CBM Industry

CBM Resource Estimates



With conventional oil and gas reserves in decline, the energy sector is turning to unconventional resources in a bid to meet forecasted demand. World reserves of unconventional hydrocarbons estimated at 3.6 billion barrels of oil equivalent (boe), are approximately double the estimate for undiscovered conventional resources (Wood Mackenzie, 2007). As conventional production declines, unconventional hydrocarbons are projected to account for over 20% of world oil supply by 2025 and 40% of U.S. gas supply by 2010 (Wood Mackenzie, 2007). CBM, tight-gas and shale gas deposits are believed to be the best immediate resources to limit the decline of conventional gas volumes.

CBM production is well advanced in the U.S., Canada and particularly Queensland in Australia, where over a relatively short period of time the region has seen an almost exponential growth in CBM production. In 2008, investment in the Australian CBM industry reached US$17.2 billion and saw the entry of multinationals BG Group Plc and ConocoPhillips (Bloomberg, 2009). CBM currently accounts for 7 percent of Australia's total gas production, with analysts predicting it to account for 25% of Australia's energy mix by 2020 (Financial Times). CBM development and exploration is also emerging in China and India with a broad range of well established projects.

CBM Fundamentals

Coalbed methane is a form of natural gas extracted from coalbeds. Coalbed methane is also known as coal seam gas ("CSG") or coal seam natural gas ("CSNG"). Chemically, coalbed methane is identical to any other source of gas and once dried and compressed coalbed methane can be sold into any market. Coalbed methane production is attractive due to several geological factors. Chiefly, coal stores six to seven times as much gas as a conventional natural gas reservoir or equal rock volume due to the large internal surface area of coal (Cockcroft, 2008, US Geological Survey 2008).

Within coal beds, methane is contained in solution and on cleat surfaces and is held in place by hydraulic pressure. To develop these unconventional gas resources, coalbed methane projects involve the dewatering of coal beds which result in the production of gas at the surface. Lowering of the hydraulic pressure by withdrawal of water from wells completed in the coal bed, allows the methane to be released and recovered. Coalbed methane projects typically cover large areas of land with producers drilling hundreds of wells. Horizontal drilling is used to reduce the impact of land access issues.

Development of coalbed methane resources generally involves five phases:

Phase I - General Exploration involving identification of coal area, characterization of coal (rank, thickness, extent, depth of coal seam, etc.), identification of suitable areas for drilling; and core drilling and testing for gas content, gas saturation and permeability of the coal.

Phase II -- Geology and geophysics

Phase III -- Pilot Project to determine the economic viability of a site. Project economics are determined by a number of factors: well flow rates, well spacing, cost of drilling and development, developing costs, ability to dispose of water cheaply, good land access and market access.

Phase IV -- Phased Development

Phase V - Abandonment