After prolonged gestation as a technical research project, coalbed methane is being born as a new branch of Canadian natural gas production this year with expectations that it will grow rapidly.

The volume of Canadian CBM drilling — concentrated in Alberta so far — is forecast this year to exceed by a potentially wide margin all the wells attempted in the specialized field’s long exploration phase.

About 1,000 research and pilot wells drilled since the late 1970s have at last succeeded in mapping out commercial production targets, says the Canadian Society for Unconventional Gas and investment houses such as Peters & Co. in Calgary.

How big will CBM production become in Canada? For now, until commercial projects establish track records, the unconventional gas society is sticking to tentative, conservative forecasts by the National Energy Board and TransCanada PipeLines. Both foresee coal gas production multiplying 10- to 20-fold within a decade into a range of 1-2 Bcf/d from current output estimated at 100 MMcf/d.

The lessons of the long Canadian CBM gestation stage included discovering that methods and geological knowledge used in the United States for decades could not just be imported, said CSUG president Kin Chow and director Cameron Cline. “The Canadian basin is definitely different from the U.S.,” said Chow, who is also executive vice-president of CDX Canada Co., an affiliate of a U.S. CBM producer.

The differences turned out to include both negatives and positives. On the negative side, geologists early concluded that Canadian coal seams tend to be less permeable than American deposits, meaning that more technical work has to be done to stimulate flows in the wells north of the border. But on the positive side, the long exploration campaign established that Alberta has a large geological formation of dry coal where Canadian gas producers do not face the costs and environmental complications of dealing with water that confront their American counterparts.

Known as the Horseshoe Canyon Coals after an outcrop near the high plains city of Drumheller, a former mining center about 90 miles northeast of Calgary, the CBM drilling target carpets much of central Alberta in a broad band reaching as far north as the Edmonton region.

The Horseshoe Canyon formation is the world’s biggest deposit of dry coal, Chow said. As a result, opposition to the new form of gas production in Canada is expected to melt down into a hard core of NIMBYs that has relatively modest power to slow the spread of CBM production. Resistance to Alberta coalbed methane projects centers on fears of repeating U.S. problems of waste, spills and contamination instead of any bad experiences in the province, Chow added.

In practice, Alberta coalbed methane development is expected to bear a close resemblance to conventional shallow gas drilling or one of the Canadian industry’s most routine and least controversial operations.

After tens of thousands of shallow gas wells, field contractors have them down pat. The specialty has evolved a new generation of fast drilling equipment such as coiled-tubing rigs with down hole motors, a type of gear that works like a giant dentist’s drill. Counting time to move rigs, wells are drilled 200 to 800 metres (650-2,600 feet) into Horseshoe Canyon Coals in a single oilfield working day between 6:00 a.m. and 11:00 p.m., said Cline, who manages EnCana Corp. operations in a hotbed of CBM development, the Strathmore area about 25 miles east of downtown Calgary.

Dry coal beds only hold an estimated 25% of Alberta’s coalbed methane, but that does not mean they are small. The province’s total coalbed methane endowment is estimated as 300-1,000 trillion cubic feet, or at least five times greater than remaining reserves of conventional gas.

“However you slice it, the number is very large,” Chow said. The volume of coalbed methane will accelerate to 1,200 to 1,700 wells this year, a Peters industry survey concluded. “This number could easily double in 2005 given recent success in the dry Horseshoe Canyon Coals.”

The Calgary investment house added, “Operators have identified tens of thousands of potential locations which are expected to be exploited in the coming years.”

In some cases, tapping the coalbed methane locations will not even require new wells. Until new completion techniques for well bores into coal seams were developed, conventional shallow gas drilling just bypassed them for deeper reserves in other formations.

The emerging Canadian CBM sector has a rule of thumb that production projects only work if gas prices hold up at a minimum average US$3 per MMBtu, Peters reported. “However, the economics improve or the threshold is reduced if operators have existing wellbores with dry CBM potential in the vicinity of existing field infrastructure.”

EnCana, for instance, has a rich portfolio of aging shallow gas pools beneath coal seams that were inherited especially from the PanCanadian Energy side of the merger with Alberta Energy Co. that created the company.

In such cases, Peters pointed out “operators can simply complete the upper coal-bearing zones without having to drill a new wellbore…existing infrastructure is retrofitted or restaged to reduce line pressures allowing low-pressure CBM wells to flow.”

An Alberta government review of the budding sector’s potential, requirements and environmental aspects is scheduled to report this fall.

So far, Alberta has made no move to match CBM development incentives offered by British Columbia, which allows specialized costs such as “dewatering” wet gas-bearing coal formations to be written off against provincial royalties.

But B.C. needs all the help it can get because it has as yet no counterpart to the attractive Horseshoe Canyon Coals formation and its deposits are in much more remote, difficult and expensive locations, Chow indicated. The Alberta royalty system also already has a built-in incentive for “stripper” or low-volume conventional gas wells that automatically applies to CBM sites. Small-volume wells pay royalties in the range of 5-10%, while rates for larger conventional discoveries go as high as 30%.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.