The Brisbane-based company said it had signed a letter of intent with Medco, Indonesia’s largest petroleum company, in which they would jointly undertake a commercial and technical due diligence study of the area.
Pending the results, Arrow and Medco will finalise a commercial arrangement to monetise CSM resources in the target area.
Results from the study, as well as the signing of a joint venture agreement, are expected by the end of next month, Arrow said.
Consultant studies estimate that the coal resources of the South Sumatra Basin contain up to 120 trillion cubic feet of CSM.
The Medco LOI follows an earlier deal in which Arrow farmed-in to 12 coal exploration blocks in South Sumatra, which belong to privately-owned Sugico Graha.
Arrow said being involved in this basin was a key part of its international strategy.
The company recently acquired 50% of the issued capital of Arrow Global CBM and has two years to decide whether to acquire the remaining 50% shareholding.
Arrow plans to use its Indonesian portfolio, as well as existing Indian assets, to underpin the proposed partial initial public offering of Arrow International later this year.
