Coalbed methane projects stirring to life in Canadian Rockies

Sector trails United States in commercial development, but PanCanadian Energy executive believes the potential could be a “phenomenal story”

Gary Park

PNA Canadian Correspondent

Interest in coalbed methane ventures is quickening along the Rocky Mountains, as Canada follows the lead of the United States in exploring what some industry officials think could be a greater resource than conventional gas.

Although the sector is still in its infancy in Canada, there have been a series of developments in the past two weeks and more are in store with the British Columbia government promising a new royalty regime for coalbed methane by year’s end.

A partnership of PanCanadian Energy Corp. and MGV Energy Inc. announced Nov. 7 that its current exploration program in southern Alberta will be expanded, while Alberta Energy Co. Ltd. said it will proceed with an experimental coalbed methane project in southeastern British Columbia.

In addition, Burlington Resources Inc., which recently acquired Canadian Hunter Exploration Ltd. and currently operates coalbed methane projects in the San Juan Basin of New Mexico, said it has identified a number of prospects in Canada and will spend up to C$5 million this year on test wells.

“This is a significant resource which obviously is dependent upon economics, but we won’t have the feel for the true potential until we capture some real data,” said Burlington vice-president Tommy Nusz.

Terry Lawrence, executive vice president of PanCanadian, told a Ziff Energy Group conference Nov. 6 the full potential of Western Canada’s gas prospects may lie in coalbed methane programs just getting under way. “I just think at the end of the day it will prove to be a phenomenal story,” he said.

Palliser coalbed methane drilling largest in Canada

The remaining 51 pilot wells should be completed by mid-2002, giving the partnership a total of 112 exploratory and pilots wells — 100 in the block and 12 outside.

The plans to expand outside the Palliser block and “aggressively” pilot some promising wells in Palliser, puts the joint venture “on track to develop this important resource in Alberta and Canada’s natural gas future,” said PanCanadian senior vice-president of new ventures, Gerry Protti.

MGV chairman and chief executive officer Mike Gatens said the Palliser drilling is the largest coalbed methane exploration and pilot in Canadian history. “The encouraging exploration results there have prompted us to accelerate our schedule and expand our exploration activity to other areas of Alberta,” he said.

AEC, after quietly assembling a land position in southeastern British Columbia over the last three years, has drilled or licensed seven wells, but is keeping the details confidential.

Based on lease sales in recent months, AEC has purchased almost 38,000 acres, representing a contiguous block almost 40 miles long on the western slopes of the Rockies.

Suncor Energy Inc. and Anadarko Canada Corp. have been identified as other buyers of coalbed methane prospects in the region.

In a new study of its oil and gas potential, the British Columbia Oil & Gas Commission has estimated the coalbed methane potential in the Elk Valley field, where AEC is operating, at 7.7 trillion cubic feet, while the Crowsnest region to the south is rated at 12.2 trillion cubic feet.

Environmentalists raising concerns

First developed on a commercial scale 20 years ago in the San Juan Basin of New Mexico and Colorado, coalbed methane development has spread to Colorado and Wyoming.

Don Wallette, Rockies regional director for Phillips Petroleum Co., said the appeal of coalbed methane is the reduced exploration cost, which he said is much less expensive than an offshore project.

But, as the Bush administration moves to open up more of the Rockies to exploration, environmentalists are raising concerns, especially about the disposal of saline water that is released as a byproduct of coalbed methane production.