Producers targeting coal seams worldwide hope to mirror the success of the US coalbed methane (CBM) industry.

Following a rapid rise from coal mine nuisance in the mid-1980s to 8% of nonassociated gas production in 2000, CBM in the United States has found its place as a contributor to energy supply. While the potential for this resource has been recognized in other countries for some time, the pace of development has been slower. Two places where nascent CBM industries could be on the verge of similar rapid growth periods are Canada and Australia.
Pilot projects lead the way
While a significant amount of CBM resource exists in Canada, the jury is still out on how much is recoverable and at what price. A compilation of resource estimates published by the Canadian Gas Potential Committee and the British Columbia Ministry of Energy and Mines puts the total at between 280 Tcf and 523 Tcf, with most of that concentrated in Alberta and eastern British Columbia (Table 1). The Canadian Gas Potential Committee estimates the total CBM resource to be as high as 750 Tcf, but is careful to note technological advances will be required to extract the gas economically. Canadian producers have waited longer to begin to assess unconventional gas resources than US producers, primarily because their gas-productive basins have not reached the same level of maturity as those in the United States. But maturing Canadian gas fields, a well developed gas-gathering infrastructure in Alberta and the success of CBM in the United States has led to growing interest and increased activity during the past 2 years. Prior to 1999, perhaps 200 wells had tested coal seams. In less than 2 years that number has roughly doubled.
At this stage, the focus is on determining, through multiple-well pilot projects, if economic combinations of gas content and permeability in the widespread coal deposits can be found. CBM operators in the Rocky Mountain and Black Warrior basins learned controlling costs and recognizing the unique set of technological hurdles presented in each individual basin are key elements of development success. Operators in Canada are being careful not to ignore this history. More than 30 pilot projects are being tested in Alberta and British Columbia, but only one has begun selling gas.
Perhaps the most aggressive operator has been PanCanadian Energy Corp. (now EnCana after its April merger with Alberta Energy Corp.). EnCana has several CBM projects under evaluation in central and southern Alberta, southeastern and northeastern British Columbia and Nova Scotia. The most advanced projects are in the Palliser block (one of Pan Canadian's main lease holdings at nearly 1 million acres) of southern Alberta and within the Elk Valley coalfield in the East Kootenays of southeastern British Columbia. The size of this lease block was a key factor in an area where a patchwork of mineral rights ownership makes it difficult to package a large prospect.
EnCana is partnered with MGV Energy Inc., a subsidiary of Fort Worth, Texas-based Quicksilver Resources Inc. In November 2000, EnCana-MGV began a US $19 million (C $30 million) CBM exploratory project encompassing several areas in Alberta. The joint venture has drilled 37 exploratory wells and 75 pilots, most to coals at depths of less than 3,281 ft (1,000 m). The results prompted the partners to move forward with a 250-well development program in the Palliser block. When an exploratory well reveals suitable gas content and permeability, pilot well offsets are drilled and the pattern is put on production and tested. Fourteen EnCana-MGV pilot wells are producing about 1.5 MMcf/d. A well-developed production infrastructure in the Palliser area allows these wells to be tested into existing sales lines, generating months of valuable performance data. This data already has revealed some surprises with regard to unexpectedly low rates of water production.
Outside Palliser, MGV will drill another 15 to 20 exploratory wells and another 15 to 20 pilot wells this year in joint venture projects with EnCana, Conoco and others, said Mike Gatens, MGV Energy Inc. chief executive officer. He added, "Operators need to be careful not to rely on preconceived notions of what will or won't work in Canadian projects. Otherwise, they may end up finding themselves trapped by their CBM experience rather than guided by it."
In addition to EnCana-MGV, other larger independents in various stages of acreage acquisition, exploratory drilling or pilot testing in Canadian CBM plays include: Burlington Resources, Devon Energy Corp., Nexen Inc. and Anadarko Petroleum Corp. Smaller companies include: Penn West Petroleum Ltd., Promax Energy Inc., Thunder Energy Inc. and Canscot Resources Ltd.
CBM evaluation activity in British Columbia has lagged behind Alberta's somewhat, primarily due to a lack of oil and gas infrastructure and the wider distribution of the resource. Three areas that have seen activity are: northeast British Columbia (Peace River), southeast British Columbia (Elk Valley) and Vancouver Island, said Derek Brown, CBM strategy manager with the province's Ministry of Energy and Mines. In northeast British Columbia AEC (now EnCana), BP/Devon, Talisman/CDX and Koch have invested more than $13 million (C $20 million). "Five pilot projects are under way, and additional drilling is expected during this upcoming drilling season," Brown said. In southeast British Columbia more than 14 wells have been drilled in the Elk Valley area, with testing ongoing. Additional drilling in the Crowsnest coalfield to the south also is expected. A smaller operation is investigating the Vancouver Island coalfield, where Priority Ventures drilled three core holes in 2001 to obtain desorption data. A test well also has been drilled. The Klappan/Groundhog coalfields have seen no CBM activity, and little data is available on the potential of the resource there.
Companies are cautious about revealing the results of their testing programs. Sources say that while some results have been disappointing, significant potential remains if the right combinations of permeability, gas content and completion technology are discovered.
Eastern Australian tests under way
Coal seam gas has been produced in eastern Australia for many years from ongoing mining operations (methane drainage), in advance of mining and more recently from traditional CBM wells. Activity is concentrated in a dozen areas in Queensland, New South Wales (NSW) and Victoria. The majority of Australian coal deposits and all of the CBM production are in these three states.
Queensland. Since the mid-1970s more than 200 CBM evaluation wells have been drilled in Queensland, mainly to Permian coals of the Bowen Basin. The bulk of the production has been from three areas - the Moura Mine, Dawson Valley and Fairview - northwest of Brisbane. More recent CBM exploration activity has focused on coals of the Galilee Basin (Permian), Ipswich Basin (Triassic) and the Surat and Clarence-Moreton basins (Jurassic).
The Geological Survey of Queensland considers the Bowen Basin to have the greatest potential, with a total resource between 113 Tcf and 175 Tcf. Proven CBM reserves are estimated at 910 Bcf, with the potential to become 22.75 Tcf as a result of ongoing and planned exploration and appraisal drilling, according to some industry sources. By comparison, total remaining reserves for conventional gas in Queensland are estimated at less than 2.3 Tcf. During 2000-2001, 30 CBM exploration wells and 43 appraisal and development wells were drilled, compared to an annual average of 20 exploration and nine appraisal wells during the previous 6 years. CBM production accounts for about 25% of Queensland's gas supply.
The number of companies involved in Australian CBM activity has grown rapidly, but several key players stand out.
Tri-Star Petroleum Co., active since 1989, is conducting CBM exploration activities over five authorities to prospect (ATPs) and is operator of three producing leases in the Fairview field, about 250 miles (400 km) northwest of Brisbane. Fairview, Australia's first commercial CBM production, commenced in 1998 and is producing about 18 MMcf/d.
Oil Co. of Australia (OCA), a subsidiary of Origin Energy, has been active since 1996 and is the leading producer of CBM from several projects, including the Peat field (15 MMcf/d), Dawson Valley (7.5 MMcf/d) and Denison Trough (40 MMcf/d). OCA also is active in the Surat Basin's Walloon play.
Queensland Gas Co. (QGC) has initiated two five-well pilot projects at Aberdeen and Berwyndale South in the Walloon play. The first of the two at Aberdeen has been completed, with all of the wells on pump and stabilized gas flows expected in 3 to 6 months. At the Berwyndale South project the five wells have been drilled and cased, with completion and testing under way. At the Aberdeen site the targeted Walloon coal is a four-seam interval with net coal thickness of about 66 ft (20 m) at a 2,260-ft (690-m) depth. At the Berwyndale South site, the target is two intervals comprising four seams with a net thickness of about 98 ft (30 m) at a 2,165-ft (660-m) depth.
The potential CBM resource in the areas being tested by these pilots totals more than 5 Tcf, according to QGC. The company estimates its areas of interest in the Surat Basin contain an aggregate resource of some 43.5 Tcf. Actual reserves remain to be determined based on production performance.
Arrow Energy NL has a significant acreage position in the Walloon CBM play and has drilled several exploration and core wells close to Chinchilla. Arrow plans to commence pilot testing mid-2002 and begin development next summer contingent on results and financing. Arrow also is evaluating its acreage in the Styx Basin south of Townsville.
Developers of a proposed gas-fired power station in Townsville chose CBM from CH4 Pty. Ltd.'s Moranbah coal seam project in the Bowen Basin as the source of its supply. CH4 has been exploring within ATP 364P in the northern Bowen Basin, and has drilled several medium-radius wells linking to vertical wells in the Grosvenor area near Moranbah with promising results. The company has produced gas from pilot wells since April 2001.
A sixth operator, Molopo Australia NL, has three Australian CBM projects ongoing, one of which is near OCA's Dawson Valley project.
NSW. The majority of NSW coal resources is in the Sydney-Gunnedah-Bowen and Clarence-Moreton basins along the eastern coast. Urban development and national parks limit exploitation of CBM in some areas. The Geological Survey of NSW estimated the CBM resource in unrestricted areas by basin to be: Sydney Basin (27 Tcf); Gunnedah Basin (26 Tcf); and Clarence-Moreton Basin (38 Tcf). Assuming a 20% recovery, reserves might total about 18 Tcf. Potential for CBM also exists in the Gloucester and Surat basins. The two most advanced exploration programs in the state are near Camden in the southern Sydney Basin and near Narrabri in the Gunnedah Basin.
In the Sydney Basin, Sydney Gas (SG) has interests in five exploration leases covering 5.9 million acres. The company completed a pilot project with 18 producing wells and has been testing these wells since May 2001 for evaluation purposes. It also is selling the gas. The proposed Camden Gas Project, a 300-well development program that will include innovative horizontal wells, is moving through the permitting and approval process. The project's second phase, 50 to 75 wells, is planned for completion in early 2003, with the remaining wells to be completed during 2005-2006. SG estimated the CBM resource in its Sydney Basin holdings to be roughly 63 Tcf.
Gastar Exploration Ltd. plans to develop Petroleum Exploration License 238 in the Gunnedah Basin. The NSW government has drilled 140 core holes, and Gastar's predecessor drilled 14 wells and tested them. Gastar estimates this license holds a potential resource of 17 Tcf.
Victoria. Victoria has some of the largest brown coal deposits in the world. The Melbourne Trough contains brown coal resources that are mined where these coals occur close to the surface. Eastern Star (ES) has drilled four exploration wells on its acreage, just west of Melbourne. These
wells have confirmed the presence of 56-ft (17-m) -thick brown coals at a 354-ft (108-m) depth, and ES has begun a five-well pilot project at Oak Park to establish gas content and productivity.
Gastar Exploration has licenses totaling 2 million acres in the Gippsland Basin east of Melbourne, which it believes holds 37 Tcf to 57 Tcf of gas resource. The company is drilling a pilot program to establish gas content and production potential.

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