Ephindo and the Community

As a fast-growing coal mining town in East Kalimantan, Sangatta currently has a serious power supply problem with frequent cuts.

“Power normally goes off at my house around two or three times every day, and sometimes it switches off for hours,” says Wahyu Nguroho a receptionist working for a hotel in Sangatta. “Even with the all cuts, our power bills are much more expensive than when I was living in Java. With all the new developments going in the city, I’m worried what will happen in the future.”

Despite being increasingly wealthy from coal mining, there is a resource mismatch in Sangatta, with the town’s creaking power infrastructure struggling to keep pace with its rapid growth. The power plants run by state electricity company PLN are all of the old-diesel burning kind, with all fuel having to be transported overland on a winding, potholed road from the Bontang Refinery. Diesel is significantly more expensive and less environmentally friendly than gas, which is increasingly being used to power plants in other parts of the country.

Size also matters. Installed power capacity in Sangatta is just 7.4 megawatts of energy, with operational capacity at 1.5 MW, constrained by fuel supply and problems and frequent equipment breakdowns. Meanwhile, the demand from the town’s current population of more than 200,000 people is estimated at well above 7.4MW.

However, under Sangattta’s vast tracts of flat swampland lies a solution to the problem. With huge reserves of coal, East Kalimantan is one of Indonesia’s main sources of potential in coal bed methane (CBM). Together with South Sumatra, the province is thought to make up about 60 percent of Indonesia’s 450 trillion cubic feet (TCF) of estimated CBM resources. At almost three times Indonesia's current proven reserves of natural gas, Ephindo believes the potential for CBM is great.

It is intended that gas produced Ephindo’s pilot CBM well in Sangatta along with gas from other planned pilot wells at Sangatta West, will initially be sold to PLN under an approved pilot-to-power scheme. To achieve this, Ephindo has signed a memorandum of understanding with General Electric and local gas-fired genset supply company, Navigat, with an aim of supplying gas-fired electricity to the local grid.

Ephindo Chief Business Development Officer and Sangatta West General Manager Amrullah Hasyim says the well, SCBM#1, is on track to produce gas before the end of 2011. With a modest investment it could up to 1MW of power to the local supply, two-thirds of the existing capacity, he says. Other wells that follow, would make power shortages a thing of the past, with the fuel eventually being piped overland to the Bontang Refinery.

“With CBM, we have the potential to change a energy-poor town into an energy-rich one in just a couple of years, while minimizing harm to the environment,” he says.  “It’s very exciting,” adds Sammy Hamzah, Ephindo CEO. “CBM is really a good fit for local power solutions, and the well is a perfect way to demonstrate to the community what it we can achieve.”

A few kilometers from CBM#1, Wahyu has noticed the flare burning from the top of the well, and wondered what it was about. For him, more power cannot come soon enough. “I’ve heard most of the coal mined here is taken away to be burned in power stations in China. It would be good if we could use local energy to solve local problems,” he says. “Then, hopefully, my power bill will go down.”

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