WORLD COAL JULY 2006 www.worldcoal.comUUnconventional gas...

WORLD COAL JULY 2006 www.worldcoal.com
UUnconventional gas supplies are becoming
a suddenly attractive proposition. This
means that a significant solution to securing
future gas supplies for Europe may be
sitting in its own backyard.
Recent events have brought into sharp focus
Western and, in the case of the Ukraine,
former Soviet satellite nations' exposure to
political uncertainties in ensuring plentiful,
cheap and reliable sources of energy.
While politics has always been a major
factor in the sector, rapid social, political
and economic change sweeping through
many energy producing regions has combined
with ever mounting environmental
concerns to make formerly overlooked
sources of supply become newly attractive.
Much of this has been driven by the consistent
and seemingly irresistible rise in oil
and other energy commodity prices which
makes hitherto uneconomic sources viable.
And in the case of the UK, tardiness
in framing strategic energy policy when the
current generation of nuclear power plants
reach the end of their working life has
added a fourth element into the mix.
Exploration companies
So the four factors of political uncertainty,
concern over long-term sources of supply,
a more economically favourable extraction
equation and uncertainly over replacing
nuclear sources of power make exploration
companies such as Heritage Petroleum
suddenly extremely interesting to investors
and energy majors who are now becoming
aware of what such pioneers are doing.
Heritage and its joint venture (JV) partner
European Gas Ltd are arguably the
largest holders of Coal Bed and Coal Mine
Methane resources in Europe. The JV has
exploration rights over three former coal
fields in France: Bleue Lorraine in Alsace
covering 460 km2, Gaz de Gardanne (563
km2) and Gaz de St Etienne (730 km2) as
well as a further four in Italy; Belforte (511
km2) covering the Volterra-Radicondoli Basin,
Sienna (478 km2) covering the Casino
Basin and Cinigiano (564 km2), covering
the Cana-Montalcini Basin, all in southern
Tuscany and a fourth, Sulcia in south west
Sardinia covering 615 km2.
There's gas in them there
mines...
Andrew Springer, UK, explains why unconventional gas resources are becoming
increasingly economically attractive.
Table 1. Lorraine permit gas in place
Billion m3 Billions ft3 Petajoules Category
Saint Avold 11.8 414.9 410.0 GIP
Alsting 16.3 576.3 569.4 GIP
Total 28.1 991.2 979.4 GIP
Figure 1. Geological map of Carboniferous beneath Permo-Trias cover, Lorraine Basin.
1 Petajoule = 1 000 000 000 000 000 j or 30 million kW hours.
Draft
WORLD COAL JULY 2006 www.worldcoal.com
Bleue Lorrainne
It is the Bleue Lorrainne field that is the
focus of Heritage's efforts to get onstream
first. The company has recently achieved a
further £1 million fund raising for the Ofex
listed company to achieve a final permeability
test in order to establish the extent
of the field's reserves and begin a pilot production
programme.
Initial estimates of gas in place (GIP) are
of 991.2 billion ft3/979.4 PJ. This is divided
between sites at Saint Avold (414.9 billion
ft3/410.0 PJ) and Alsting (576.3 billion
ft3/569.4 PJ) (Table 1).
The GIP calculations are based on definitive
polygonal resource estimation techniques
over the extensive drill core and petrophysical
database. Due to the high level
of reliability of the GIP calculations, it is
expected that over 50% of the resource will
be able to be categorised at higher levels of
confidence according to the Petroleum Reserves
Definitions of the Society of Petroleum
Engineers.
The two areas comprise 68 km2 in total
or approximately 15% of the entire Lorraine
Permit of 460 km2. In addition, a further
528 km2 adjoining the Lorraine Permit
and covering the southern extensions of
the Lorraine Basin are under application by
Heritage.
The company, which was granted the
Lorraine Permit in November 2004, has
granted a 75% interest to European Gas,
which it earnt by producing a reservoir report.
Heritage has retained 25%. The permit
encompasses a significant part of the
Lorraine Basin and has historical coal production
in excess of 850 million t. The coal
seams within the permit area are of Carboniferous
age and are characterised as black,
gassy, highranking coals.
GIP estimates have been calculated over
coals shallower than 1500 m and are based
on the extensive database of Charbonnages
de France (CdF), the French state owned
coal mining company. The CdF data is detailed
and has enabled the identification of
areas that have a high CBM content/unit
area. In the greater Lorraine Basin, CdF has
drilled in excess of 600 fully cored holes to
support its coal mining activities. For over
30% of these holes detailed gas content
measurements have been made. Evaluation
of the database covering additional potential
resource areas is continuing.
Saint Avold block
GIP volume for the Saint Avold block has
been calculated using polygonal resource
estimation techniques over an area of 32
km2 and is principally based on core drilling
and gas content data. Average gas content
used in calculations for the north section
of the ft/t reducing to an average of
284 ft/t towards the south of the block. The
coals in the Saint Avold area occur as three
packets of seams over a gross vertical interval
in the range 220 - 240 m and net coal in
the range 8 - 75 m (average 34.7 m). Generally
the coal measures have younger cover
of 500 - 800 m, thickening to the south.
The Alsting block GIP has been calculated
over an area of 36 km2 and is based
on core drilling and seismic data. Average
gas content used in calculations is 353 ft/
t. Gas contents of over 750 ft/t have been
recorded. The axis of the Alsting Anticline
marks a zone of coal thickening and enhanced
permeability. The coals in this area
occur as six packets, four of these packets
Figure 2. Sub Permo-Trias Geology St Avold Development Area, with elected block areas.
Figure 3. Bleue Lorraine Concession block areas.
WORLD COAL JULY 2006 www.worldcoal.com
with good CBM potential from depths between
880 - 1250 m. Net coals range up to
32.8 m from a depth of 876 m as measured
in the Johansviller well drilled near the
crest of the anticline.
The previous licence holder Enron
Exploration France (Enron) calculated that
the coals in the Lorraine Basin contained a
CBM GIP resource of 6.9 trillion ft3 of methane
within an area of 680 km2 and to a maximum
depth of 1500 m. For the Saint Avold
area covering 416 km2, Enron estimated 4.5
trillion ft3 within the Westphalian 'D' seam,
with an average net coal thickness of 30 m
and an average gas content of 318 ft/t.
The GIP resource is based on an area
comprising 68 km2 in total or approximately
15% of the entire Lorraine Permit
of 460 km2. In addition, Heritage and European
Gas have a further 528 km2 under
application adjoining the Lorraine Permit
and covering the southern extensions of the
Lorraine Basin. The resource area forms a
part of the area used in the Enron resource
calculations. Based on this and the initial
analysis of areas outside of Saint Avold and
Alsting, it is expected that significant increases
to European Gas’s GIP calculations
are likely.
In addition, significant quantities of
methane within sediments and adjacent
to the coal seams has been identified. The
presence of methane in associated sediments
is shown by CdF’s analysis to be
ubiquitous, and according to initial computations
from one area in the Saint Avold,
within the coals.
As a first step towards development of
these methane deposits, European Gas will
commence additional core drilling in July
to provide further petrophysical parameters
prior to pilot production. Pilot production
should commence in the second half of
this year. Heritage regards the commercial
development of this major resource as one
of its principal objectives.
Dr Larry Thomas, of independent consultants
Dargo Associates Ltd, has been
advising Heritage and recently reported
favourably on the resource reporting process.
In France, the first area to be explored
is the Bleue Lorraine area, which forms the
north eastern part of the Lorraine Coalfield.
This coalfield has a long history of underground
coal mining, all now ceased. The
area has known high gas content in the coal
seams and in the two selected development
areas within the concession area. The rock
strata are folded upwards, producing extensive
fracturing, a property favourable to
coalbed methane extraction.
The coal sequence is overlain by a thick
sequence of younger rocks, which act as a
'seal' above the gas bearing coal sequence.
The targeted coal seams occur in packets at
depths up to 1000 m.
The initial programme is to drill two
stratigraphic wells, one in each project area,
and if conditions are favourable, deviated
wells will be drilled into each packet of coal
seams to access the methane gas present
within the coals.
Italian projects
In Italy, Heritage has a similar joint venture
relationship with European Gas as in
France in respect of the Belforte, Sienna and
Figure 4. Cross Section showing dipping coal bearing Carboniferous equence beneath Permo-Trias sediments
acting as a sealant.
Figure 5. Vertical stratigraphic profiles St Avold
development Area showing ?, ?1, ß, a coal seam
packet.
Figure 6. Seismic section illustrating dipping Carboniferous sequence beneath shallow dipping Permo-Trias,
with faults terminating at the Carboniferous-Permo-Trias interface.
WORLD COAL JULY 2006 www.worldcoal.com
Cinigiano basins of southern Tuscany and
Sulcis in Sardinia.
The area of Tuscany south of Florence
has within it a number of Tertiary age sedimentary
basins, the larger of which contain
significant amounts of Miocene age coal
and are covered by the three permits. There
have been numerous attempts at artisanal
type coal mining in areas where the coals
crop out around the edge of the basins;
and one area west of the Cinigiano permit
where a small underground mine was developed
near the town of Ribolla. The mine
had a continuous record of methane problems
and in the early 1950s a major gas explosion
occurred and the mine was closed
shortly thereafter.
The young coals of tertiary age are prospective
for CBM because the basins are
coincident in area with an occurrence of
exceptionally high contemporaneous heat
flow, which is causing an accelerated coalification
process. At a depth of 200 m subsurface
the VR value is 0.75, indicating that
the coals are in the gas generating window
even at this shallow depth. Deeper coals
could possibly be at peak gas generation
levels.
Some of the basins have been explored
in connection with the development of geothermal
resources and through this work
the general architecture of the basins is
known. However, no attempt has been
made to quantify the coal resource in terms
of tonnage present and methane content of
the coals.
Over the past several decades, there
have been a number of different ways to define
unconventional natural gas. Often, the
distinction between conventional and unconventional
gas resources has been made
on the basis of economics. Commonly,
Figure 7. CdF coal tonnages and gas in place assessments, for designated block areas, St Avold Development
Area.
Figure 8. Cleat development in bituminous coal.
Figure 8. Alsting well site. Figure 8. St Avold well site.
WORLD COAL JULY 2006 www.worldcoal.com
uneconomic or marginally economic resources,
such as tight (low permeability)
sandstones, shale gas and coalbed methane
(CBM) are considered unconventional.
However, due to continued research and
favourable gas prices, many previously uneconomic
or marginally economic gas resources
are now economically viable, and
may not be considered unconventional by
some companies.
Future opportunities
Paul Ray, the CEO of Heritage, believes that
there is no doubt that this is a tremendous
opportunity: just how great an opportunity
it is will depend on the final assessments
that are being made to establish the extent
of reserves in the Bleue Lorraine field in the
first instance.
This field is continuous with the one
over the French-German border in the Saar
that is already producing methane gas. The
company is highly optimistic that it will receive
favourable findings that will lead to
production soon.
When that happens the company will
have added momentum to its wider plans
to develop those fields for which it already
has licences and it is certainly the intention
to look for other licences not just in Europe
but around the world.
This certainly appears to be at the leading
edge of a new evaluation of the unconventional
natural gas category (CBM, gas
shales, tight sands, and landfill). This is expected
to continue at double-digit growth
levels in the near term. Until 2008, demand
for unconventional natural gas is likely
to increase at an AAGR corresponding to
10.7% from 2003.
The disparity between projected increases
for natural gas consumption in
mature market economies and the much
smaller increases expected for production
in these markets points to an increasing
world dependence on transitional and
emerging market gas production.
Natural gas from unconventional reservoirs
is being targeted to contribute a
greater share of the world's natural gas
supplies in the next two decades. Independent
producers are helping develop many
of the new technologies and well-site strategies
to ensure that as much unconventional
gas as possible will be available when it is
needed.
Extracting more gas from unconventional
resources will require significant improvements
in exploration and production
technology. New drilling technologies contributing
to the efficiency of unconventional
gas reservoir development and redevelopment
include horizontal drilling, improvements
to bits and better drill pipe.
Although unconventional gas resources
are abundant, they have been more costly
to produce. Their exploitation was boosted
in the late 1980s and early 1990s with the
successful implementation of tax incentives
designed to encourage their development.
Indeed, increasing production from unconventional
gas resources has actually offset
a decline in conventional gas production in
recent years and with prices expected to remain
high, they are becoming all the more
economically attractive. ______________n
Figure 9. Location of St Avold Stratigraphic well site.
Draft