Since Indonesia announced in November 2007 to offer investors a 45 percent production split for coalbed methane contracts in an effort to attract funds into the sector, there has been several successful contracts taken up.

In that same month, Director General oil and gas Luluk Sumiarso said the government will sign a CBM contract with PT Medco Energi Internasional Tbk (MEDC.JK), for the South Sumatra area.

Ephindo and McLaren Resources Inc – under the flag South Sumatra Energy – together with Medco E&P, signed a CBM (Coal Bed Methane) contract with BPMIGAS in May 2008, witnessed by the Minister of Energy and Mineral Resources, Republic of Indonesia.  The signing marks the first CBM Contract and signifies the beginning of CBM industry in Indonesia.

In June 2008 the government awarded two companies with coalbed methane (CBM) contracts;  PT Ridlatama Mining Utama won a contract to extract gas from coal seams in a block in East Kalimantan, while PT Samantaka Mineral Prima will develop a block in Riau province.

CBM Asia Development Corp. announced in November 2008 that the Government of Indonesia awarded a production sharing contract (“PSC”) for the development and production of coalbed methane on a portion of the Company’s Kutai Block located in eastern Kalimantan Island of Indonesia. The PSC covers an area of approximately 760 square kilometres in the Kutai basin of Indonesia and has been granted to Kutai West CBM Inc. (“Kutai West”), a consortium established by the Company and its joint venture partners, and Newton Energy Capital Inc. (“Newton”).

Studies have shown that the country has over 453 trillion cubic feet of CBM, twice the resource of natural gas. But due to a quirk in Indonesian law, the CBM potential has yet to be tapped. Indonesia differentiates between subsurface rights for coal and those of gas/oil. So if someone wanted to come in and do a CBM deal they had to deal with both the owner of the coal rights and the owner of the gas/oil rights. In the confusion, nothing was accomplished.

At one of the contract signing ceremonies, the Minister of Energy completed his marathon-signing event, and spoke to the large assembled group for a few minutes. One of the first things he announced was that he had signed a document the prior night taking the coal people out of the equation. In the future, the gas and oil people have preference and anyone wanting to drill for CBM will have to deal with them but will not have to deal with both them and the coal people. As such, for a foreign company, it’s a giant step forward because it cuts the number of people involved in the deal in half.

Be at 2nd CBMWorld 2009 with the key people in the business and find opportunities in CoalBed Methane. Your participation in this conference is the gateway to your success in Indonesia’s vast gas resources!

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