Challenges and Opportunities for the Development of Shale Gas in Indonesia

Abstract. Since the success of shale gas development in the United States, countries around the world, including Indonesia, are looking for possibilities to replicate the success of United States in order to achieve their energy security goals. Indonesia's declining conventional gas supplies have highlighted the potential role of unconventional gas in the future energy mix. Indonesia’s shale gas industry, however, is still in the early exploratory stages and may face many of the challenges for its future development.This paper specifically analyzes the feasibility of developing shale gas project in the North Sumatra block. This block was chosen because it was the first shale gas block awarded by the Indonesian government in 2013, in which the first exploratory drilling was conducted in 2017. The first part of the analysis discusses resource estimation of the North Sumatra block, in which it is estimated that there is around 73.6 TCF of total gas-in-place, yielding a 13.5% of difference from reported data. This analysis is followed by sensitivity analysis that serves as a tool for determining which data are pertinent to resource estimation and therefore should be given more emphasis when conducting data gathering and analysis. From this analysis, special attention should be given to rock volume and porosity because these parameters have the most impact on estimated gas-in-place. The second part of this analysis discusses the project economics of the shale gas project in North Sumatra.The result presents negative economic outlook, marked by negative NPV and IRR given the current economic outlook and assumptions. This paper provides what would be the bare minimum gas price and drilling costs to make the project break even and is concluded with a summary of the challenges and opportunities that Indonesia might face it were to develop its shale resources.     «

Abstract. Since the success of shale gas development in the United States, countries around the world, including Indonesia, are looking for possibilities to replicate the success of United States in order to achieve their energy security goals. Indonesia's declining conventional gas supplies have highlighted the potential role of unconventional gas in the future energy mix. Indonesia’s shale gas industry, however, is still in the early exploratory stages and may face many of the challenges for i...     »