Publications

The slowing down in the unconventional energy business in Indonesia can be visibly seen. This is indicated by less work programs, the decrease in the number of exploration wells drilled, and less interest in unconventional blocks being offered by the Government of Indonesia. Based on the PSC bidding in 2013, from 15 PSC unconventional block contracts that were offered, only 5 or 33% of the contracts were awarded and until 2014, only 80 wells were being drilled by 54 companies. The objective of this paper is to develop an alternative business model that works for unconventional resource development in the Indonesian PSC regime. This alternative business model should satisfy the interest of the Indonesian government as well as a balanced return and risk for investors. We undertook a literature study and simulation of the development of the unconventional energy industry in the United States and Australia and performed business modeling for the environment in Indonesia. Based on the business modeling, there were two keypoints: (1) With the current applied regulations, a green field project will be hard to be developed even with the large resources due to the huge investment required and land access issues, and (2) Brown field projects can still be developed with conditions: (i) full integration with conventional project, (ii) adjustment of regulations that allow condition (i) to be applied. Our conclusions for development of the unconventional industry in Indonesia is that coalbed methane (CBM) needs to be an incremental project for conventional PSCs instead of standalone and integration between CBM and conventional methods started from wells.