T

he government is planning to offer two shale gas blocks up for auction by the end of this year as part of its long-term project of developing unconventional hydrocarbon resources across the archipelago.

Energy and Mineral Resources Ministry director for upstream oil and gas Hendra Fadly says his office was now evaluating the two blocks, Kisaran in North Sumatra and West Tanjung in South Kalimantan, before putting them up for auction.

'€œThey [Kisaran and West Tanjung] are located in the conventional natural gas field. We, however, estimate that the two blocks have shale gas reserves,'€ he said on Monday.

According to him, potential investors could soon join the auction.

Hendra said the ministry would need around three months to finalize its assessment of the two shale gas blocks that would be offered through direct bids. Potential investors are currently conducting joint studies before moving further in the tender process.

In May this year, state-owned oil and gas corporation PT Pertamina was awarded the country'€™s first shale gas project '€” the Sumbagut block in North Sumatra. The company has committed to spending US$7.8 billion to explore the Sumbagut block, aiming to produce around 40 million meters standard cubic feet per day (mmscfd) to 100 mmscfd from the project by 2020.

Separately, the ministry'€™s oil and gas director general, Edy Hermantoro, said the government would award up to eight shale gas production-sharing contracts (PSCs) this year to Pertamina and private oil and gas firms, including foreign players.

'€œI cannot reveal the names of the companies as the deals have not yet been finalized,'€ he said.

Shale gas is a natural gas produced from shale rocks and other geological formations by injecting water and chemicals into the rocks through a technique known as hydraulic fracturing.

Shale is becoming an important source of natural gas, particularly in the US, where stories on the shale gas boom dominated news headlines last year.

The shale gas boom in the US is expected to make the country one of the world'€™s largest gas exporters by 2018.

Last year, the Energy and Mineral Resources Ministry estimated the shale gas resources in the country '€” Sumatra, Kalimantan, Papua and Java '€” to reach around 574 trillion cubic feet (tcf).

Shale gas resources in the country, according to the ministry'€™s data, surpass unconventional coal bed methane (CBM) potential resources of around 453.3 tcf and conventional natural gas of around 153 tcf.

Sumatra supposedly had the largest shale gas reserves of around 233 tcf, particularly in the central region, where approximately 86.9 tcf of shale gas resources could be found, according to the ministry'€™s geological bureau.

Kalimantan had an estimated 194 tcf of shale gas reserves, the ministry said, followed by Papua Island (90 tcf) and Java Island (48 tcf), while the remaining 9 tcf was spread across other parts of the archipelago.

The lack of technology, land acquisition problems and overlapping permits may hinder the nation'€™s effort in developing its potential shale gas resource, according to the Indonesian Geologist Association (IAGI) advisory board member Andang Bachtiar.

'€œIndonesia has the [shale gas] potential particularly in Kalimantan and Sumatra. The real problem is not in the potential but more in technology for the fracturing method, if we do not use the right technology, we will most likely pollute groundwater,'€ he said.

'€” JP/Amahl S. Azwar