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MHI and MC to Collaborate with Indonesia in
Large-scale Substitute Natural Gas Synthesis Project Using Low Rank Coal

Mitsubishi Heavy Industries, Ltd.
Mitsubishi Corporation
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Tokyo, September 29, 2011 - Mitsubishi Heavy Industries, Ltd. (MHI) and Mitsubishi Corporation (MC) have agreed with the Indonesian government to collaborate in a large-scale substitute natural gas (SNG) synthesis project utilizing Indonesia's abundant low rank coal (LRC) which is conducted by MHI/MC and Indonesian partners (government institution and private company), as a follow up of Indonesia-Japan Energy Round Table held in November 2010. A feasibility study (F/S) has already gotten under way with support from the Indonesian and Japanese governments. MHI, MC and Indonesian partners plan to complete the F/S by March 2012, targeting inauguration of commercial operation at a new SNG synthesis plant in 2017.

The project plans call for production of SNG at the new plant, to be built by MHI and Indonesian partners, through coal gasification using abundant LRC in Sumatra. Consumer of the gas is still being studied and will be determined after F/S. The large amount of carbon dioxide (CO2) produced as a "by-product" of the plant's operation will be sequestered deep underground applying a carbon capture and storage (CCS) system. The project will also study partial use of the CO2 for enhanced oil recovery (EOR). EOR is a method for boosting crude oil production by injecting CO2 into an oil reservoir suffering from low productivity - a feat difficult to achieve using conventional methods.

The Japanese side plans also call for introduction of a "bi-lateral offset mechanism," based on the agreement between the governments of Indonesia and Japan, whereby the amount of greenhouse gas reduction achieved through the project would be reflected in Indonesia and Japan emission reduction efforts. If realized, the project will thus contribute significantly to environmental and energy initiatives.

The economy of Indonesia today continues to expand, the country's oil production is in a declining trend, and for this reason utilization of the nation's abundant coal resources has been an urgent matter. Part of the nation’s coal reserves, however, are high in moisture and low in energy content – features that make effective use of such coal difficult.

In tandem with Indonesia's eagerness to utilize its available coal resources, MHI has been looking to expand business applying its advanced and comprehensive technology in this area – from coal drying and oxygen combustion gasification to SNG production, CCS and EOR. MC on its part enjoys an abundant track record in energy development in Indonesia. In this way, the intentions and strengths of these three parties have meshed well in reaching the new agreement. Moves to bring the planned project to fruition are now expected to advance rapidly. A number of Indonesian companies have already shown interest in the project, either state owned company or private company, and if the project is realized, it will mark the first SNG synthesis production in Indonesia.