Coal Seam Gas - to be or not to be? Part two

By Jeames McKibben*

To read the first part of this story click here.

The Queensland CSG Inferred Reserves are estimated to be as large as those found in the USA. The US Department of Energy reports that CSG supplies more than 7 per cent of the US gas demand and comprises more than 7 per cent of its natural gas reserves. This 7 per cent represented about 1,754 PJ in 2007. This compares to Australia's total natural gas production of 1,740 PJ in 2007/08, of which approximately half was for domestic demand.
The Queensland Government has identified gas as a key transitional fuel source for reducing the emissions intensity from electricity generation while emerging renewable and low emission coal technologies are being developed.
Since the Queensland Gas Scheme began operating in January 2005, Queensland electricity retailers and large electricity users have been required to source at least 13 per cent of their electricity from gas-fired generators. The Queensland Gas Scheme has stated that gas demand will need to increased from 13 per cent to 15 per cent by 2010, with the option to increase the target to 18 per cent by 2020.

So what is required to monetise this under-utilised resource?
. There is currently a lack of transmission capacity for CSG based power generators, with Queensland grid company Powerlink estimating that $2.9 billion will need to be spent over the next few years extending the grid to handle CSG and renewables powered generation.
. Unlike natural gas wells, CSG wells cannot be turned on-and-off which means that once developed, they must be used. If the facilities and infrastructure are ready to accept the gas this does not present any issues. However, no LNG trains are currently operational and additional LNG plants are required to be on stream for current wells otherwise they could be rendered useless.
. Exploration is easier said than done with limited resources but all future coal exploration, regardless of whether it is for coal or CSG should be expanded to capture key technical data that can be used to aid future CSG exploration and development.
. Progress studies into groundwater impacts and wastewater uses.
. Ongoing consultation with local governments and community groups over multiple land uses, including rehabilitation.
. Operational strategies with a particular focus on the integration of CSG production within existing operations.

And only then we may start to realise the CSG potential of Queensland and answer the question of whether the envisaged growth and sustainability of the CSG sector is “to be or not to be?”.

* Written by Jeames McKibben with input from Michelle Clarke - from Xstract Group, a team of specialist mining consultants.
For more information email: jmckibben@xstractgroup.com or visit: www.xstractgroup.com

What is CSG?
CSG is a form of natural gas trapped within open fractures (called cleats) and pores within a coal seam and held in place by a combination of water and ground pressure. CSG is a mixture of hydrocarbon gases, (90 to 95 per cent) methane with minor amounts of other gases such as nitrogen and carbon dioxide.
It is important to note that conventional coal technologies do not gain any benefit from CSG, as this is largely burnt off or lost to the atmosphere during mining and processing.
By comparison, CSG technologies enable the gas inherent within coal measures to be captured and processed, thereby monetising a previously unused (and thus worthless) resource.
Once captured CSG can be used to generate electricity or be liquefied to produce Liquefied Natural Gas (LNG). Several companies are currently proposing to pipe Queensland CSG gas to liquefaction plants, where it will be supercooled to create LNG. The LNG product will then be transported around the world in purpose-built LNG tankers. Once the LNG is delivered it undergoes “regasification” which is a process that returns LNG to natural gas.
Within Australia, CSG is a major and increasingly important power source.  CSG is currently used to supply the domestic gas industry and to supply gas-fired electricity generation facilities.
Brown and black coals reportedly generate around 80 per cent of Australia’s current electricity needs. However, the proposed Emissions Trading Scheme (ETS) is likely to result in the rapid conversion of many larger power stations to CSG technologies due to its lower cost and perceived environmental benefits (i.e. lower greenhouse gas emissions) relative to other fossil fuel energy sources such as coal and oil.