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Indonesia - Darwin Zahedy Saleh.

The Energy and Mineral Resources Minister since October 2009, Saleh in this post succeeded Purnomo Yusgiantoro, who in a cabinet reshuffle was made minister of defence. Purnomo had served as energy minister since Aug. 23, 2000, when he succeeded Rtd. Gen. Susilo Bambang Yudhoyono (see the background in omt13IndnsWhoMar30-09).

Saleh's appointment came as President Susilo's re-election gave him a fresh mandate to usher in reforms to attract more foreign investment in the energy sector, with emphasis on the petroleum industry and special care for unconventional resources such as shale gas and coal-bed methane (CBM). In the last few years of his service as energy minister, Purnomo presided over a steady fall in conventional oil and gas production. Indonesia withdrew from OPEC in late 2008.

With the Jakarta government prioritising gas for domestic use, in early 2011 Saleh said 13 new CBM areas were being offered this year under production sharing contracts (PSCs). These are in addition to 20 active PSCs for CBM across 11 basins in Indonesia operated by companies including Vico, the local Medco Energy group, ExxonMobil and smaller Indonesian companies.

Vico's Sanga Sanga PSC in East Kalimantan, which has produced conventional petroleum for decades, is aimed to become the world's first CBM-to-LNG venture.

Medco Energy, the largest among the private Indonesian energy companies, has high hopes for its CBM E&P projects. Medco executive Pudjo Suwarno was on Feb. 25, 2011 quoted as saying CBM eventually will replace existing conventional gas sales to the power utility PLN and industries like fertiliser manufacturers in South Sumatra. Medco has already drilled four CBM exploration wells on its Sekayu block and will now de-water and test some of them ahead of targeted gas production to supply nearby villages in the fourth quarter of this year.

Medco is partnering Dart Energy on the Muralim CBM project, which is in the province of South Sumatra. Initial production from this PSC is being aimed for in 2011.

Suwarno says CBM in Indonesia is unique because reserves are often located near villages and forests and on acreage which overlaps with that held by mining, plantation and petroleum companies. He adds: "We need innovative solutions".

Saleh says his ministry is considering improving E&P terms for CBM and shale gas ventures as Indonesia seeks to enjoy the same level of success in unconventional gas development as the US. Indonesia has a significant number of CBM and shale gas basins which are only now beginning to be evaluated.

Indonesia's proven reserves of CBM have been put at 453 TCF - the world's second largest next to those of China. Preliminary studies from the University of Bandung put the country's shale gas resources at about 1,000 TCF, though many treat this figure circumspectly.

In March 2010, Saleh's ministry announced plans for the first shale gas bid round. But no progress has been seen to date. Yet Saleh and his aides say acreage will definitely be offered this year.

Saleh says there are three key challenges to optimally developing Indonesia's extensive gas resources. For one, many of the large gas reserves are far from the domestic markets and a significant number of these lie in deep waters. Secondly, there is the lack of infrastructure for the domestic gas markets. Thirdly, there is the lack of competitive sales prices for gas producers.
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Publication:APS Review Oil Market Trends
Geographic Code:9INDO
Date:Mar 28, 2011
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