Coalbed Methane and U'S' Fuel Supply in the U'S'

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Coalbed Methaneand U.S. Fuel Supplyin the U.S.

• Presented to
• Virginia Center for Coal and Energy Research
• Southwest Virginia Higher Education Center
• Abingdon, Virginia

Presented by Marshall S. Miller Marshall Miller
Associates Bluefield, Virginia August 15, 2001
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Fuel Supply in the U.S. and the Ever-Changing
Status of the Primary Related Fuels
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Electricity Generation by Fuel Type
Coal 1.1 Growth
Gas7.7 Growth
Nuclear -1.1 Growth
Source E.I.A.
(Annual Energy Outlook 2001)
4

• Total U.S. Imports of Oil will reach an all-time
  high this year (2001) with a 3.5 jump. This
  will be sixth consecutive year have grown to meet
  strong U.S. demand.
• (Saudi Arabia remains leading source)

Oil Gas Journal July 2001
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The Pendulum Ready to Swing?

• Environmental concerns and regulations
• No energy policy
• Government aloofness and neglect
• Natural gasfuel of choice

• Available low cost fuel
• Clean coal technology
• Consolidation industry
• Strong technologies
• Available capacity of existing power plants
• Rapidly escalating prices of competing fuels
• Education of government and citizensreality of
  global warming

Source Marshall Miller Presentation September
2000 Pittsburgh, PA
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Natural Gas Consumption by Sector1970-2020
(trillion cubic feet)

• 34.7 Tcf by 2020?
• Gas consumption is expected to grow 1.8 to 2.0
  percent updated 2.3faster than any other major
  fuel source. (Mainly because of the growth in
  gas-fired electricity generation)
• (Latest forecast 3 economic growth)

Energy Information Agency Integrated Analysis and
Forecasting Department of Energy July 26,
2000 Updated January 2001
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U.S. Natural Gas Supply
79.5 Bcf/d
71.8 Bcf/d
63.4 Bcf/d
57.0 Bcf/d
51.23 Bcf/d
51.1 Bcf/d
Source E.I.A.
(Annual Energy Outlook 2001)
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Derived from Oil Gas Journal
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Natural Gas Projection Needs at 2 Growth
Below 52 Bcf/d
At 2 growth a year, the industry will have to
produce more than 55 Bcf/d of gas in 2004, even
though production levels have failed to reach 52
Bcf/d for the past 6 years. (Graph courtesy of
Lehman Brothers).
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Natural Gas Production
Oil Gas Journal / Jan. 22, 2001
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Western Canada Status

• Reserves to production ratio has decreased
  considerably in western Canada
• Decline in RP ration has caused concern about
  future prospects for future increased production
• Record levels of gas drilling in 2000
• 8,000 new gas wells resulted in limited growth
• Future production will depend heavily on CBM,
  tight sands, shales

U.S. Export
Derived from Oil Gas Journal
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Canadian Replacement Balance
Oil Gas Journal / Jan. 22, 2001
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Coalbed Methane Proved Reserves1989-1999
Trillion Cubic Feet
Source E.I.A., Office of Oil and Gas
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Proved Reserves
In trillions of cubic feet
Source Energy Information Administration
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Natural Gas Production1955-2020 (trillion cubic
feet)
Source E.I.A. (July 2000)
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The 30-Tcf Gas Economy

• The uncertainty surrounding recoverable gas
  resource estimates is reflected in the differing
  views on the subject

Mary Hutzler, Integrated Analysis and
Forecasting, EIA Hearing July 2000
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Will require..

• 1.5 trillion in private sector financing
• More than 255,000 miles of distribution pipelines
  (27 more than exist today)
• More than 38,000 miles new transmission lines
  (14 increase)
• Number of wells drilled each year will have to
  double
• Number of drill rigs will have to increase by 60
• Thousands of new workers will be needed

Honorable T.J. Glouthiere Deputy Secretary
Dept. of Energy July 2000
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Achieving Natural Gas Expectations

• Federal Lands A Big Issue
• Environmental RegulationsA Big Issue
• Technology Advancements A Big Issue
• Moderating Price Expectations A Big Issue
• Will have to drill deeper and in more difficult
  environmentsMeans Higher Costs
• Is there enough gas to meet demand at affordable
  prices?
• Available Labor A Big Issue

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Oil and Gas Industry in Delimna for Labor,Human
Capital

• Massive downsizing
• Mergers and acquisitions
• Volatile and maturing industry with doubtful
  future
• The attractiveness of new economy and other high
  tech industries (DOT COMS) have captured talent
• Lack of job security
• Fewer students choosing energy disciplines
• Not being fed by universities as once was
• Oil and Gas Industry Lost 390,000 Jobs (1982-1995)

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• While our demand for oil is expected to increase
  by one third over next two decades, we produce
  less oil than we did in 1970will continue unless
  we change course.
• While our demand for electricity will rise by
  45, demand for natural gas projected to rise
  62hard pressed to supply that demand.
• Only 4.2 increase in transmission lines over
  next 10 years

U.S. Energy InfrastructureTransmission Lines and
Pipelineswholly inadequate Spencer Abraham
July 19, 2001
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U.S. CBM Resources
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(No Transcript)
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CBM Production
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Factors to Consider

• Growth has been phenomenal
• 11 Bcf in 1985 (2 Basins)
• 550 Bcf in 1992
• 1.2 to 1.5 Tcf in 1998 (9 Basins)
• The 1998 level was not projected to occur
  until the year 2010

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Relationship of Depth, Rank, and Gas Content
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Relationship of Gas Content and Permeability to
Depth
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Coalbed Methane...

• Requires understanding of both coal and petroleum
  and mining and reservoir engineering
• Important factors to address
• physical and chemical nature of the coal (rank,
  chemistry, depositional environment diagenesis,
  mineralization)
• composite thickness
• overburden
• geologic structure
• fractures
• hydrology
• reservoir pressure
• gas content
• permeability

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E P Characteristics of CBM

• High success rates (generally 85)
• Low finding and development costs
• Higher compression cost
• Many felt industry would die with expiration of
  Section 29 Tax Credits
• Improving technology and resource understanding
  account for success

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San Juan Basin

• New Mexico

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San Juan Basin - Fruitland Formation Coal Rank
Map
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San Juan Basin Fruitland Formation Overburden
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Powder River Basin

• Wyoming and Montana

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Powder River BasinAnderson-Wyodak Seam Thickness
Map
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Generalized East-West Cross Section Across the
Powder River Basin, Wyoming
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Powder River BasinCBM Well Characteristics
(Primary Fairway)

• Depths 200 to 1200 feet
• Costs 35,000 to 70,000 per well
• Water is generally fresh and useable at the
  surface
• Well depths greater than 800 feet can increase
  water handling costs. Water production normally
  5 to 20 gpm
• Majority of drilling to date within 10 to 12
  miles downdip from large surface mines

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Powder River BasinCBM Production
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Yearly production and number of producing wells
for coalbed methane in the Powder River Basin,
Wyoming, 1989 through 2000, with forecasts to
2010.
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Appalachian Basin
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Northern Appalachian BasinGeneralized
Stratigraphic Column
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Northern Appalachian BasinCross Section A - A'
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Northern Appalachian BasinCoal Thickness Map of
Pittsburgh Coal
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Northern Appalachian BasinGas Content for the
Pittsburgh Coalbed
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Northern Appalachian BasinDistribution of CBM
Resources
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Northern Appalachian BasinGeology and
Characteristics

• Formations Monongahela, Allegheny, Pottsville
• Coal 20 to 35 feet thick
• No. of Seams 5 to 7
• Rank Predominantly High Vol
• Gas Content 50 to 200 CF/ton (max 300 CF/ton)
• Structural influence upon CBM productivity
• Gas In-Place 61 TCF

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Northern Appalachian BasinCBM Well
Characteristics

• Depths 500 to 2000 feet
• Water 100 to 150 BBl/day
• Permeability 5 to 100 md
• Average Well Production 50 to 120 MCF/day
• Production from LW GOB wells and conventional
  CBMs

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Northern Appalachian BasinCBM Production History

• Frontier Basin
• Producing Wells approximately 45
• CBM Fields
• WV Big Run, Pine Grove
• 1932 began production in Big Run, West of Federal
  No. 2

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Northern Appalachian Basin Commercial CBM Fields
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Northern Appalachian Basin Commercial CBM Field
Summary (Ranked by Total Number of CBM Wells)
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Central Appalachian Basin

• Southern West Virginia

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Central Appalachian Basin CBM Gas Content Map
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Central Appalachian Basin Coal Rank Map
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Central Appalachian BasinGeneralizedStratigraph
icColumn
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Central Appalachian BasinCBM Well
Characteristics

• Depths 1500 to 2500 feet
• Seams/wells 8 to 10
• Water 3 to 5 BBl/day
• Well Spacing 60 to 80 acre
• Permeability 5 to 30 md
• Average Well Production 120 MCF/day
• Maximum Gob Well Production 10 MM CF/day

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Central Appalachian BasinGeology and
Characteristics

• Formations New River and Pocahontas
• Coal 15 to 35 feet thick
• No. of Seams 5 to 25
• Rank Semi-Anthracite to High Vol
• Gas Content lt100 to 500 CF/ton
• Gas In-Place 15 TCF
• Strong structural influence upon productivity

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Central Appalachian BasinCMB Production History

• Emerging CBM Basin
• 1988 began production
• 5 Fields
• VA Oakwood, Nora, Buck Knob
• WV Slab Fork, Welch
• Current Basin Production 0.1 BCF/day
• Pipeline construction having difficulty keeping
  up with production capacity
• Significant production from LW Gob wells, but
  conventional CBMs are highly productive

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CBM Fields in Central Appalachian Basin
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Central Appalachian Basin CBM Operators
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Southern West Virginia CBM Production by Field
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Southern West Virginia Annual CBM Production
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(No Transcript)
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Central Appalachian Basin CBM Completions by
Operator (1/1/2000)
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Production Trends 1991 2000
Source Bob Wilson, VA Department of Mines,
Minerals and Energy - Division of Gas and Oil
August 2001
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Production Trends1991 - 2000
Source Bob Wilson, VA Department of Mines,
Minerals and Energy - Division of Gas and Oil
August 2001
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Production Trends1991 - 2000
Source Bob Wilson, VA Department of Mines,
Minerals and Energy - Division of Gas and Oil
August 2001