Indonesia seeks investors for coalbed methane sector

JAKARTA (Reuters) - Indonesia will offer investors a 45 percent production split for coalbed methane contracts in an effort to attract funds into the sector, mines and energy minister Purnomo Yusgiantoro said on Tuesday.

The country, Asia-Pacific's only OPEC member, has encouraged domestic industries and power plants to use alternative sources of energy such as coal and natural gas due to stubbornly high international oil prices.

Coalbed methane (CBM) is natural gas trapped in seams of coal and sometimes requires large quantities of high-salinity water to be pumped out. Studies show Indonesia has CBM resources of about 450 trillion cubic feet, mostly located in South Sumatra.
"We will give a better split to investors because coalbed methane takes long time to produce. Investors need guarantees for their investment," Purnomo told reporters.

Director general oil and gas Luluk Sumiarso said the government will sign a CBM contract with PT Medco Energi Internasional Tbk (MEDC.JK), within a month for the South Sumatra area.
"The CBM contract will be treated on the same terms as oil and gas and will be controlled by BPMIGAS," Sumiarso said.

BPMIGAS is the country's energy watchdog, which currently controls and monitors oil and gas companies operating in Indonesia.

Last year, Indonesian gas distributor PT Perusahaan Gas Negara Tbk (PGN) (PGAS.JK) said it plans to prospect for coalbed methane in South Sumatra to secure future gas sources.
Despite its membership in OPEC oil cartel, Indonesia's ageing wells and lack of investment in the energy sector has pushed the country to become a net crude oil importer, although it is still a net energy exporter, thanks to a huge supply of natural gas and coals.