Producers and field contractors are lining up to confirm that the Canadian natural gas industry is sprouting a new growth arm in coalbed methane (CBM). Ensign Group, the second-biggest Canadian drilling contractor after Precision Drilling, underscored the rising expectations by ordering 10 new rigs especially suited for rapidly harvesting shallow coal seams.

A forecast surge in Canadian coalbed methane drilling is projected to generate work for a wide range of field services from specialized well completion operations to pipeline construction.

The extent of the developing effort was underlined by Calfrac Well Services, a Calgary-based specialist in “fracturing” or breaking underground formations with high-pressure injections of materials ranging from sand to nitrogen. Calfrac declared intentions to field four “spreads” or mobile sets of fracturing equipment by early 2005, in time for an Alberta coalbed methane rush which contractors’ trade associations expected to include 3,000 wells next year then keep on accelerating.

Among producers, a pioneer in the field confirmed that coalbed methane is maturing rapidly into a production business after decades as a science project in Canada. Texas-based Quicksilver Resources said “our Canadian team,” subsidiary MGV Energy, “is doing a great job of bringing on the coalbed methane production.”

The Quicksilver-MGV organization alone drilled 270 wells so far this year into Canadian coal seams, reaching production exceeding 32 MMcf/d. The Texans’ Canadian CBM drilling count will exceed 300 wells by the end of this year. As a case of multiple low-cost wells involving little exploration risk compared to conventional drilling, CBM is turning out to be suited for the growing Canadian crop of royalty income trusts.

Unlike their more static investment counterparts in the United States, the Canadian trusts are not tied to particular assets and expand their portfolios by combinations of acquisitions and development drilling. Among more than two dozen Canadian income trusts, Petrofund, Vermilion, Enerplus and APF have declared CBM interests.

Calver Resources, a home grown specialist in CBM, recently set out to test the market for the new development by putting itself up for sale. Calgary financial house Sayer Securities reported, “With coalbed methane transactions starting to appear in the mergers and acquisitions market, it is reasonable to assume this recently discovered component of the Canadian natural gas business is going to continue to grow.” Sayer, which makes a specialty of tracking fund raising and asset transactions, observed that Calver is far from alone.

Bonterra Energy Income Trust raised about C$20 million (US$16 million) for a coalbed methane program. Privately-owned Trident Exploration, a Calgary coalbed methane specialist, has alone raised C$100 million for the new Canadian field, Sayer reported. The scale of potential growth in coal gas production north of the border is underline by the Canadian Association of Petroleum Producers.

The Canadian Association of Petroleum Producers (CAPP) has pointed out that technical geological studies peg the Canadian endowment of recoverable CBM at 167 Tcf or not much less than the amount available in the U.S. But as of 2003 Canadian annual coal gas production was only 18 Bcf or 1% of the U.S. total of about 1.6 Tcf. By CAPP’s count, only 800 mostly experimental wells had been drilled before this year into Canadian CBM deposits compared to more than 30,000 in the U.S.

The comparisons ignite imagination inspiring questions and projections about Canadian potential if CBM drilling accelerates towards the U.S. activity level. Estimates of 2004 production range as high as 150 MMcf/d after the Canadian industry only started to tap coal gas. “Together with the financing available to pursue coalbed methane exploration, it seems that the CBM ‘buzz’ in Canada is here to stay,” Sayer said.

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.