While North America is looking at LNG exports as a possible market for its excess shale gas, in other parts of the world these facilities are getting a different kind of feed gas – coalbed methane (CBM).

In some ways CBM might not seem the sexiest unconventional. It is abundant and relatively easy to produce, and the wells often can be drilled using truck-mounted rigs. But those “boring” attributes also make it the fuel of choice in many countries whose supplies of conventional gas are drying up.

In Indonesia, for instance, conventional gas fields are in decline, and much of the new offshore exploration is resulting in dry holes. Australia has a shale gale in its future but currently lacks the infrastructure to develop it. For now these and other countries in the Asia-Pacific region are relying on their vast supplies of CBM to provide gas for themselves and their neighbors.

Indonesia – poised for success

At a 2004 Society of Petroleum Engineers international conference, Scott Stevens with Advanced Resources International gave a presentation on Indonesia’s prospectivity as a CBM-producing country. At the time no significant testing had taken place. “There has been a perception by CBM operators that Indonesia’s coal deposits are too shallow and too low-rank to be prospective,” Stevens wrote. “After all, Indonesia’s coal mining sector produces primarily lignite or sub-bituminous coal from open-pit mines that have no significant methane control issues.”

What a difference a decade makes. Stevens, now chairman of CBM Asia, is so bullish on Indonesian CBM that he was hard-pressed to find anything negative to say about its potential. And what’s not to like? The coal seams are up to 50% thicker than similar deposits in the Powder River basin in Wyoming, they are shallower, and the gas content is very high. Netherland Sewell & Associates Inc. (NSAI) has estimated gas content in East Kalimantan at 300 cf/ton, about six times that of the Powder River.

Gas saturation also is high. “Picture a sponge that’s totally soaked with water,” Stevens said. “If you squeeze it a little, water comes out. It’s a little like that with CBM.” Under-saturated coals need up to six months to dewater before they produce gas, but Stevens said that Indonesian wells produce gas much more quickly.

And then there are the prices. Talisman, for instance, is selling gas to Chevron for its Duri steamflood project. The company averaged US $11.26/Mcf in 2012. Blocks in East Kalimantan sell gas to the Bontang LNG plant, the second largest in the world. Stevens said that due to Indonesia’s declining conventional gas reserves, the plant typically only runs at two-thirds capacity. BP already is commercially producing CBM and selling it to this facility.

Dart Energy’s website notes that South Sumatra and East Kalimantan, both of which have vast resources of CBM, are facing gas shortages, and pipeline infrastructure in the former province exists to send gas to nearby Java, while the latter province can deliver gas to the Bontang LNG facility. These two areas are of strategic interest to the company because of their technical and business characteristics, the site notes.

CBM Asia has been slower to get its feet wet, purchasing minority stakes in two blocks in 2008 after the Indonesian government altered its oil and gas laws to include CBM tracts. While Stevens said the situation was “a good entry but not ideal,” CBM Asia and its partners did get some good results, with NSAI auditing the wells and determining about 961 Bcf of net prospective recoverable reserves.

More recently, the company has entered a joint venture (JV) agreement with Exxon-Mobil. Stevens said that Exxon entered Indonesia a few years ago and acquired majority stakes in four production-sharing contracts in the Barito basin in South Kalimantan. “It’s really spectacular geology,” Stevens said. “It is super thick, more than 100 m [330 ft], and there are gas kicks in all of the well logs, so there clearly is gas in the coals. And there’s almost no faulting. It’s geologically very simple, and it has huge potential.”

Exxon drilled six wells, confirmed the good geologic conditions, and then sought a low-cost partner. “We were in the right place at the right time,” Stevens said. The companies are planning a five-well pilot project this year.

While they will not yet get to enjoy the high gas prices in the area, the gas will not go to waste. An existing power line to a nearby town is close to the project area, and the JV plans to use a natural gas-fired engine to produce power to sell into the line. “The government has allowed this,” Stevens said. “They’ve changed the contract to allow early gas sales before the development period.”

So what are the drawbacks? They are few. Produced water from one of CBM Asia’s wells in South Sumatra is being provided to a local town because it is cleaner than the town’s existing water supply. More brackish water can be discharged into the ocean in coastal areas or reinjected into sandstone reservoirs.

Stevens said that a lack of services was an issue earlier, but the region is gaining critical mass, with BP already commercially producing CBM and other players, like Santos, Eni, and Dart, with major drilling plans in the works.

Overall, the region has enormous potential. Estimates of gas in place range from 3.6 Tcf in the Bengkulu basin to as much as 183 Tcf in South Sumatra, totaling 435 Tcf and making Indonesia the sixth largest CBM resource in the world, according to Stevens’ paper. And its proximity to gas-hungry markets in Asia positions it to remain a world-class player.

Coal seams in Oz

Australia also has abundant CBM resources, although here it is referred to as “coalseam gas” (CSG). A January 2012 estimate placed economic demonstrated reserves at 33 Tcf, with a reserve life of about 150 years at current rates of production, according to the Australian Mines Atlas. However, the atlas notes that production is likely to increase substantially.

This ramp-up is primarily based on the growth of the LNG industry in Australia. The country currently has three export facilities, but at least five more are under construction or planned. While construction of an LNG plant can take several years, there is still a possibility that some of these plants may come onstream before the CSG is available to supply them.

Unlike Indonesia, Australian development is undergoing serious scrutiny. The government of New South Wales (NSW), for instance, has put in place new legislation that industry entities warn will discourage development of CSG resources. Platts reported that the Australian Petroleum Production and Exploration Association (APPEA), the Australian Workers’ Union, and the Australian Industry Group have written to NSW Premier Barry O’Farrell warning that “current policy was threatening investment and damaging energy security.” The warning was based on a report funded by the APPEA that found that a freeze on development would cost jobs and increase energy costs. Both NSW and Queensland have banned the use of BTEX, a chemical commonly used in hydraulic fracturing that has been found to be carcinogenic. SBS World News noted that only about 8% of the 4,500 CSG wells in Queensland required fracturing.

Commercial production of CSG in Australia began in 1996 in the Bowen basin in Queensland, according to the Australian government. Seen initially as an environmentally friendly alternative to oil, its popularity was such that in 2000 the Queensland government made a decision that 13% of all power supplied to the state electricity grid should be generated by natural gas by 2005. That requirement grew to 10% by 2010 and will ramp up to 18% by 2020.

But much like North America, local communities are concerned about environmental impacts. Poor well construction can lead to the contamination of local aquifers, and cracking the coal seam itself can cause other toxic chemicals to leak out, according to SBS World News. There also is concern about the vast amounts of water produced by CSG wells, and the same report quoted a National Water Commission report that stated, “The production of large volumes of treated wastewater, if released to surface water systems, could alter natural flow patterns and have significant impact on water quality and river and wetland health.”

To this end, the Commonwealth Scientific Industrial Research Organization (CSIRO) is conducting research, and hopes to establish safe, sustainable, and environmentally responsible CSG operations through comprehensive management and monitoring practices based on sound science.

Some of the primary environmental issues CSIRO outlined are the quantity of water produced, water quality and treatment, water use and disposal, groundwater contamination, and infrastructure footprint.

Despite the pushback, several companies are active in CSG development in Australia. Some are luckier than others. According to the Barrel Blog on Platts, both Santos and Origin Oil hold leases on ranchland and compensate ranchers for any disruption. Arrow and QGC, on the other hand, have acreage on cropland and face more opposition from landowners.

Origin has the longest track record in CSG, drilling its first exploration well in Queensland in 1993. Today it is the leading producer in Australia. With partners ConocoPhillips and Sinopec, Origin is developing the Australia Pacific LNG project, a two-train LNG facility that will export to markets in Asia.

“As a part of its project, Australia Pacific LNG is developing CSG resources in Queensland’s Surat and Bowen basins and building a pipeline to connect the gas fields to an LNG facility on Curtis Island,” the company noted in an email reply to questions.

Studying shales in China

Despite the Chinese government’s ambitious goals to increase shale gas production by 2020, the country has a long and steep learning curve ahead of it. But already inroads are being made to study China’s vast shale gas potential.

In a presentation at the recent European Association of Geoscientists and Engineers annual meeting, Yusheng Zhang from BGP discussed his company’s studies into a seismic fracture facies evaluation workflow for shale gas reservoirs and its application on a 100-sq-km (62-sq-mile) 3-D survey over the Block MA shale gas exploration area.

Researchers developed the “Kohonen neural network self-organization mapping” (KSOM) technique to classify the high-dimensional data volumes in a nonlinear pattern to reflect different seismic responses. The six primary attributes – coherence, maximum and minimum curvature, shape index curvature, instantaneous dip, and dip azimuth – were input into the neural network and in return created a quality control mechanism for the KSOM results. Based on the classifications provided by this analysis, researchers were able to establish five kinds of microfracture facies.

Zhang and his colleagues concluded that the KSOM technique was able to classify and identify these facies, thus helping to predict the development and distribution of gas-rich zones in the reservoir.