The development of coalbed methane (CBM) in Canada centers in Alberta, and this year promises to be the province's busiest yet in this expanding source of gas. At year-end 2003, some 780 CBM wells had been drilled in Alberta, another 80 wells targeted a mixture of coals and sands, and 155 existing wells were recompleted as CBM wells, reports the Alberta Energy & Utilities Board (EUB). The top play-the target of 80% of the total wells-is in south-central Alberta's Upper Cretaceous Horseshoe Canyon/Belly River coals, part of the Drumheller coal zone. Located northeast of Calgary and stretching to Edmonton, this prospective area features low-rank coals that occur in discontinuous seams at depths between 1,000 and 3,000 feet. Significantly, these coals produce very little to no water, a tremendous attribute that greatly reduces operating costs and environmental issues. The two most active players in the Horseshoe Canyon have been EnCana Corp. and Quicksilver Resources Inc. The companies initially had a joint venture in the Palliser area but dissolved that partnership early in 2003. Last year, following the success of a 35-well pilot project that produced 3 million cubic feet of gas per day, EnCana drilled 270 wells in its Palliser program. It approaches these coals much like it does a conventional shallow-gas play, using the same rigs and multi-zone fracturing techniques. In 2004, EnCana plans to drill about 300 wells on its 700,000 acres of prospective properties, raising production by year-end to 30 million cubic feet per day. During the next five years, it estimates that its CBM production from this play could reach 200 million cubic feet per day. Fort Worth-based independent Quicksilver, which operates in Canada through its MGV Energy Inc. subsidiary, also continues to aggressively develop CBM production in the area. "We and our partners have drilled more than 200 wells and we believe we have defined a significant fairway for coalbed methane," Glenn Darden, president and chief executive officer, said at a recent IPAA-sponsored investment conference. Currently the company is producing 22 million cubic feet of CBM gas per day in Canada from a series of joint ventures with partners including ConocoPhillips, Enerplus, NCE Petrofund, Burlington Resources and Murphy Oil. Quicksilver operates 95% of these projects, and altogether holds 525,000 net acres of leases. The company booked proved reserves of 132 billion cubic feet from these properties at year-end 2003, and it expects to double that number in 2004, Darden said. This year, Quicksilver will drill 285 net CBM wells in Alberta and expects to exit 2004 with Canadian CBM production of 35 million cubic feet per day. "This project now, we can clearly see, can be a trillion-cubic-foot project for us. And with luck we can double that number." The rates of return in the Horseshoe Canyon play are compelling: the shallow CBM wells, which average production rates of 140,000 cubic feet per day and reserves of 450 million cubic feet, deliver 60% rates of return at gas prices of US$4 per thousand cubic feet, and post nearly 100% return at prices of US$5 per thousand. Apache Canada also has an active CBM campaign in the same play, centered in its Nevis Field area northeast of Red Deer, where it holds 250 sections of land. It drilled 16 wells during first-quarter 2004, raising its total number of CBM wells to 121 and its related production to 16 million cubic feet of gas per day. During 2004, it expects to drill about 250 wells in the play. While the economic viability of CBM production from Alberta's dry coal zones is now established, the same cannot yet be said for the province's extensive wet coals. Of these more problematic targets, interest is focused on coals in the older Mannville Group and in the Ardley coal zone, a younger coal that is part of the Scollard Formation. About 140 wells have been drilled to test the Mannville coals, which produce copious amounts of saline water. These seams are coincident with part of the Drumheller coals and also extend farther east. Less than 50 of the Mannville tests are producing gas, reports the EUB. And, the Ardley coals, which occur to the north and west of Calgary, have been very lightly tested to date. About 60 wells had been drilled to the Ardley zone through 2003, and only a handful of these are on production. Like the Mannville, the Ardley coals produce water, but the volumes and salinities can vary widely.