FAQ on CBM
Frequently Asked Questions about Coalbed Methane Production
Is CBM different from other types of natural gas?
CBM or coalbed methane is an unconventional gas, but it is virtually identical to conventional natural gas. It is also “sweet” gas, meaning it does not contain hazardous hydrogen sulphide (H2S). With CBM being so clean right out of the ground, it reduces health and safety issues, and operating costs are low as little or no processing is required. Ember’s coalbed methane production sites in Horseshoe Canyon usually need only compression to move it into pipelines. From the moment coalbed methane is extracted from coal seams, it is the same as the gas that heats your home.
Why focus on Coalbed Methane production?
Unconventional gas resources, such as CBM, will become increasingly important in the years ahead. Canada’s conventional natural gas production peaked in 2000 and has been declining ever since. Western Canada’s conventional gas pools tend to be mature fields with production rates falling and few major conventional fields left to be discovered. It will take unconventional gas resources, like coalbed methane, to fill the gap between declining gas supply and consumer and industrial demand.
Is CBM competitive with shale gas plays?
Yes. New technologies are unlocking significant new gas supplies from shale gas resource plays in North America. To succeed in the current business environment, producers like Ember must have cost structures competitive with these new sources of supply. The coalbed methane production site at Horseshoe Canyon in Alberta is one of the lowest-cost unconventional gas resource plays in North America. Ember estimates a break-even supply cost of $3-4/Mcf for a typical CBM drilling well, which includes both capital, operating and royalty costs.
Where are natural gas prices headed?
Natural gas is the cleanest of the fossil-based fuels, which bodes well for future demand given the global push to reduce greenhouse gases and the U.S. administration’s strategies to increase the use of clean energy. Longer term, and particularly once the economy gains strength, there is a very healthy outlook for natural gas, and thus for unconventional gas from coalbed methane production.
When can we expect a gas price recovery?
Natural gas prices have dropped significantly through a combination of factors: a high level of storage from record levels of drilling in 2008, the emergence of high deliverability shale plays and a severe contraction in demand. Current futures are trading at $4.65/mcf for the remainder of 2009 compared with $9.10/mcf averaged in the first six months of 2008 which was the most recent peak of natural gas prices.
Any gas price recovery will require a rebalancing of supply/demand fundamentals. A number of factors are coming into play that will ultimately help rebalance the market, but it is difficult to forecast when there will be an impact on pricing. For example, natural gas drilling activity has declined dramatically with rig counts off by more than 50 per cent from 2008 levels. Ultimately, this drop will lead to a decline in domestic supply.
See more information on CBM Drilling.