Pertamina to drill Indonesia’s first shale gas well

Will tap into the expertise of Canada's Talisman Energy, Inc for the project.

State-owned energy monopoly Pertamina will spend US$28 million over the next three years on exploration and drilling in the Sumbagut shale gas block in North Sumatra province. Talisman Energy is a long-time upstream investor in Indonesia that is also involved in the Eagle Ford and Marcellus shale projects in the USA.

The company had no immediate plans to seek partners in the exploration block, which may cost US$8 billion to develop over 30 years.

Indonesia hopes shale gas output can help compensate for declining energy production from mature oil and gas fields. Its economy is struggling to meet rising domestic demand and contracted export volumes.

Oil output has fallen to about 830,000 barrels a day, nearly half of levels seen in the 1990s. Gas output has also declined to 8.2 billion cubic feet a day last year, down about 12% from 2010 levels.

Pertamina is Indonesia's second-largest oil producer behind US major Chevron. Its 121,000 barrels per day of oil is about 15% of the country's total.

Pertamina Hulu Energi said it is planning on a seven year exploration and development program that could lead to production of up to 100 million cubic feet of gas per day by 2020. Its gas output of just over 1 billion cubic feet of gas a day is about 13% of the country's total.