Arrow Energy Limited has commenced its first Coal Bed Methane (CBM) well in Indonesia. The well is located near the town of Sangatta, in East Kalimantan, about 200km north of the city of Balikpapan and 80km west of the Bontang LNG plant.

The effective ownership of the Production Sharing Contract (PSC) permit area is: Arrow 24% Ephindo 24% Pertamina 52%

Arrow and Ephindo are jointly operating the block through Sangatta West CBM Inc a joint venture company which is owned 50/50 by Arrow and Ephindo.

The PSC permit area Sangatta 1 contains coals of Miocene age, of the Balikpapan Formation. Net coal thickness for the target zone is up to 40m. The permit area is immediately to the south of the Kaltim Prima Coal mining area, owned by Bumi Resources, where high gas contents have been measured in a number of areas.

The Sangatta 1 PSC while relatively small is an important part of our gas aggregation strategy for the region. Arrow is currently in negotiations to partner on a number of highly prospective CBM opportunities in nearby areas.

Arrow has been invited to participate in an Indonesian Government forum tasked with facilitating substantial CBM production by the year 2011. Arrow is the only company exploring for CBM in Indonesia that has a proven track record in gas production from CBM. Arrow believes that commercial gas could be produced in Indonesia as early as 2010 if government regulations were streamlined and barriers to market removed.

Tags: Arrow Energy Ltd