Coalbed methane (CBM) has become a major resource, with the emergence of active CBM plays in Canada, Australia, India, and China. Although the numbers are 15 years old and probably should be updated, Table 1 shows “the big five” countries where CBM resources are huge (much more than 100 trillion cubic feet), with the remainder below that amount. Australia and Canada have large resources, and over the past decade thriving CBM industries have been established in both. At the other end of the spectrum, countries like England, France, Turkey, and Colombia have much smaller resources, and so far have not been able to get a CBM industry started, though they are actively trying. In terms of industry maturity, after the U.S., Australia and Canada rank next, followed by China and India. Estimates of India’s CBM reserves range from 70 to 160 Tcf, according to official numbers recently released by the Coal Ministry. This implies India should be moved up into the top group in Table 1, expanding it to “the big six.”

Australia has so much easy-mining coal that coal-fired electricity plants keep the price of gas artificially low (around $2.50 per thousand cubic feet), which has made it difficult for CBM to compete. Nevertheless, there are several fields where permeability is in the hundreds of millidarcies (mD), and the biggest well makes about 8 million cubic feet per day. Operators have been versatile in finding best-practice completions that vary from a simple under-ream in openhole, to cavities, to water fracs in cased and perforated wells, and also include surface-inseam horizontal wells (two wells in a chevron pattern) in one play. Recently the price of gas has risen to $4 per Mcf, which is a big boost to commercial viability. In Canada, the commercial projects are in the Western Canada Sedimentary Basins (WCSB), where the largest CBM play is Horseshoe Canyon, with thousands of wells in Alberta. That play started only a few years ago, with gas contained in up to 30 separate seams that have permeabilities of 0.1 to 100 mD. However, far greater resources lie in the Mannville and other coals of the WCSB. But permeabilities of these coals appear to be roughly 1 mD or less (for the most part) and they are difficult to produce, except with horizontal wells in certain sweet spots.

In some Chinese coal basins, coal has apparently been sheared, which is also the case in the Canadian Rockies foothills. This broken coal is difficult to drill and commonly has unproductive permeabilities (less than 1 mD). However, there is at least one commercial play in China: the Blue Flame CBM Co. in the Qinshui Basin has three projects that produced an average of 27 MMcf/d in 2006 (the permeability is 4 to 10 mD).1 India has several ongoing CBM pilot tests but little commercial production so far. That said, India is on target to produce 35 MMcf/d of CBM by first-quarter 2008. Reliance Industries, Ltd. (41 wells drilled) and Great Eastern Energy Corp., Ltd. (23 wells) are currently producing nearly 1 MMcf/d, according to government sources. These companies plan to drill over 1,000 wells total in their first commercial phases. Reliance is trying a variety of well completions: cavity, hydraulic fracture, and surface-inseam horizontals. The state-owned Oil and Natural Gas Commission is expected to install the first well in India where multilateral drilling will be tried. In early 2007, operators from Australia and the U.S. jointly leased several large blocks in India, adding momentum to the industry.

Finally, in 2007 smaller ventures have been drilling and testing coals in England, France, Turkey, and Bolivia, as well as in other countries. The attraction is usually good gas content and coal thickness, but the roadblock is often poor permeability (less than 1 mD), and this is critical for project economics.

In the U.S., the San Juan basin CBM resources are 50 Tcf (excluding Menefee coals), while total CBM resources in the Lower 48 states are estimated to be 755 Tcf. Note that different resource estimates vary. For example, U.S. CBM resources from the Potential Gas Committee (see E.I.A. of U.S. Department of Energy) are less than those given in the above map by factors of 2 to 5 mostly (but can be less by a factor of 20). Alaska is a surprising CBM resource, reported to have 1,037 Tcf – more than the entire Lower 48 states combined.2 U.S. proven reserves and production figures are given in the graph. Both these plots reveal almost straight-line growth over the past 15 years. By 2005, both reserves and production had reached almost 10 percent of total U.S. values, which is a rather significant threshold. One recent estimate is that there are now about 60,000 CBM wells in the U.S.2

BP and ConocoPhillips are two of the biggest CBM producers in the U.S. BP has over 1,500 wells, while ConocoPhillips has over 800 producing wells in the San Juan Basin. For comparison, back east in the North Appalachian basin, CNX Gas has 2,500 small wells in their Virginia plays, while in the Powder River basin there are now more than 8,000 producing wells. Other large CBM players in the U.S. are Anadarko, Devon Energy, and Chesapeake Energy. At the end of 2005, there were as many as 250 CBM players in the U.S.2 The U.S. CBM sector was boosted by federal funding for research on unconventional gas, as well as tax credits on production, both of which began in the 1970s. In recent years, the rise in gas prices to $7 or $8 per Mcf has been a strong driver for the industry. For example, the Cherokee basin in southeast Kansas (see map) produced “shale gas” early in the 20th century (the gas actually came from the coals). One visionary geologist in the late 1980s pushed the concept of viable CBM in townships like Independence, but only a few local entrepreneurs acquired leases, drilled wells, and started producing gas. But when the price of gas rose, some big operators bought those local companies, making the entrepreneurs rich. Now, the Cherokee basin has become a hotspot, with costly lease acreage and a thriving local CBM industry, proving once again that an alert individual can jump in before the main bandwagon arrives.

Coalbed Methane is Different

There are many issues, both operational and technical, that must be faced in new CBM projects. As an engineer working CBM wells once said, “Everything about CBM is squirrelly” (American lingo for “perplexing”). First, most of the methane gas is adsorbed in the coal, not just sitting there in the rock’s pore space, as it is in sandstone. (If you lower the reservoir pressure, though, it will come out of the coal – like opening a bottle of soda.) Second, stimulating CBM wells, which usually needs to be done to get the gas out fast enough, has been a mind-twisting experience. For example, one dramatic approach is to do a controlled well blowout, in which a cavern up to 10 feet across is deliberately created in a coal seam at the bottom of a well (called a cavity completion). However, a more common type of completion is hydraulic fracturing, and here we discovered that fluids and chemicals normally injected into a reservoir are absorbed by coal and can be quite damaging to the coal permeability. Last, it has been found in the San Juan basin that the coal permeability increases by 10 to 100 times as the reservoir depletes. There is no precedence for this in the entire oil and gas industry!

A big advantage of CBM is that many coals, which contain substantial amounts of gas, are shallow. This means wells are cheap. Many explorers recognized this and went after the gas, only to discover that the gas will not come out if the permeability is too low. What is too low? Most commercial CBM plays in the U.S. have permeability of 3 to 30 mD. Very few are as low as 1 mD. But many shallow coals and most deeper coals do have permeabilities that are less than 1 mD. Can anything be done about this? Canada is a good case in point. Horseshoe Canyon is commercial because permeabilities are 0.1 to 100 mD and the coal is totally dry, which means gas comes out more easily. However, the Mannville coals of Alberta and various coals of British Columbia appear to have permeabilities of 1 mD or less, except in certain patches called sweetspots where it may be greater than 10 mD. So far, horizontal wells in sweetspots provide the only viable production in the Mannville.

To produce economic gas from low-perm coals requires a three-pronged strategy: a) locate a sweetspot by paying a smart structural geologist to predict where to find one, or by drilling a lot of wells until you encounter one, b) drill horizontal wells, and c) deploy novel stimulation techniques. An example of the first strategy is the Australian CBM play on the Undulla Nose, which is the “fairway” of the Surat basin, with permeabilities up to 500 mD.3 The Undulla Nose is a structural high, and the coal measures are draped across the nose. This draping caused cleats and fractures to develop during coalification. The deepest CBM play in the world (about 7,000 feet) is the White River Dome field in the Piceance basin, where wells were drilled on a structural dome with enhanced permeability. Commercial gas production is only hampered by CO2 contamination from a deep fault. Another deep CBM play at about 5,000 feet found decent permeabilities, and this was confirmed by strong initial water production from vertical wells. However, the water production stayed too strong for too long, thus limiting the gas flow, and water disposal became a problem.

The benefit of the second prong of the strategy is that horizontal wells in one seam (generally single-lateral, but occasionally dual) commonly produce at rates 3 to 10 times greater than those of vertical wells (which have been hydraulically fractured in more than one seam). Note: the horizontal seam thickness was as low as 40 percent of the total of all seams fractured. And horizontal wells (in the U.S.) generally cost about half as much as vertical wells, making the horizontal approach very attractive economically. Many seams would require a horizontal in each of the more productive seams. For even lower permeabilities, multilateral wells in one seam, such as quadrilateral or fishbone patterns, are an option. The future of CBM seems to be horizontal wells.

Australia is the lucky country: coalbed permeabilities are in the hundreds of mD in different field fairways in the Bowen and Surat basins, with individual wells producing as much as 8 MMcf/d. So what about other countries? Chinese coalbeds in general appear to have limited permeability, one reason being that some coals have been sheared over geologic time, and that destroys the cleat structure. However, India is likely to have some coals with permeabilities in the hundreds of mD due to low-stress geological structure. That said, in general the gas contents appear to be moderate and vary greatly from basin to basin.

The Third Prong

In coals, production statistics favor horizontal wells over vertical ones that have been hydraulically fractured. But very few horizontal wells have been fractured. One reason is that the fracturing methods applied in non-CBM wells are too expensive for CBM. For example, horizontal Barnett Shale wells are routinely fractured, mostly through several perforation clusters in long cased and cemented wells. But CBM wells are cheap, and horizontal wells are rarely cased and cemented. A single very large bullhead treatment has been tried, with diversion induced by screenouts (this is cheap). Another technique is fracturing through an uncemented liner in an openhole well in isolated segments by using external casing packers, and dropping a ball to move a sliding sleeve and initiate a fracture in an adjacent segment of the well. Again, this practice is too expensive for a cheap CBM well. If the future of CBM is horizontal wells, someone will surely figure out an economical way to stimulate them.

The Alberta Research Council is managing a consortium of about 10 companies with the goal of “creating” permeability in fields where permeability is too low to be profitable. The consortium is currently preparing a well stimulation design for the Mannville coals to induce shear failure in the coal reservoir, hoping to boost the virgin permeability enough to make Mannville gas production commercial. If a breakthrough is achieved, it could have enormous consequences for the widespread Mannville and many other low-permeability coals.

Other novel stimulations look promising. One example is microholes: radials of 1 to 2 inches extending out from a vertical wellbore. At the University of Queensland in Australia, research is proceeding on methods to commercially produce vast coal resources below 3,000 feet where permeability is less than 0.1 mD.

Finally, a strong permeability increase with depletion in the San Juan basin has greatly boosted the CBM economics. The source of the permeability increase is shrinkage of the coal matrix as gas desorbs from the coal. The matrix shrinkage implies the coal cleats will open wider, thus increasing the permeability. If we could predict the increase in a new play, this could turn marginal plays into economic successes. Recent theoretical work has made significant progress in this area.

Geological sequestration of greenhouse gases, such as carbon dioxide, has become a hot topic. The CBM twist is that carbon dioxide is adsorbed by coal, even more strongly than methane gas. This implies that if carbon dioxide is injected into a coal seam, it will displace methane in the reservoir and methane gas rates in offset wells will be increased. This has been proven by field trials, and more are pending to see if the process is economically viable. Sequestration economics is debatable at present, but if the nascent system of carbon credits grows, the sequestration of carbon dioxide in coals and the accompanying enhanced methane production should become economic. One challenge is to understand the injectivity of the carbon dioxide, which appears to depend on two factors. Adsorption of carbon dioxide by coal will a) swell the coal, and lower the injectivity, while at the same time b) weaken the coal, leading to failure and permeability increase, which would increase the injectivity. The injectivity of carbon dioxide may be the key to the successful implementation of carbon dioxide sequestration in coals.

Summary

CBM wells are cheap because they are usually shallow. Deeper wells tend to have lower coalbed permeability and productivity. Low permeability is the Achilles’ heel for CBM ventures, and many have failed on this account alone. Nevertheless the CBM industry, which began in the 1970s, is robust. This is mostly due to the increase in gas prices, but also to technology awareness (such as the need to find good permeability) and technology advances (such as the success of horizontal wells). There is a bright future for CBM and it entails finding regions of enhanced permeability in coals, utilizing horizontal wells with the option of fracturing these wells, and in “creating” permeability by new-paradigm methods such as shear stimulation.

Many thanks to folks who provided valuable input to this article: Walt Ayers, Andrew Scott, Paul Masserotta, Barry Ryan, Roger Gierhart, and Prem Sawhney.

References

1. Professor Yong Qin, CUMT, “CBM & ECBM Research in China and at CUMT,” Seminar at University of Queensland, Australia, 2007.
2. Andrew Scott, personal communication, 2007.
3. S. Scott et al., “Revised geology and coal seam gas characteristics of the Walloon Subgroup – Surat Basin, Queensland,” PESA Eastern Australasian Basins Symposium II, p. 345, Adelaide, Sept. 2004.

Ian Palmer is a partner at Higgs-Palmer Technologies, which has offices in Tulsa and Albuquerque.