Gas riches from our coal

New Zealand’s coal seam gas is set to become a major ‘clean coal’ energy resource, following a boom in the technology over in Australia.  By Lindsay Clark.

A company which has carried out the most extensive coal seam gas exploration throughout the country, L&M Coal Seam Gas, estimates that in just five of its permit areas it holds around 1100 petajoules (or over 1 trillion cubic feet) of potential in-ground gas resource of coal bed methane.

That would be as much gas as held in the country’s largest natural gas field at Pohokura, or just over quarter of what was originally in the Maui field, although gas resource estimates from coal do not have the same level of accuracy as natural gas reserves from petroleum sands and less is known about the gas performance of individual coal fields.

However, the coal seam gas estimates from just one company gives some idea of the scale of future coal seam gas potential in New Zealand.

Coal seam gas has already erupted onto the Australian gas market over the past few years based mainly on development of the huge resources found in the Queensland coal fields. Coal seam gas now supplies 70 percent of the Queensland gas market and provides such an oversupply that a number of companies are planning to export the surplus gas by building new LNG plants to meet burgeoning Asian and other offshore markets.

In contrast, New Zealand’s coal seam gas scene is just getting off the ground. Already the potential seems great and it is a “clean coal” technology, though technically no coal is used in the process.

Coal seam gas (also known as coal bed methane) contains about 98 percent methane, trapped in pores of the coal by water pressure. The gas is extracted, usually from depths of between 200 and 1000 metres, by drilling wells and pumping water out of the seam. This allows the gas to flow at relatively low pressures. The gas is almost identical to natural gas so can be fed straight into gas networks.

Though initial use of coal seam gas is likely to be for small power generation plants and for large industrial plants, L&M Coal Seam Gas is also talking of supplying bottled gas as CNG (compressed natural gas) to replace diesel and petrol in trucks and cars. CNG was first used here in cars in the 1980s, but the market has declined severely in recent years. Vehicles fuelled on gas are sharply cheaper to run than on petrol with the added benefit of cutting emissions of CO2.

Coal fields which contain good supplies of coal seam gas are spread between south Auckland and north Taranaki, on the West Coast and in Southland and Otago.

Christchurch-based coal producer Solid Energy began producing the first electricity from coal seam gas in August this year using temporary generators at a set of its pilot wells west of Huntly, which first flowed gas in December 2007. The onsite trials will help calculate how much energy can feasibly be extracted from the field. The company earlier estimated the area had reserves of 300 PJ of gas.

Solid Energy says a decision on whether or not to progress the pilot to commercial scale would depend on gas production estimates, the cost of drilling and the price at which the gas can be sold.

The company’s business plan, as disclosed in their latest annual report, projects gas production building up quickly to 700 terajoules of gas (0.7 petajoules) by 2011.

Solid Energy is a partner with US coal seam gas developer Resource Development Technology in a large petroleum exploration permit covering the central Waikato coal fields from Hamilton including the Huntly fields. Solid Energy is to do more drilling in the next year in its other permits in north Taranaki and near Greymouth.

Though Solid Energy has been the first to take coal seam gas through to the near commercial decision-making stage, it has been fellow Christchurch-based company L&M Coal Seam Gas which has undertaken a more systematic search through the country’s main coal fields for the best gas resources.

After carrying out preliminary work on a dozen or more exploration permits from Whangarei to Invercargill in the past decade, it is now working on just five of these with good gas potential. Two of the L&M permits are in Southland, two in Otago with combined potential in-ground gas resource of 420 PJ and the multi-coalfield south Waikato permit with another estimated 780 PJ. Switching focus from an explorer to a producer and developer, the L&M Group has appointed Australian engineer Kent Anson with 10 years of coal seam gas production experience in Queensland and India as its new chief executive.

Anson says previous exploration by L&M shows the country has a significant resource of coal seam gas with its own permits having 1100 PJ. He was hired by the L&M Group to turn their coal seam gas exploration subsidiary’s results into commercial production.

“We plan an aggressive appraisal programme over the next year in Southland and Otago where we will drill three separate multi-hole pilot programmes over the next 18 months, with the aim of certifying an initial tranche of gas reserves.”

The first appraisal pilot programme will be drilled on the Kaitangata coal field, 50 kilometres south of Dunedin, which contains a potential resource of 54 PJ. Kaitangata field contains two billion tonnes of sub-bituminous coal at depths up to 500 metres with seam thicknesses up to 15 metres. L&M expects to have its first tranche of Kaitangata gas reserves by the middle of 2009.

A second 5-well pilot will be drilled around the start of 2009 at the Ohai coalfield in western Southland (150 PJ). The Ohai resource contains a high gas content of 10 cubic metres of gas per tonne of coal. The field contains multiple seams of sub-bituminous coal, some up to 15 metres thick with a net depth of 50 metres going down to 800 metres.

This will be followed by a third 5-well pilot at the remote Hawkdun (57 PJ) lignite field north of Alexandra in Central Otago.

Another L&M Coal Seam Gas permit in Southland north of Invercargill at the Winton permit is estimated to contain another 140 PJ gas drawing from previously unmined sub-bituminous coal seams.

L&M has held its south Waikato permit only since March this year,  but on the basis of previous drilling it estimates resources of 780 PJ from over six billion tonnes of coal at drillable depths in known fields, including some which have never been mined.

L&M Group’s publicly listed petroleum company L&M Petroleum Ltd is also currently exploring for coal seam gas in western Southland from Ohai to further west in the Waiau Basin. The petroleum explorer estimates there are 300 PJ of gas resources in the area.

The other substantial coal seam gas explorer is the New Zealand-Australian joint venture Macdonald-Chartwell, which was awarded the first coal seam gas mining permit near Greymouth.  The company says initial studies indicate the central area of its permit has a gas in place resource of over 300 PJ.

The joint venture also holds two other coal seam gas permits near Westport and the north Waikato-South Auckland area and the Thames Valley.

There is a long way to go before a clearer picture emerges of New Zealand’s coal gas seam reserves, but the raw estimates just taken from developments to date indicate a resource of possibly 2000PJ about equal to current natural gas reserves.

This would fit with estimates of world coal seam gas resource which, at about 6000 trillion cubic feet of gas, are now believed to equal the world’s natural gas resources.