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Canadian Coalbed E&P Comes of Age; BC Onboard

The newest branch of Canada's gas industry, coalbed methane, will be its hottest growth front for a second consecutive year in 2006, field contractors predict.

About 3,500 gas wells will be drilled into western coal seams next year, chiefly in Alberta, the Petroleum Services Association of Canada (PSAC) said in an annual forecast. The voice of more than 250 service and supply companies expects coalbed methane activity to increase by 6%-7% in southern and central Alberta.

The region is a hotbed of the new production specialty because its coal seams are shallow and dry, allowing for rapid drilling without environmental headaches, costly processing installations or delays connecting new wells to pipelines.

Coal-gas drilling is also expected to spread into British Columbia and potentially to eastern Canada, where coal is abundant and a variety of companies are experimenting with new production techniques.

Alberta continues to dominate the Canadian scene, accounting for an anticipated 20,000 wells in 2006 or 80% of forecast total Canadian drilling of 25,290 wells. The 2006 pace is expected to break a record of 23,890 wells projected for this year. Gas is the target for 70% or more of the activity.

British Columbia's gas-rich northeastern plains and foothills of the Rocky Mountains have at last emerged from exotic frontier status to enter the industry mainstream, PSAC added. The association predicts a 20% jump in BC drilling next year to 1,600 wells. Although the number is far lower than the Alberta total, the wells are often bigger because drilling targets tend to be deeper and larger in much less exploited BC.

The BC government has also at last succeeded in erasing the province's old image as hostile, expensive terrain where regulatory processes were slow and costs were punitively high. An old regime of multiple agencies and high fees has been replaced by a new one of a single regulatory master and an array of incentives unavailable anywhere else in Canada. The inducements include reduced royalties for deep or costly wells, out-of-the-way locations where new fields are expensive to develop and special reductions for coalbed methane activity.

PSAC predicts coalbed methane activity will spread into southern BC next year, overcoming environmental resistance based on horror stories mostly about wastewater disposal from the early days of the specialty in the United States. Canadian industry leaders say accelerating coal gas activity has demonstrated that deposits north of the border are different and that companies leading the field have learned from past mistakes."BC is becoming a very favorable location for oil and gas activity," PSAC President Roger Soucy said. "With the move towards southern BC for natural gas from coal, we are expecting a significant elevation in activity levels there."

A similar forecast is expected soon from the Canadian Association of Oilwell Drilling Contractors. Efforts to understand the scale of coalbed methane development and its prospects continue among senior Canadian gas industry observers, with the emerging field expected to be reviewed by a state-of-supplies report due from the National Energy Board next week.

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