Turning to unconventional gas to close demand–supply gap-
In a bid to reduce the region’s dependence on oil and gas imports from the Middle East, Southeast Asian countries have recently begun to explore unconventional gas resources. In fact, Indonesia had already awarded its first contract for shale oil and gas exploration in May 2013. Studies conducted by Advanced Resources International (ARI) have identified two Southeast Asian countries – Indonesia and Thailand – as having significant shale gas and oil potential. However, both countries will have to rely on imported liquefied natural gas (LNG) to meet their domestic demands till the shale gas can be commercially exploited, which may not be for another five or six years. Myanmar is also estimated to have shale gas exploitation potential in the long run. Apart from shale gas, Indonesia also has promising reserves of coal bed methane (CBM).
Shale gas: A promising but distant dream
Given its geography, Indonesia is estimated to hold considerable amounts of conventional and unconventional hydrocarbon resources. With huge shale gas potential, the country awarded its first exploration contract for shale gas in the Sumbagut block in North Sumatra to state-owned Pertamina in May 2013. Although no shale gas exploration activity has been reported in Thailand so far, the basins in some parts of the country, such as the Khorat, Northern Intermontane, and Central Plains, are thought to have significant shale gas potential.
Even though Indonesia is currently a net exporter of natural gas, it has been exploring its unconventional gas resources to cater to its rising gas demand. Though gas production in the country has increased over time, domestic gas consumption has almost doubled since 2004. Indonesia is counting on its unconventional supply sources to bridge the rising demand–supply gap. The country is seeking technical assistance from the US to develop its shale gas reserves.
The Sumbagut block of North Sumatra in Indonesia is estimated to have potential shale gas reserves of around 18.56 trillion cubic feet (tcf). However, exploration takes time: Pertamina is planning to spend around six years on exploration. Initial production from the block is expected to be around 40 million standard cubic feet per day (mmscfd), a figure that will rise to 100 mmscfd in 2020. The budgeted expenditure for the exploration of this block is $7.8 billion.
In addition, the Ministry of Energy and Mineral Resources estimates that Indonesia has around 574 tcf of shale gas reserves throughout Sumatra, Kalimantan, Papua, and Java. The shale gas potential in the country even surpasses the potential CBM resources (approximately 453.3 tcf) and conventional natural gas resources (approximately 153 tcf).
According to the ministry’s geological bureau, Sumatra has the largest shale gas reserves of around 233 tcf in Indonesia. The bulk of these reserves – an estimated 86.9 tcf – are to be found in the island’s central region. Kalimantan has an estimated 194 tcf of shale gas reserves, followed by Papua (90 tcf), and Java (48 tcf), while the remaining 9 tcf is spread across the other parts of the island group.
Meanwhile, even with rising natural gas production, Thailand remains a net importer of gas. As of January 2013, the country holds 10.1 tcf of natural gas reserves, according to the journal Oil and Gas . Although natural gas production has increased in the past decade, it is still not sufficient to meet domestic demand. Thus, the country’s oil and gas conglomerate, PTT, is investing in developing domestic resources.
Thailand has four sedimentary basins and regions with potential shale gas resources: the Khorat plateau, the Northern Intermontane basin, and the Central and Southern Plains. The ARI study shows that the Khorat basin has an estimated 5 tcf of recoverable shale gas resources. The shale potential of the Northern Intermontane basin and Central Plains has not yet been assessed. The possibility of shale gas exploration fructifying in the Khorat region is higher due to the presence of an existing pipeline network, local drilling rigs, and active independent oil and gas producers.
Despite the presence of promising gas reserves and a well-connected existing pipeline network in the country, Thailand has not taken up shale gas exploration on a significant scale. It was only in 2011 that a memorandum of understanding (MoU) was signed between Statoil and PTT Exploration and Production (PTTEP) to undertake studies of potential conventional and unconventional gas resources in the country. While Indonesia has commenced work on its shale gas reserves, private exploration companies in Thailand are hesitant to venture into shale gas exploration without some support and risk sharing by the government.
Apart from Indonesia and Thailand, Myanmar is also considered a promising country in terms of shale gas reserves in the region. The country invited bids for 30 offshore areas (11 shallow water and 19 deepwater) in April 2013, which will be awarded in 2014. Production from the blocks on offer is expected to boost domestic supply.
Tapping into the CBM potential
In addition to the promising prospect of shale, Indonesia also possesses significant quantities of CBM reserves (another unconventional gas resource), largely in the sedimentary basins of Sumatra and Borneo. Although the CBM industry in the country is still in its initial stages of development, Indonesia is estimated to hold a minimum of 453.3 tcf of CBM reserves. The country has been ranked sixth in the world for its potential CBM reserves, with South Sumatra alone holding about 183 tcf.
CBM exploration is helped by the relatively low costs of drilling as compared to the conventional wells and the availability of data from conventional activities carried out in established basins. Moreover, easy access to slimhole mining rigs and dedicated CBM rigs with lower horsepower can help to lower drilling costs in the region.
The Indonesian government is targeting for gas to make up at least 30 per cent of its primary energy consumption by 2025. CBM is expected to constitute 3 per cent of the total energy mix. To this end, the government aims to produce around 500 mmcf of CBM per day by 2015, with production levels increasing to 1 bcf per day by 2020 and 1.5 bcf per day by 2025. In 2012, the Indonesian government approved the work plans and budgets of 274 contractors in an endeavour to achieve its targeted production levels. Of these, 74 plans were for the production phase of 1,200 development wells, 1,100 workover wells, and 100 exploration wells. The remaining 200 plans submitted by firms were for projects still in the exploration phase, involving an investment of around $2.7 billion.
At present, there are four commercially producing CBM blocks in Indonesia. BP and Eni have been exporting CBM from the Bontang plant in Indonesia’s Kutai basin since March 2011 – the world’s first CBM-to-LNG project. The country’s Barito basin has been estimated to hold around 102 tcf of in-place gas.
It is likely that Indonesia’s unconventional gas reserves will play a key role in meeting its domestic gas demands and ending the country’s reliance on imports. The CBM reserves are already yielding production, far earlier than the country’s shale gas reserves
The Philippines and Vietnam also have CBM reserves. However, unlike Indonesia that started CBM production as early as 2008, the respective industries in Vietnam and the Philippines are only just emerging.
Growing impetus for unconventional gas
For now, in the few Southeast Asian countries that have unconventional gas reserves, exploration and development are still in the initial stages; hence regional production is still low. However, the need for energy security, the push for lower emission fuel, and the rising demand for energy are likely to push Southeast Asian countries to pursue the commercial production of shale gas, oil, and CBM, in addition to other hydrocarbons. The challenge lies in the fact that it might take more than five years for shale gas production to be feasible in the region, with the cost of explora-tion likely to be far higher than in the US due to geographical challenges. In the meantime, these countries will have to rely on other gas sources, such as imported LNG, to cater to domestic demand.
