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Several factors are converging to create more favorable tailwinds for the increased exploitation of unconventional natural gas reserves – and by unconventional, we don’t mean shale gas, we mean coal bed methane.

The technology to extract the methane trapped in coal seams was first developed in the US in the 1970s as part of a program working on mine degasification and safety. Since then, the process of extracting methane from coal beds trapped deep underground has been steadily developed such that the US has been, and remains, the world’s largest producer of coal bed methane (or CBM, as it’s known).

By Stuart Burns

Some of the techniques used in shale bed fracking are applicable to CBM wells, such as horizontal drilling and fracturing of the beds to release gas, but it's typical in CBM wells to have considerable water present as a byproduct, which has to be pumped out first to reduce pressure in the seam and allow the gas to escape.

In some parts of the world this is a valuable asset; but it is also a running cost for such wells.

As a Resource Investing News article explains, CBM production is still a largely region-specific practice dependent on the local price of natural gas and the geology of the coal bed.

Global production totals 5.8 billion cubic feet (Bcf) per day from 15 basins in the United States, Canada, Australia, China and India, according to the article, but the US still dominates global output with nearly 5 Bcf per day of production and about 20 trillion cubic feet (Tcf) produced to date.

However, production is expected to fall in the long term as a result of resource maturity and depletion, with low North American natural gas prices hindering new resource exploitation. With natural gas prices so high in Asia and the drive to migrate as quickly as possible from polluting coal power generation, Asia in general, and Australia in particular, is considered a frontrunner to displace the US as the top-ranked producer.

While coal bed methane production in China and India currently remains low, at 150 million and 10 million cubic feet per day respectively, there has been a shift in focus to increasing production as natural gas prices in Asia continue to rise, the RIN article says.

Coal bed methane production in the Asia region is expected to reach 98 billion cubic meters by 2020, with Australia expected to contribute over 60 percent of this total, according to the Resource Investing News; China and India are the next major contributors and have projects underway to exploit new resources over the next few years.

China is estimated to hold CBM reserves of 36.8 trillion cubic meters, according to the China Daily, giving it the third-largest reserves after Russia and Canada.

With natural gas prices finally rising in the US and reserves in storage falling, it seems likely the US may have begun to turn the corner on natural gas prices, being so low they hinder new exploration and development.

But the reverse is the case in Asia, where prices are so high they are hindering the switch from more polluting coal as a source for power generation to less polluting natural gas.

The development of Australian and other Asian coal bed methane reserves is being spurred by those same high prices, a situation which is unlikely to be reversed as air quality standards are gradually raised and a cost for pollution becomes more commonplace.

In the US, the cost of complying with tougher Environmental Protection Agency (EPA) air quality standards could spur an increased shift away from coal and toward natural gas for electricity generation, according to a new Duke University study quoted in this article.

Stricter regulations on sulfur dioxide, particulate matter, nitrogen oxide and mercury may make nearly two-thirds of the nation’s coal-fired power plants as expensive to run as plants powered by natural gas, the study found. Even if gas prices rise considerably from current levels, it would be more economically sound to build a new gas-fired power station than to upgrade an old coal-fired one to meet the new standards, according to research quoted in the article.

Coal bed methane may be some countries’ answer to the game-changing impact of shale bed gas in the US as the less environmentally contentious nature of its production proves more acceptable – or geology favors CBM formation over shale.

Source: Coal Bed Methane: The Next Shale Gas Revolution?