COALBED GAS-1 HUNT FOR QUALITY BASINS GOES ABROAD

Vello A. Kuuskraa, Charles M. Boyer II, Jonathan A Kelafant
Advanced Resources Inc.
Arlington, Va.

Spurred on by the success of the U.S. coalbed gas industry, a worldwide hunt for the next San Juan-type coalbed gas basin is under way.

This search is taking both major and independent exploration companies from Australia to Zimbabwe.

The goal is to find high quality coal basins and areas that not only contain large volumes of gas in place but also have the potential for high gas production rates.

Given the widespread distribution of coal-bearing strata around the world, a reasonable assumption is that high-quality basins with commercial levels of coalbed gas production do exist.

Thick, gassy coal seams are present on all populated continents as documented by coal production statistics and numerous methane-related mining disasters. In some countries, such as China, the potential gas resources contained in the coal seams may dwarf the conventional gas resource base.

However, it is still too early to know how efficiently and quickly this enormous international gas resource can be turned into economic gas reserves.

This first of a three-part series summarizes the current activity and reviews the storage and production mechanisms essential for delineating high quality coalbed gas prospects.

With this as background, the second article will provide a more detailed country-by-country look at the world's coal and coalbed gas resources. Emphasis will be on those basins that have high potential for gas development.

The concluding article will review the status of significant international coalbed gas projects currently under way.

U.S. ACTIVITY

In the U.S., coalbed gas development and production have increased dramatically during the past few years. From a few dozen wells in the mid-1980s, nearly 5,000 wells are now producing methane from coal seams. Another 2,000 wells are drilled and awaiting completion or connection to a gathering system.

Coalbed gas production now exceeds I bcfd. Proved reserves booked at the end of 1991 are about 12 tcf.

Assuming continued growth, coalbed gas could supply 2 bcfd of pipeline-quality natural gas in 1995 and provide 3 bcfd, or 1 tcf/year by 2000 (Fig. 1.).

SAN JUAN BASIN

The San Juan basin currently accounts for about three quarters of total U.S. coalbed methane production. At the end of 1991, about 1,660 wells were producing 860 MMcfd.

A typical well in the northern portion of the San Juan basin has a peak production rate of 500-1,000 Mcfd and ultimate expected gas recoveries of 2-3 bcf. However, in the central part of the basin, where the thick, overpressured coal seams are found, gas production rates are 3-4 MMcfd/well and gas recoveries may reach 10 bcf/well.

The best well in the basin, Well No. 412 (drilled in 1987 in the San Juan basin 30-6 Unit), has a peak gas production rate of 15 MMcfd and a cumulative gas recovery to date of 17 bcf (Fig. 2).

In the San Juan basin, open hole cavity completions are a recent technological advance for improving gas production rates. The enlarged well bore more efficiently links the well with the natural fractures in the coal.

Side-by-side comparisons of open hole cavity and hydraulically stimulated wells show that, under favorable geologic and reservoir conditions, the open hole cavity wells produce gas at rates 6-8 times higher than cased and fractured wells.

Table 1 shows the performance of fracture stimulated and open hole cavity wells in the Northeast Blanco Unit of the San Juan basin. Here, 10 wells, originally cased and fractured, were redrilled and completed on the same well locations using the open hole cavity technology.

After recompletion, gas production rates per well climbed to nearly 4 MMcfd, up substantially from the original 500 Mcfd.

In other geologic settings, creating an open hole cavity has not yet succeeded or has led to insignificant differences in gas production rates when compared with hydraulic stimulations.

Research efforts sponsored by the U.S. Gas Research Institute (GRI) are under way to better understand the reservoir prospects that control the natural cavitation process and the settings where this technology works best.

Thus, finding basins and areas geologically favorable to open hole cavitation has risen high on the priority list of the coalbed gas explorationist.

WARRIOR BASIN

The Warrior basin (or Black Warrior basin) in Alabama has had most of the coalbed gas drilling. Gas production from about 2,740 wells has increased steadily, reaching 235 MMcfd by the end of April 1992.

A representative coalbed gas well along the eastern portion of the basin has a peak gas production rate of 100-150 Mcfd and is expected to recover between 200 and 600 MMcf. However, a number of step-out wells toward the center of the basin have been disappointing.

The current drilling and completion practice is to case, cement, perforate, and hydraulically stimulate the wells completed in multiple zones.

Recent laboratory work, confirmed by modeling and field tests, indicates that hydraulic fractures do not always efficiently stimulate the reservoir or link the well bore with the natural fractures in the coal. Numerous problems have been identified, including:

Damage to the coal cleat system caused by the well completion and stimulation chemicals
Tendency for the proppant to settle out of zone
Poor linkage of the stimulated well with the natural fracture system in the coal.

Recently, a previously stimulated but damaged well (Well P3) at the GRI Rock Creek field laboratory was worked over and refractured. The gas production increased six-fold, from about 50 Mcfd before to over 300 Mcfd after the refracture (Fig. 3).

Based on this success, other opportunities may exist in this basin for increasing gas production rate and recovery.

OTHER BASINS

After being one of the most active U.S. gas plays for the past several years, U.S. coalbed gas drilling has leveled off. The San Juan and Warrior basins still dominate today's coalbed gas production in the U.S., but other coal basins are beginning to be developed, such as:

In the Central Appalachian basin, nearly 200 wells were drilled in western Virginia. An additional 200 wells are planned to be drilled before year end. Average gas production is about 100 Mcfd/well.
The shallow Cherokee basin of southwestern Kansas and northeastern Oklahoma has about 130 producing coalbed methane wells. Operators plan to double this number by the end of 1992. Early time gas production rates are reported to vary widely, but are averaging about 50 Mcfd/well.
About 160 coalbed methane wells were drilled in the shallow, low-rank coals of the Powder River basin. The 45 wells with reported gas production have rates that range from 10 to 140 Mcfd. Two recent exploration wells reported initial rates of 100-200 Mcfd.
In the Piceance basin, 125 wells have been drilled and completed since 1989. The wells, some dually completed in both the coal seams and the surrounding tight gas sands, produce in the range of 100-400 Mcfd. Two recently drilled coalbed exploration wells in the northern portion of the basin tested 950 Mcfd.

WORLDWIDE RESOURCES

World coal resources (including hard and brown coal) are estimated at 25,000 billion tons. Four countries, Russia, China, the U.S., and Canada, account for nearly 90% of the total. Table 2 lists the top 12 coal resource countries.

While initial interest has focused on these major coal-bearing areas, many other countries, such as Spain, Hungary, and France, have smaller but significant coal reserves and by extension, coalbed gas resources.

Given this very large amount of coal, it is reasonable to infer a similarly large world coalbed gas resource. Unfortunately, relatively few countries have conducted detailed gas resource appraisals on their coal basins. Thus, considerable uncertainty surrounds any estimate of global coalbed gas.

Based on published estimates and estimates made by the authors, the worldwide coalbed gas resource is 4,000-7,000 tcf (Table 2).

As the international coalbed methane industry expands, more refined estimates will become available. However, the overall magnitude of the resource, thousands of trillion cu ft in place, will likely remain large.

Based on geologic age, the bulk of the world's coal resources can be grouped into five categories (see box). Within each category, the coal deposits tend to have similar characteristics, even though the deposits may currently be thousands of miles apart. These similar characteristics are the result of paleoclimatic conditions and types of vegetation existing at the time of peat deposition and alteration.

STORAGE AND PRODUCTION

A discussion of the mechanisms controlling coalbed methane storage and production was presented in a previous article (OGJ, Oct. 9, 1989 p. 49). Therefore, the following will provide some highlights from the previous article as well as some new insights that help define a quality coalbed gas prospect.

GENERATION AND STORAGE

Coal is a heterogeneous, carbon-rich material that is formed by the biochemical and geochemical alteration of peat, an organic material that is the source of most of the world's coal deposits.

During the process of coal formation, commonly called coalification, methane and other by-products such as water and carbon dioxide are generated (Fig. 4).

Once generated, methane is stored in the coal as a monomolecular layer adsorbed on the internal surfaces of the coal matrix. Significant quantities of methane can be adsorbed in this fashion since the molecules are tightly packed and because coal has a very large internal surface area, over 1 billion sq ft/ton of coal.

As a result, coal can hold two to three times as much gas in place as the same volume of a conventional sandstone reservoir (Fig. 5).

The amount of methane stored in coal is related to the rank and the depth of the coal. The higher the coal rank and the deeper the coal seam is presently buried (causing pressure on the coal), the greater its capacity to hold gas.

Releasing this adsorbed methane is accomplished by lowering the pressure on the coal, which generally involves removing the water and lowering the hydrostatic pressure in the coal reservoir.

GAS FLOW

After the gas desorbs from the coal, the released gas must diffuse through the coal matrix until reaching a coal cleat, the natural fracture network in coal. The gas then flows through the cleats or other fractures into the well bore.

Gas diffusion through the coal matrix is controlled by the gas concentration, the inherent diffusivity properties of the coal matrix, and the distance that gas travels to reach the cleat or fracture.

Once the gas reaches the cleat or fracture, the gas flow is governed by permeability and pressure. However, because both gas and water are flowing through the cleat system, one must calculate the continually changing relative permeabilities of the gas and water phases to accurately describe this two-phase flow.

Well tests from coal basins show that the coal cleat permeability is stress, and thus depth, dependent. As such, coal permeability is higher in low-stress settings such as at the shallow depth of the coals in the Bowen basin in Australia (Fig. 6).

Knowing the in situ stress of the various portions of a basin can greatly assist in appraising the quality of a coal prospect.

HIGH-QUALITY RESOURCES

Coalbed gas explorationists have traditionally focused on thick, gassy coals. This has given priority to high-rank (and inferred high gas content) coal seams that help assure a high concentration of gas in place and to moderate coal burial that implies lower drilling costs and higher permeability.

More recent work shows that other reservoir parameters, often overlooked, can have as much or more impact on the quality of a coalbed gas prospect.

Because coal reservoir properties have so much impact on gas recovery, gathering data and conducting tests to accurately define these reservoir parameters should help the explorationist obtain better definition of the high-quality coal prospects.

Three such sets of reservoir parameters are:

Gas sorption characteristics. Lower rank (and thus lower as concentration) coals with favorable gas sorption characteristics can provide a higher-quality prospect than a high rank (and thus higher gas concentration) coal that is undersaturated and has an unfavorable or low Langmuir pressure.
As shown by Table 3, the lower rank coal prospect, because this coal is fully gas charged and has a favorable desorption isotherm, will in 5 years recover 2.2 bcf/well. But the higher rank coal prospect, with only 80% gas saturated and a steep desorption isotherm, in 5 years will recover only 0.9 bcf/well.
Coal depth, pressure, and permeability. All else being the same, a deeper and thus higher pressure coal will be a higher quality prospect than a shallow coal.
The explorationist's challenge is to establish those areas where, because of intense natural fractures or low in situ stress, the coals have adequate permeability at depth.
In 5 years (Table 3), the deep coal prospect, of the same rank and permeability, will produce 2.7 bcf/well vs. 1.1 bcf/well for the shallow coal prospect.
Coal porosity and saturation. A low porosity or low water saturation coal will be a higher-quality prospect than a high porosity or high water saturation coal. This assumes that the inherent permeability of the two coal prospects is the same.

In 5 years (Table 3), the low porosity coal prospect produces 2.4 bcf/well vs. 2.0 bcf/well for the high porosity coal prospect.

INTERNATIONAL DEVELOPMENT

The U.S. coalbed gas industry has benefitted from a number of special situations that have greatly assisted rapid development. Boosting the development and aiding project economics were such factors as:

Large, well studied and geologically simple coal basins (Warrior and San Juan, for example)
Fully integrated natural gas pipeline system
Significant research and development efforts (GRI and U.S. Department of Energy)
Section 29 tax credit.

Outside the U.S., however, many of these favorable factors do not exist. As such, a series of political, geologic, engineering, and marketing considerations, taken for granted in the U.S., need to be addressed for a successful international coalbed gas play.

In many cases, a successful international coalbed methane project will need to be a fully integrated, self-contained project from the drill bit through the burner tip.

POLITICS

Countries with established oil and gas production have established policies for the acquisition of hydrocarbon leases or concessions. However, many countries with significant coalbed gas resources, but no prior oil and gas development, have little legal framework for administering the distribution of these mineral resources.

One case is the newly democratized countries of eastern Europe, specifically Poland, Czechoslovakia, Hungary, Romania, and Bulgaria. Many U.S. and foreign-based companies are actively pursuing coalbed exploration and development concessions in these countries.

To date, no leases or concessions have been granted, because of the lack of laws that define the method of granting or auctioning these lands or govern the ownership of these resources.

In addition to legal uncertainties, economic incentives for initiating the development of coalbed methane are often lacking.

The U.S. industry was "kick-started" with the incentives of the Section 29 tax credits. Outside of the U.S., few financial incentives exist to counterbalance the risks of coalbed methane development.

GEOLOGY

The Warrior and San Juan basins are stable, intracratonic basins with relatively flat-lying and laterally persistent coal seams. The simple geology lends itself to establishing large commercial projects by providing a consistent reserve base and a simple producing horizon.

Conversely, many coal basins of the world are structural in nature. Because of complex stratigraphy and structure, proven exploration techniques developed for the coal basins of the U.S. are less applicable.

Exploration geologists familiar with the broad, easily definable features of U.S. coal basins will be challenged by the structurally complex coal basins such as in northeast China and southern Hungary.

These areas include extensive thrust faulting, overturned folds, high stress, and coal seams dipping close to 90 at the edge of the basins.

ENGINEERING

Just as the geologist will be challenged by the structural complexity, the engineer will face different, but none the less, difficult challenges in coal basins outside of the U.S.

The U.S. coalbed gas industry has been able to draw on the readily available oil field services and materials. Although coal basins in areas such as western Europe have access to oil field services and infrastructure, other major coal basins, such as southern Africa or China, have few or no locally available oil and gas services or materials.

Thus, shipping and mobilization will become a major cost item, especially during initial exploration and pilot testing.

Other factors such as weather, especially the colder climates of northern Europe and Asia, will adversely impact production operations and water disposal.

The remote locations of these coal basins will increase personnel and overhead costs.

The environmental restrictions, especially in the heavily populated regions of western Europe, will increase drilling and production costs.

Also the need to coordinate coalbed gas development and degasification with local mining will also have to be addressed.

MARKETING

In the U.S., the existing natural gas pipeline system has provided a ready means for distributing and marketing the produced coalbed methane.

In many cases, a low wellhead gas price has been the only marketing effort required.

However, establishing natural gas markets outside of the U.S. will be more challenging.

In such locations as eastern Australia or southern Africa the lack of existing pipeline facilities for the distribution and sale of the gas may require construction of hundreds of miles of pipelines to connect the coalbed methane play to the gas market.

Also, a market to use the gas may need to be established. This may entail the long-term conversion of a population and/or industrial center to natural gas use, the installation of gas-fired electric power plants (especially cogeneration facilities), and the construction of new chemical plants for converting the coalbed gas to fertilizer or methanol.

The use of the coalbed gas as a transportation fuel, such as CNG or LNG, may also provide new markets.