A decision analysis for valuation of natural gas resources with high CO₂ in East Natuna Basin, Indonesia

The natural gas industry is experiencing greenhouse gas emissions-related challenges. The naturally occurring CO₂ in natural gas reservoirs is one of the major anthropogenic sources of atmospheric CO₂ when it is produced. Unfortunately, a significant portion of the world's natural gas resources are contaminated with CO₂, at varying concentrations. Decarbonization targets of oil and gas companies increase the difficulty in developing these challenging resources. The conventional practice of releasing the separated CO₂ gas into the atmosphere is unlikely to be favorable to the recent oil and gas companies’ (OGCs) attitude towards decarbonization. A synergy between natural gas resources with high CO₂ concentrations and oil fields with CO₂-EOR applications can effectively address the two most important issues: the environment and the economy. However, economic issues arise when opportunities for the utilization of CO₂ produced are unavailable, making saline aquifer the only realistic storage option for developing these resources in an environmentally responsible manner with carbon capture and storage (CCS) deployment. This obviously will increase resource development costs without increasing expected revenue, and lessen their financial viability. A valuation model based on decision analysis was built to assess the impact of additional costs from CCS deployment. The model focuses on the valuation of a natural gas exploration venture opportunity that potentially contains high CO₂ concentrations. The case of the Paus Prospect in East Natuna Basin, Indonesia, was selected for implementing the model due to basinal and local indications that its target reservoirs have significant CO₂ concentrations. An Indonesian PSC cashflow model was used to estimate the potential outcomes of developing this prospect. The results indicate negative expected monetary values (EMVs) for this investment opportunity by considering that aside from its incremental cost, the CCS deployment would cause a delay in development schedule. The fiscal terms improvement of the PSC and the adaptation of a tax credit for CCS were evaluated to provide recommendations for attracting investment to develop this challenging natural gas resources.