Cleveland, Ohio-based operator BPI Energy Inc. is dedicated to making Illinois Basin coalbed methane commercial. It’s been chipping away at the challenge since 2001, and it’s showing consistent progress.

The company has some 529,000 CBM acres under lease in Illinois, and a producing project in Saline County and pilots under way in Macoupin and Shelby counties. Its production recently reached 900,000 cubic feet per day from its 10,000-acre Delta project in southern Illinois, where it has 121 producing wells on 80-acre spacing. Six additional Delta wells are waiting on completion, and a handful of locations are left to drill.

Indisputably, the Illinois Basin holds great promise for commercial CBM. It’s the second-largest coal basin in the country, it’s crisscrossed with interstate and intrastate pipelines, and its regulatory process is smooth. Additionally, Illinois Basin gas trades with no basis differential to Nymex.

BPI targets Pennsylvanian coals in the Tradewater, Carbondale and Shelburn formations. As many as nine major seams run throughout the Illinois Basin, comprising a prospective section of between 20 and 25 feet of net coal. Individual seams are two to eight feet thick. The basin’s coals are quite shallow, at depths above 500 feet, and contain biogenic gas at concentrations around 80 standard cubic feet per ton.

At Delta, the Herrin and Springfield coals, the basin’s major seams, have been mined out. Delta’s development program has focused on such deeper seams as the Houchin Creek, Colchester and Dekoven. Net pay is 10 to 13 feet in Delta wells, about half the thickness that can be encountered in undisturbed areas.

The typical well in Delta is expected to produce between 40,000 and 80,000 cubic feet of gas per day after dewatering, which takes about two years. Delta’s production continues to incline and most of the wells have not reached peak rates. Per-well costs are $186,000 and per-well reserves average 185 million cubic feet.

Illinois Basin coals will not prove to be productive everywhere, says the company. More likely, production will be in sweet spots, depending on local variations in permeabilities and gas saturations. BPI’s exploration strategy is to drill test wells to establish net pay, gas content, gas saturation and permeabilities. A core hole, followed by injection fall-off tests, costs $140,000.

The company follows the more promising test wells with five- to 10-well pilots. A typical pilot costs $2.5 million, and includes a water-disposal well but no gas-gathering facilities. Conclusive results can take a year or more. If these preliminary investigations are positive, the next step is full field development.

BPI’s newest pilot is in Macoupin County, in the northern part of the basin. The wells reach 450 feet total depth, and are completed in 15 net feet of coal. Gas saturations are about 43% and permeabilities are four milliDarcies.

At Macoupin, BPI is testing and evaluating a new completion strategy. It has completed five wells openhole, and used water breakdowns on the reservoir. If this approach works, it could slice $50,000 off per-well costs. As a control group, BPI has five wells at Macoupin completed with its traditional method of cased holes and fracture stimulation. All-in costs for these are $131,000. Dewatering efforts at the pilot started in the fall of 2007.

Also in northern Illinois, BPI is monitoring a pilot in Shelby County. The company drilled 10 wells in fiscal 2006 on the property (BPI’s fiscal year is August 1 to July 31). In fiscal 2007, it added a pressure observation well and two producers. The company discovered that, despite ongoing dewatering efforts, hydrostatic pressures in the coal seams were not dropping sufficiently. A move to full development was not warranted, and it continues to pump water at the pilot.

BPI believes that it is on the verge of unraveling the knotty problems unique to achieving commercial CBM production in the Illinois Basin. It’s heartened by its success at Delta, and is hunting for its next large-scale development project. This year, it has a rig busy full time on its widespread acreage position, doing both exploratory and development work.

And, it has arranged access to substantial capital to move its program forward. This past summer, BPI entered into a $75-million credit agreement with Houston-based GasRock Capital LLC to fund development of its CBM acreage portfolio.

Comments