Publications

The potential for commercialising the coal bed methane (CBM) resources of Indonesia is well recognised. Indonesia's vast coal reserves have been estimated to contain up to 453 trillion cubic feet of natural gas. The ",prize",, so to speak, would be to demonstrate the capacity to produce and sell significant quantities of CBM profitably into the domestic natural gas market and/or via liquefied natural gas (LNG) export. Nevertheless, Indonesia has been relatively slow to develop a CBM industry compared to its peers in the region. A prime factor in this relative lack of progress has been uncertainty and perceived deficiencies surrounding the legal and regulatory framework applicable to CBM exploitation in Indonesia. This paper examines the current regulatoryenvironment for CBM activities in Indonesia and the extent to which Indonesia's first CBM-specific regulations address the concerns of investors. Although the current CBM regulations are a positive start, there are various shortcomings in the status quo which, the authors believe, should be addressed. In terms of methodology, lawyers have collaborated with commercial specialists from the experienced CBM operator, Arrow Energy, and have sought to understand better the unique nature of CBM operations and their commercial drivers. By applying the resultant understanding to the prevailing regulations, the authors have made certain recommendations aimed towards a regime which is more attractive to serious foreign and domestic investors whilst, at the same time, providing tangible benefits to the Government and the people of Indonesia. One of the principal conclusions reached is that an opportunity exists for fundamental reform to the existing PSC model.