Coal-Bed Methane Gas Endeavours

There has been much made of the potential Indonesia has in the production of coal-bed methane gas as an alternative and green form of energy. The Indonesian government has been touting coal-bed methane gas as a means of supplying domestic energy needs and simultaneously diversifying the current dependence on oil. To this end, the Minister of Energy and Mineral Resources has issued Regulation No. 36 of 2008 to stipulate the provisions relating to coal-bed methane gas endeavours.

Coal-bed methane gas is deemed to be a natural resource and as such is under the control of the Central Government. Therefore, the Minister is to determine policy relating to work areas based on technical, economic, and risk considerations, among other matters. The Regulation clearly sets out that ‘endeavours’ in the context of the provisions of this Regulation means; exploration and exploitation.

All joint contracts in the coal-bed methane gas sector will be in the form and with terms and conditions determined by the Minister. The Regulation lists 19 basic provisions which must be included as a minimum in any work contract.

Chapter III of the Regulation sets out the procedures for determining and offering coal-bed methane gas work areas. The maximum work area offered is not to exceed 3,000m2. The process is to include a joint evaluation and in the event this joint evaluation involves a direct offer then the business being made the offer is required to deposit USD 1 million as a guarantee within 14 days of the date of the direct offer.

The Regulation also addresses matters related to the use and exploitation of data and information as well as the use of equipment and facilities.

Any disputes that arise between coal-bed methane gas contractors and oil & gas contractors are to be resolved through negotiation. If the dispute cannot be successfully resolved through negotiation then it is to be referred to the Indonesian National Arbitration Board (Badan Arbitrase Nasional Indonesia / BANI).

The provision relating to domestic use of coal-bed methane gas is included in a single sentence in Article 31 and states that coal-bed methane gas is to be prioritized for domestic use.

The Regulation repeals and replaces Minster of Energy and Mineral Resources Regulation No. 033 of 2006.