Junior coalbed methane (CBM) company NuEnergy Gas Limited (ASX: NGY) was founded in Australia in 1985, but has received a new lease of life since being acquired by Malaysian investment holding company Globaltec Formation Berhad, through its subsidiaries New Century Energy Resources Limited (NCE) and Globaltec Energy Resources Sdn Bhd, in mid-2014. Recapitalised and with a new Executive Director, NuEnergy now has the resources to develop a set of CBM prospects in South Sumatra, Indonesia.
Hailing from NCE, Kee Yong Wah joined NuEnergy in August 2014 and became Executive Director in January 2015. Kee has worked in the oil and gas servicing industry for more than 30 years, 26 of which were spent with global energy services company Halliburton. He says NCE spent eight months researching NuEnergy’s Production Sharing Contracts (PSC) in Indonesia before deciding to invest.
“Indonesia has some of the world’s largest coal resources, but the gas element has not been developed yet,” he explains.
“Looking at the coal and gas content of the Sumatra Basin, we were confident that we would be able to release the gas from the coal. The infrastructure is good as well, as there’s a pipeline just three to five miles from some of the assets, and the gas price is always good in Indonesia because there’s a shortage.”
NuEnergy holds Operator status in five CBM PSCs in the Sumatra Basin. These are:
The company is also the Operator of one CBM PSC in the Kutai Basin in East Kalimantan, Indonesia:
Muara Enim, Muara Enim II, Tanjung Enim and Muralim all lie within South Sumatra, which contains more than 12 CBM blocks in all. These PSCs are within several miles of major gas infrastructure that connects to the undersupplied gas markets of Java, Singapore and Duri, making their locations highly strategic.
Previous drilling confirmed coal seams of between 40 and 88 metres thick in the region, and these have become the focus of further drilling at the Muara Enim and Muara Enim II PSCs. The current resource estimate for NuEnergy’s PSCs in South Sumatra, independently prepared by RPS Group Plc and Netherland, Sewell and Associates, Inc., stands at 39 billion cubic feet and 154 billion cubic feet of 3C Company’s Working Interest contingent gas resources for Muara Enim and Tanjung Enim, respectively.
Analysis of the gas at Muara Enim PSC confirmed an average sales gas content of approximately 98% methane. This implies that no further processing of the CBM will be required other than for dehydration and compression, which lowers the project’s costs and improves its economics.
At Tanjung Enim PSC, three core wells have been drilled to the target depth and 49 metres of net coal seams identified, including more than 13 metres for a single seam. During a production test this year, gas flared from the TE-01 well within 72 hours of dewatering.
In Central Sumatra, exploratory wells were drilled at the Rengat PSC and identifiable coal seams were confirmed to have low economic significance.
NuEnergy’s key focus over the next 12 months will be converting the resources of the Indonesian PSCs into 1P/2P reserves. The team, some of whom have been developing unconventional gas resources for more than 20 years, are confident that a Plan of Development (POD) could be proposed to the Indonesian government in the first half of 2017.
Development of unconventional oil and gas, such as CBM, in Indonesia has previously been stalled due to the regulatory uncertainties. However, in 2015 new regulations were established to accelerate such development. The new regulations target unconventional resources separately to conventional resources and provide options for new contract types as described below with improved commercial terms. This is in addition to the policy that oil and gas production from unconventional blocks can be sold before the POD is confirmed.
There are now three types of production sharing contracts possible: current PSC, Sliding Scale PSC and Gross Split Sliding Scale PSC.
“These are good policies that we’ve been working on with the Indonesian government for the last 10 months,” says Kee. “They give much more flexibility and speed to the process, and will benefit our operations greatly.”
He adds that through utilising these new policies and regulations, NuEnergy hopes to become: “the first guys to unleash CBM in Indonesia.”