Coal Bed Methane: The Next Shale Gas Revolution?

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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).

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 its 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.

Continued in Part Two.

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