CBM reserves of 41.67 trillion cubic feet (tcf). Pertamina wants to see its CBM production reach 100 million metric standard cubic feet per day (mmscfd) by 2017.

The company expected to reach production levels of around 150 to 500 mmscfd beyond 2020.

SKKMigas planning deputy Aussie Gautama said the energy regulator was yet to receive an official request from Pertamina to transfer the operations of the CBM blocks, but said such a move was '€œtypical in the oil and gas business'€.

Sugico Graha engages in the businesses of metals and mining, covering trading and services for pipelines, oil extraction, coal and coal bed methane, according to its official website. The firm is also known to hold a CBM concession in collaboration with US-based firm ExxonMobil in the Barito area, South Kalimantan.

No Sugico Graha executives responded to queries as of Thursday.

The country'€™s CBM reserves are estimated to be around 453 tcf, mainly in Sumatra and Kalimantan, according to data from the Energy and Mineral Resources Ministry.

However, as of today, the Indonesian government records investment in the CBM projects at only around US$150 million, with a CBM gas pricing of $7.5 per million British thermal units (mmbtu).

In 2008, the Indonesian government started development projects for unconventional gas and it is estimated the projects will be finished in 2015.

Indonesia, the third-largest exporter of conventional liquefied natural gas (LNG) behind Qatar and Malaysia, is keeping an eye on unconventional gas such as shale gas and CBM to secure domestic supplies in the future.

Most of the LNG produced in Indonesia has been exported mainly to countries such as Japan on long-term contracts, despite the needs of the nation'€™s industry sector as well as state utility firm PT PLN.