Local Participation Push for Major Australian Developments

Leaders of Australia's oil and gas industry are working together in an effort to develop methods towards increasing the amount of local content on major developments.

Locally based suppliers servicing the growing liquefied natural gas sector in Western Australia (WA) have expressed concern in recent years about being overlooked for development contracts.

Developers have cited the high Australian dollar, high labor costs and rising energy costs as reasons for opting to award contracts to competing foreign companies, often from Asia.

Despite these obstacles, developers have been urged to do more to increase local participation in projects.

Local suppliers are also being encouraged to develop a better understanding of the criteria to help them win contracts.

The issue was a key topic at the Australasian Oil & Gas Conference in Perth recently where industry groups, government representatives, and oil and gas companies discussed how more local participation could take place.

Paul Johnson, the Australian Government's Energy Resources Supplier Advocate, spoke at the conference and believes oil and gas developers need to take into account the capability and capacity of Australian suppliers if they want to boost the level of local content on their projects.

Johnson, who was appointed to this position in August of last year, said there was much good work happening in the sector to raise the capability of Australian firms to win work, but more could be done by both developers and suppliers.

"Project developers should take into account the limitations faced by Australian suppliers in undertaking large procurement packages, accessing the necessary finance and obtaining sufficient numbers of skilled workers," Johnson said.

"Small adjustments to the way projects are designed, engineered and procured can make a big difference to local suppliers.

"Early consideration of what can be done here should inform the design and engineering approach and basing some of the procurement team in Australia will lead to better engagement with local suppliers."

While major developers have been questioned for the amount of local content on their projects, Chevron reinforced its commitment to local suppliers through its conference presentation.

Colin Beckett, Chevron's general manager at the Gorgon LNG development, explained that the project had so far awarded $18.7 billion (AUD $18 billion) in contracts to local suppliers and created 9.000 jobs in the country.

However, he conceded that many Australian companies had not met the pre-conditions for tendering for work, with reasons including a lack of experience or capacity.

To assist in preparing local firms to win work, Australia's Department of Industry, Innovation, Science, Research and Tertiary Education last year engaged economic advisory firm, Development Impacts, to undertake a project examining best practices by companies successfully supplying into the sector to determine how they meet the needs of project proponents.

Pia Turcinov, Development Impacts director, explained to Rigzone that it found there was more to the issue than obstacles such as a high Australian dollar, a lack of financial profile and Australia's skills shortage.

"They are huge hurdles for Australian companies, but there are other issues surrounding what the benchmarks are that local companies need to meet before they are considered… even in the tender stage," Turcinov, who also addressed the conference, said.

"Our work on this project identified 22 key factors companies need to focus on.

"Yes, price was a major factor, but other key factors were about quality, flexibility, design capabilities, QA systems, technical expertise, after sale service, and financial capabilities and risk profile.

"We looked at factors such as these and how the better performing companies compare and where they are outperforming against expectations."

Turcinov explained that suppliers needed to establish a clear capability beyond just a normal website and marketing brochure, and it was advisable for them to look at forming alliances with other local companies to build profile and capability.

In an election year, both at a federal and state level in WA, political parties in Australia have been prioritizing this issue.

WA's governing Liberal Party regularly produces an industry participation framework aimed at ensuring the local industry receives opportunity to participate in major resource projects.

The opposing Labor Party in WA has also shown its commitment by releasing a discussion paper outlining its openness to the issue.

At a federal level, the governing Labor Party is focusing on strengthening opportunities for the local industry through a proposed plan administering the issue.

Under the plan, major projects worth $519 million (AUD $500) million or more will be required to have an Australian industry participation plan identifying opportunities for local firms.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Local Participation Push for Major Australian Developments

Leaders of Australia's oil and gas industry are working together in an effort to develop methods towards increasing the amount of local content on major developments.

Locally based suppliers servicing the growing liquefied natural gas sector in Western Australia (WA) have expressed concern in recent years about being overlooked for development contracts.

Developers have cited the high Australian dollar, high labor costs and rising energy costs as reasons for opting to award contracts to competing foreign companies, often from Asia.

Despite these obstacles, developers have been urged to do more to increase local participation in projects.

Local suppliers are also being encouraged to develop a better understanding of the criteria to help them win contracts.

The issue was a key topic at the Australasian Oil & Gas Conference in Perth recently where industry groups, government representatives, and oil and gas companies discussed how more local participation could take place.

Paul Johnson, the Australian Government's Energy Resources Supplier Advocate, spoke at the conference and believes oil and gas developers need to take into account the capability and capacity of Australian suppliers if they want to boost the level of local content on their projects.

Johnson, who was appointed to this position in August of last year, said there was much good work happening in the sector to raise the capability of Australian firms to win work, but more could be done by both developers and suppliers.

"Project developers should take into account the limitations faced by Australian suppliers in undertaking large procurement packages, accessing the necessary finance and obtaining sufficient numbers of skilled workers," Johnson said.

"Small adjustments to the way projects are designed, engineered and procured can make a big difference to local suppliers.

"Early consideration of what can be done here should inform the design and engineering approach and basing some of the procurement team in Australia will lead to better engagement with local suppliers."

While major developers have been questioned for the amount of local content on their projects, Chevron reinforced its commitment to local suppliers through its conference presentation.

Colin Beckett, Chevron's general manager at the Gorgon LNG development, explained that the project had so far awarded $18.7 billion (AUD $18 billion) in contracts to local suppliers and created 9.000 jobs in the country.

However, he conceded that many Australian companies had not met the pre-conditions for tendering for work, with reasons including a lack of experience or capacity.

To assist in preparing local firms to win work, Australia's Department of Industry, Innovation, Science, Research and Tertiary Education last year engaged economic advisory firm, Development Impacts, to undertake a project examining best practices by companies successfully supplying into the sector to determine how they meet the needs of project proponents.

Pia Turcinov, Development Impacts director, explained to Rigzone that it found there was more to the issue than obstacles such as a high Australian dollar, a lack of financial profile and Australia's skills shortage.

"They are huge hurdles for Australian companies, but there are other issues surrounding what the benchmarks are that local companies need to meet before they are considered… even in the tender stage," Turcinov, who also addressed the conference, said.

"Our work on this project identified 22 key factors companies need to focus on.

"Yes, price was a major factor, but other key factors were about quality, flexibility, design capabilities, QA systems, technical expertise, after sale service, and financial capabilities and risk profile.

"We looked at factors such as these and how the better performing companies compare and where they are outperforming against expectations."

Turcinov explained that suppliers needed to establish a clear capability beyond just a normal website and marketing brochure, and it was advisable for them to look at forming alliances with other local companies to build profile and capability.

In an election year, both at a federal and state level in WA, political parties in Australia have been prioritizing this issue.

WA's governing Liberal Party regularly produces an industry participation framework aimed at ensuring the local industry receives opportunity to participate in major resource projects.

The opposing Labor Party in WA has also shown its commitment by releasing a discussion paper outlining its openness to the issue.

At a federal level, the governing Labor Party is focusing on strengthening opportunities for the local industry through a proposed plan administering the issue.

Under the plan, major projects worth $519 million (AUD $500) million or more will be required to have an Australian industry participation plan identifying opportunities for local firms.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Local Participation Push for Major Australian Developments

Leaders of Australia's oil and gas industry are working together in an effort to develop methods towards increasing the amount of local content on major developments.

Locally based suppliers servicing the growing liquefied natural gas sector in Western Australia (WA) have expressed concern in recent years about being overlooked for development contracts.

Developers have cited the high Australian dollar, high labor costs and rising energy costs as reasons for opting to award contracts to competing foreign companies, often from Asia.

Despite these obstacles, developers have been urged to do more to increase local participation in projects.

Local suppliers are also being encouraged to develop a better understanding of the criteria to help them win contracts.

The issue was a key topic at the Australasian Oil & Gas Conference in Perth recently where industry groups, government representatives, and oil and gas companies discussed how more local participation could take place.

Paul Johnson, the Australian Government's Energy Resources Supplier Advocate, spoke at the conference and believes oil and gas developers need to take into account the capability and capacity of Australian suppliers if they want to boost the level of local content on their projects.

Johnson, who was appointed to this position in August of last year, said there was much good work happening in the sector to raise the capability of Australian firms to win work, but more could be done by both developers and suppliers.

"Project developers should take into account the limitations faced by Australian suppliers in undertaking large procurement packages, accessing the necessary finance and obtaining sufficient numbers of skilled workers," Johnson said.

"Small adjustments to the way projects are designed, engineered and procured can make a big difference to local suppliers.

"Early consideration of what can be done here should inform the design and engineering approach and basing some of the procurement team in Australia will lead to better engagement with local suppliers."

While major developers have been questioned for the amount of local content on their projects, Chevron reinforced its commitment to local suppliers through its conference presentation.

Colin Beckett, Chevron's general manager at the Gorgon LNG development, explained that the project had so far awarded $18.7 billion (AUD $18 billion) in contracts to local suppliers and created 9.000 jobs in the country.

However, he conceded that many Australian companies had not met the pre-conditions for tendering for work, with reasons including a lack of experience or capacity.

To assist in preparing local firms to win work, Australia's Department of Industry, Innovation, Science, Research and Tertiary Education last year engaged economic advisory firm, Development Impacts, to undertake a project examining best practices by companies successfully supplying into the sector to determine how they meet the needs of project proponents.

Pia Turcinov, Development Impacts director, explained to Rigzone that it found there was more to the issue than obstacles such as a high Australian dollar, a lack of financial profile and Australia's skills shortage.

"They are huge hurdles for Australian companies, but there are other issues surrounding what the benchmarks are that local companies need to meet before they are considered… even in the tender stage," Turcinov, who also addressed the conference, said.

"Our work on this project identified 22 key factors companies need to focus on.

"Yes, price was a major factor, but other key factors were about quality, flexibility, design capabilities, QA systems, technical expertise, after sale service, and financial capabilities and risk profile.

"We looked at factors such as these and how the better performing companies compare and where they are outperforming against expectations."

Turcinov explained that suppliers needed to establish a clear capability beyond just a normal website and marketing brochure, and it was advisable for them to look at forming alliances with other local companies to build profile and capability.

In an election year, both at a federal and state level in WA, political parties in Australia have been prioritizing this issue.

WA's governing Liberal Party regularly produces an industry participation framework aimed at ensuring the local industry receives opportunity to participate in major resource projects.

The opposing Labor Party in WA has also shown its commitment by releasing a discussion paper outlining its openness to the issue.

At a federal level, the governing Labor Party is focusing on strengthening opportunities for the local industry through a proposed plan administering the issue.

Under the plan, major projects worth $519 million (AUD $500) million or more will be required to have an Australian industry participation plan identifying opportunities for local firms.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Dart Targets Several CBM Developments in the UK

Coal-bed methane (CBM) is one of a number of unconventional sources of natural gas that several countries around the world are currently exploring – particularly in the developed world where coal itself is being increasingly seen as too dirty a fuel to use and too expensive to mine from deep beneath the ground.

CBM (also known as coal seam gas) has become an important source of energy in the United States and a number of other countries. Australia, for example, has very rich deposits of CBM and its industry has expanded significantly since the beginning of this century.

Recently, a firm that has its roots in the Australian CBM industry successfully tested a CBM well in Scotland. Dart International Ltd. reported in late January that during a three-month production test at its Airth 12 well, on the PEDL 133 license, it achieved sustained gas flow rates in excess of 500,000 standard cubic feet per day and is now powering an electricity generator with the gas – making Dart the first company in Scotland to produce electricity from CBM.

In the UK, total CBM resource is estimated at 97 trillion cubic feet (2,900 billion cubic meters of gas), according to a 2004 British Geological Survey study. Although this study estimated that as little as 1 percent of this resource could be recovered – because of perceived widespread low seam permeability, low gas content, resource density and planning constraints – the UK's Department of Energy and Climate Change (DECC) points out that analogous CBM developments in the United States have been proven to achieve recovery of between 30 and 40 percent in some fields.

Consequently, DECC believes that if 10 percent of the UK's CBM resource potential could be developed it would correspond to more than three years of the country's natural gas supply.

CBM extraction exploits the fact that natural gas in a coal reservoir is stored differently to how it is stored in a conventional reservoir. Instead of occupying spaces as a free gas between sand grains, the methane is held to the surface of the coal by a process called adsorption. Large numbers of micropores in the coal mean a very large surface area that methane molecules can be attached to. Indeed, due to these micropores in its structure one pound of coal typically has the equivalent surface area of a few dozen football fields.

This means that an individual lump of coal can contain a very large amount of methane. Typically, companies looking to extract methane from a coal seam judge it economical if it contains in excess of 50 cubic feet of natural gas per ton of coal.

The gas in the coal is held in place by the pressure of surrounding water and rock, so simply by drilling through a coal seam this natural gas can be pumped out.

Dart is in a good position to exploit this potential in the UK since it has acquired 40-plus onshore licenses there that enable it to conduct unconventional gas projects, said Dart Chief Commercial Officer Eytan Uliel.

The company first developed its CBM expertise in Australia and has since honed the practice at projects in China and Indonesia.

"The well design for Scotland was first developed in Australia but it was perfected at one of our projects in China and has been adapted for the geological conditions you find in Scotland," Uliel explained to Rigzone in a recent interview.

"That's really the magic of CBM. People make a big song and dance about it being a technology-driven thing, but actually the technology is vanilla. It's nothing when you compare it to offshore conventional wells. The technology is very simple. You are drilling shallow holes, you are intersecting coal mines, drilling a horizontal-section hole. It's not complicated by any means.

"The expertise you need is what you might call the diagnostic tool kit. The ability to take a particular coal system in a particular place and then figure out the right well design, the right completion architecture and then the right surface solution that creates a viable economic project."

In the immediate future, Dart is focused on its Airth development in Scotland. Rather than embark on a rapid rollout of CBM in the UK, Dart prefers to take a "slow but steady" approach.

"The lesson learnt in Australia and the lesson to be applied here is that people want to see a result and everyone is skeptical. And for good reason," said Uliel.

"A lot of [companies] have tried and a lot have failed, so the focus of this company is very much to get a project up and running, and prove to people it can be done both commercially but also viable in a community sense. You are working with local communities. People need to see that you are responsible and you create jobs and you don't damage the environment. So, we do one project and we do it well."

The Airth project was previously a joint venture between Composite Energy (since acquired by Dart) and BG Group plc. Although the companies drilled a few exploration wells, proved gas was there and it flowed, it has taken Dart's involvement to make the project it work.

"They hadn't quite figured out how to flow it sustainably, and how to maximize the production, and they hadn't quite come up with the right development plan for that license," Uliel said.

While, vertical drilling into a coal seam can – and has – yielded commercial gas at certain projects in the United States, it is horizontal drilling that has made CBM a viable source of gas in Australia and elsewhere.

"In Australia, we adapted horizontal drilling technology to CBM. So what we did was, instead of drilling a simple vertical well, what we would do was drill a vertical and then off that vertical we would drill a very long horizontal well in the coal seam. And what that does is it effectively creates a channel along which the gas can flow back to the vertical and then out to the surface.

"Now, if you've got a coal seam that's 10 meters thick and you drill a vertical well, you've got access to a 10-meter area of coal. But if you drill a horizontal well, you can drill them one, two or three thousand meters through the coal seam. And so from the same well, you are opening up a huge area of coal. You are draining a very large area and that's what made the industry work in Australia."

Uliel explained that this is what Composite and BG Group had been trying to do in Scotland.

"The problem was that the seams are so thin that even drilling one single lateral for a long way through a coal seam didn't give you enough gas volume to justify the economic cost of the well you are drilling," he said.

"So, what we've done, and this is the 'architecture' we've brought from Australia via China to Scotland, is instead of drilling one horizontal into the seam you drill four. So you have different coal seams at different depths and from the one vertical well you drill four horizontal sections.

"Each horizontal is about 2,000 meters so from the well you are accessing 8,000 meters of coal from four different seams. So there's a lot of know-how that sits with that, because the pressure at which the gas is held in each seam is different, the flow rates are different, the water rates you get are different and the knowledge you have about how to drill it and then how to operate that well."

Uliel continued explained that the production test that Dart undertook at the end of last year at Airth saw the firm take one of these wells in order to see how it would flow.

"We produced on a sustainable basis about half a million cubic feet of gas per day and we let it run for a short while and we got up to about 800,000 cubic feet. And that's a viable, economic, doable proposition," he said.

Dart expects to start selling the gas produced – up to 10 billion cubic feet per annum initial and perhaps double that over time – into the UK's national gas grid.

"There is a main trunk pipeline that runs to our license area that is owned and operated by Scottish and Southern Energy (SSE). And we have a gas sale contract agreed with them. So, as and when we we're ready to start delivering the gas, we will.

"The issue there is you need to compress [the gas] so it gets to the pressure that the pipeline can receive it. And so we're currently going through a process of planning and permitting so that we can put in the compressor facility and drill more wells. And once we've done that we'll be in a position to start delivering gas to SSE.

"In the meantime, for the early gas that we're generating from the first few wells we've drilled we have a small electricity generator on site and the gas goes into that. We manufacture electricity and we sell it into the electricity grid. So we're doing that already."

Dart is investing up to $150 million into the Airth project, and much of this will go into the local economy. The project will support between 40 and 50 local jobs as well.

Once the Airth project begins exporting gas to the grid, Dart will turn its focus onto the Canonbie project, located on onshore license PEDL 159, which straddles the England/Scotland border.

"It will be a very similar project in terms of scale, scope, size and profile to the one at PEDL 133," Uliel explained. "So there, we've done early exploration work. We've drilled some core holes. We need to know about the coal and the gas content and permeability. So the next thing we would need to do there, which is on our agenda for either this year or early next year, is to put down a couple of pilot wells and run a production test, and see how well the coal there will produce."

The Canonbie project could also produce between 10 and 20 billion cubic feet of gas per annum, according to Uliel, who pointed out that while such numbers represent a "drop in the bucket" in the context of the overall energy equation for the UK, they will also help the country reduce its dependence on imported gas.

"Every molecule of domestically-produced gas means a molecule less of Russian or Norwegian gas that needs to be purchased," he said.

"The UK is blessed with considerable shale gas resources and considerable coal-bed methane resources, and if they can be sensibly tapped over the next several years they will make a big difference to the energy dynamic here. That's for sure!"

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Dart Targets Several CBM Developments in the UK

Coal-bed methane (CBM) is one of a number of unconventional sources of natural gas that several countries around the world are currently exploring – particularly in the developed world where coal itself is being increasingly seen as too dirty a fuel to use and too expensive to mine from deep beneath the ground.

CBM (also known as coal seam gas) has become an important source of energy in the United States and a number of other countries. Australia, for example, has very rich deposits of CBM and its industry has expanded significantly since the beginning of this century.

Recently, a firm that has its roots in the Australian CBM industry successfully tested a CBM well in Scotland. Dart International Ltd. reported in late January that during a three-month production test at its Airth 12 well, on the PEDL 133 license, it achieved sustained gas flow rates in excess of 500,000 standard cubic feet per day and is now powering an electricity generator with the gas – making Dart the first company in Scotland to produce electricity from CBM.

In the UK, total CBM resource is estimated at 97 trillion cubic feet (2,900 billion cubic meters of gas), according to a 2004 British Geological Survey study. Although this study estimated that as little as 1 percent of this resource could be recovered – because of perceived widespread low seam permeability, low gas content, resource density and planning constraints – the UK's Department of Energy and Climate Change (DECC) points out that analogous CBM developments in the United States have been proven to achieve recovery of between 30 and 40 percent in some fields.

Consequently, DECC believes that if 10 percent of the UK's CBM resource potential could be developed it would correspond to more than three years of the country's natural gas supply.

CBM extraction exploits the fact that natural gas in a coal reservoir is stored differently to how it is stored in a conventional reservoir. Instead of occupying spaces as a free gas between sand grains, the methane is held to the surface of the coal by a process called adsorption. Large numbers of micropores in the coal mean a very large surface area that methane molecules can be attached to. Indeed, due to these micropores in its structure one pound of coal typically has the equivalent surface area of a few dozen football fields.

This means that an individual lump of coal can contain a very large amount of methane. Typically, companies looking to extract methane from a coal seam judge it economical if it contains in excess of 50 cubic feet of natural gas per ton of coal.

The gas in the coal is held in place by the pressure of surrounding water and rock, so simply by drilling through a coal seam this natural gas can be pumped out.

Dart is in a good position to exploit this potential in the UK since it has acquired 40-plus onshore licenses there that enable it to conduct unconventional gas projects, said Dart Chief Commercial Officer Eytan Uliel.

The company first developed its CBM expertise in Australia and has since honed the practice at projects in China and Indonesia.

"The well design for Scotland was first developed in Australia but it was perfected at one of our projects in China and has been adapted for the geological conditions you find in Scotland," Uliel explained to Rigzone in a recent interview.

"That's really the magic of CBM. People make a big song and dance about it being a technology-driven thing, but actually the technology is vanilla. It's nothing when you compare it to offshore conventional wells. The technology is very simple. You are drilling shallow holes, you are intersecting coal mines, drilling a horizontal-section hole. It's not complicated by any means.

"The expertise you need is what you might call the diagnostic tool kit. The ability to take a particular coal system in a particular place and then figure out the right well design, the right completion architecture and then the right surface solution that creates a viable economic project."

In the immediate future, Dart is focused on its Airth development in Scotland. Rather than embark on a rapid rollout of CBM in the UK, Dart prefers to take a "slow but steady" approach.

"The lesson learnt in Australia and the lesson to be applied here is that people want to see a result and everyone is skeptical. And for good reason," said Uliel.

"A lot of [companies] have tried and a lot have failed, so the focus of this company is very much to get a project up and running, and prove to people it can be done both commercially but also viable in a community sense. You are working with local communities. People need to see that you are responsible and you create jobs and you don't damage the environment. So, we do one project and we do it well."

The Airth project was previously a joint venture between Composite Energy (since acquired by Dart) and BG Group plc. Although the companies drilled a few exploration wells, proved gas was there and it flowed, it has taken Dart's involvement to make the project it work.

"They hadn't quite figured out how to flow it sustainably, and how to maximize the production, and they hadn't quite come up with the right development plan for that license," Uliel said.

While, vertical drilling into a coal seam can – and has – yielded commercial gas at certain projects in the United States, it is horizontal drilling that has made CBM a viable source of gas in Australia and elsewhere.

"In Australia, we adapted horizontal drilling technology to CBM. So what we did was, instead of drilling a simple vertical well, what we would do was drill a vertical and then off that vertical we would drill a very long horizontal well in the coal seam. And what that does is it effectively creates a channel along which the gas can flow back to the vertical and then out to the surface.

"Now, if you've got a coal seam that's 10 meters thick and you drill a vertical well, you've got access to a 10-meter area of coal. But if you drill a horizontal well, you can drill them one, two or three thousand meters through the coal seam. And so from the same well, you are opening up a huge area of coal. You are draining a very large area and that's what made the industry work in Australia."

Uliel explained that this is what Composite and BG Group had been trying to do in Scotland.

"The problem was that the seams are so thin that even drilling one single lateral for a long way through a coal seam didn't give you enough gas volume to justify the economic cost of the well you are drilling," he said.

"So, what we've done, and this is the 'architecture' we've brought from Australia via China to Scotland, is instead of drilling one horizontal into the seam you drill four. So you have different coal seams at different depths and from the one vertical well you drill four horizontal sections.

"Each horizontal is about 2,000 meters so from the well you are accessing 8,000 meters of coal from four different seams. So there's a lot of know-how that sits with that, because the pressure at which the gas is held in each seam is different, the flow rates are different, the water rates you get are different and the knowledge you have about how to drill it and then how to operate that well."

Uliel continued explained that the production test that Dart undertook at the end of last year at Airth saw the firm take one of these wells in order to see how it would flow.

"We produced on a sustainable basis about half a million cubic feet of gas per day and we let it run for a short while and we got up to about 800,000 cubic feet. And that's a viable, economic, doable proposition," he said.

Dart expects to start selling the gas produced – up to 10 billion cubic feet per annum initial and perhaps double that over time – into the UK's national gas grid.

"There is a main trunk pipeline that runs to our license area that is owned and operated by Scottish and Southern Energy (SSE). And we have a gas sale contract agreed with them. So, as and when we we're ready to start delivering the gas, we will.

"The issue there is you need to compress [the gas] so it gets to the pressure that the pipeline can receive it. And so we're currently going through a process of planning and permitting so that we can put in the compressor facility and drill more wells. And once we've done that we'll be in a position to start delivering gas to SSE.

"In the meantime, for the early gas that we're generating from the first few wells we've drilled we have a small electricity generator on site and the gas goes into that. We manufacture electricity and we sell it into the electricity grid. So we're doing that already."

Dart is investing up to $150 million into the Airth project, and much of this will go into the local economy. The project will support between 40 and 50 local jobs as well.

Once the Airth project begins exporting gas to the grid, Dart will turn its focus onto the Canonbie project, located on onshore license PEDL 159, which straddles the England/Scotland border.

"It will be a very similar project in terms of scale, scope, size and profile to the one at PEDL 133," Uliel explained. "So there, we've done early exploration work. We've drilled some core holes. We need to know about the coal and the gas content and permeability. So the next thing we would need to do there, which is on our agenda for either this year or early next year, is to put down a couple of pilot wells and run a production test, and see how well the coal there will produce."

The Canonbie project could also produce between 10 and 20 billion cubic feet of gas per annum, according to Uliel, who pointed out that while such numbers represent a "drop in the bucket" in the context of the overall energy equation for the UK, they will also help the country reduce its dependence on imported gas.

"Every molecule of domestically-produced gas means a molecule less of Russian or Norwegian gas that needs to be purchased," he said.

"The UK is blessed with considerable shale gas resources and considerable coal-bed methane resources, and if they can be sensibly tapped over the next several years they will make a big difference to the energy dynamic here. That's for sure!"

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Dart Targets Several CBM Developments in the UK

Coal-bed methane (CBM) is one of a number of unconventional sources of natural gas that several countries around the world are currently exploring – particularly in the developed world where coal itself is being increasingly seen as too dirty a fuel to use and too expensive to mine from deep beneath the ground.

CBM (also known as coal seam gas) has become an important source of energy in the United States and a number of other countries. Australia, for example, has very rich deposits of CBM and its industry has expanded significantly since the beginning of this century.

Recently, a firm that has its roots in the Australian CBM industry successfully tested a CBM well in Scotland. Dart International Ltd. reported in late January that during a three-month production test at its Airth 12 well, on the PEDL 133 license, it achieved sustained gas flow rates in excess of 500,000 standard cubic feet per day and is now powering an electricity generator with the gas – making Dart the first company in Scotland to produce electricity from CBM.

In the UK, total CBM resource is estimated at 97 trillion cubic feet (2,900 billion cubic meters of gas), according to a 2004 British Geological Survey study. Although this study estimated that as little as 1 percent of this resource could be recovered – because of perceived widespread low seam permeability, low gas content, resource density and planning constraints – the UK's Department of Energy and Climate Change (DECC) points out that analogous CBM developments in the United States have been proven to achieve recovery of between 30 and 40 percent in some fields.

Consequently, DECC believes that if 10 percent of the UK's CBM resource potential could be developed it would correspond to more than three years of the country's natural gas supply.

CBM extraction exploits the fact that natural gas in a coal reservoir is stored differently to how it is stored in a conventional reservoir. Instead of occupying spaces as a free gas between sand grains, the methane is held to the surface of the coal by a process called adsorption. Large numbers of micropores in the coal mean a very large surface area that methane molecules can be attached to. Indeed, due to these micropores in its structure one pound of coal typically has the equivalent surface area of a few dozen football fields.

This means that an individual lump of coal can contain a very large amount of methane. Typically, companies looking to extract methane from a coal seam judge it economical if it contains in excess of 50 cubic feet of natural gas per ton of coal.

The gas in the coal is held in place by the pressure of surrounding water and rock, so simply by drilling through a coal seam this natural gas can be pumped out.

Dart is in a good position to exploit this potential in the UK since it has acquired 40-plus onshore licenses there that enable it to conduct unconventional gas projects, said Dart Chief Commercial Officer Eytan Uliel.

The company first developed its CBM expertise in Australia and has since honed the practice at projects in China and Indonesia.

"The well design for Scotland was first developed in Australia but it was perfected at one of our projects in China and has been adapted for the geological conditions you find in Scotland," Uliel explained to Rigzone in a recent interview.

"That's really the magic of CBM. People make a big song and dance about it being a technology-driven thing, but actually the technology is vanilla. It's nothing when you compare it to offshore conventional wells. The technology is very simple. You are drilling shallow holes, you are intersecting coal mines, drilling a horizontal-section hole. It's not complicated by any means.

"The expertise you need is what you might call the diagnostic tool kit. The ability to take a particular coal system in a particular place and then figure out the right well design, the right completion architecture and then the right surface solution that creates a viable economic project."

In the immediate future, Dart is focused on its Airth development in Scotland. Rather than embark on a rapid rollout of CBM in the UK, Dart prefers to take a "slow but steady" approach.

"The lesson learnt in Australia and the lesson to be applied here is that people want to see a result and everyone is skeptical. And for good reason," said Uliel.

"A lot of [companies] have tried and a lot have failed, so the focus of this company is very much to get a project up and running, and prove to people it can be done both commercially but also viable in a community sense. You are working with local communities. People need to see that you are responsible and you create jobs and you don't damage the environment. So, we do one project and we do it well."

The Airth project was previously a joint venture between Composite Energy (since acquired by Dart) and BG Group plc. Although the companies drilled a few exploration wells, proved gas was there and it flowed, it has taken Dart's involvement to make the project it work.

"They hadn't quite figured out how to flow it sustainably, and how to maximize the production, and they hadn't quite come up with the right development plan for that license," Uliel said.

While, vertical drilling into a coal seam can – and has – yielded commercial gas at certain projects in the United States, it is horizontal drilling that has made CBM a viable source of gas in Australia and elsewhere.

"In Australia, we adapted horizontal drilling technology to CBM. So what we did was, instead of drilling a simple vertical well, what we would do was drill a vertical and then off that vertical we would drill a very long horizontal well in the coal seam. And what that does is it effectively creates a channel along which the gas can flow back to the vertical and then out to the surface.

"Now, if you've got a coal seam that's 10 meters thick and you drill a vertical well, you've got access to a 10-meter area of coal. But if you drill a horizontal well, you can drill them one, two or three thousand meters through the coal seam. And so from the same well, you are opening up a huge area of coal. You are draining a very large area and that's what made the industry work in Australia."

Uliel explained that this is what Composite and BG Group had been trying to do in Scotland.

"The problem was that the seams are so thin that even drilling one single lateral for a long way through a coal seam didn't give you enough gas volume to justify the economic cost of the well you are drilling," he said.

"So, what we've done, and this is the 'architecture' we've brought from Australia via China to Scotland, is instead of drilling one horizontal into the seam you drill four. So you have different coal seams at different depths and from the one vertical well you drill four horizontal sections.

"Each horizontal is about 2,000 meters so from the well you are accessing 8,000 meters of coal from four different seams. So there's a lot of know-how that sits with that, because the pressure at which the gas is held in each seam is different, the flow rates are different, the water rates you get are different and the knowledge you have about how to drill it and then how to operate that well."

Uliel continued explained that the production test that Dart undertook at the end of last year at Airth saw the firm take one of these wells in order to see how it would flow.

"We produced on a sustainable basis about half a million cubic feet of gas per day and we let it run for a short while and we got up to about 800,000 cubic feet. And that's a viable, economic, doable proposition," he said.

Dart expects to start selling the gas produced – up to 10 billion cubic feet per annum initial and perhaps double that over time – into the UK's national gas grid.

"There is a main trunk pipeline that runs to our license area that is owned and operated by Scottish and Southern Energy (SSE). And we have a gas sale contract agreed with them. So, as and when we we're ready to start delivering the gas, we will.

"The issue there is you need to compress [the gas] so it gets to the pressure that the pipeline can receive it. And so we're currently going through a process of planning and permitting so that we can put in the compressor facility and drill more wells. And once we've done that we'll be in a position to start delivering gas to SSE.

"In the meantime, for the early gas that we're generating from the first few wells we've drilled we have a small electricity generator on site and the gas goes into that. We manufacture electricity and we sell it into the electricity grid. So we're doing that already."

Dart is investing up to $150 million into the Airth project, and much of this will go into the local economy. The project will support between 40 and 50 local jobs as well.

Once the Airth project begins exporting gas to the grid, Dart will turn its focus onto the Canonbie project, located on onshore license PEDL 159, which straddles the England/Scotland border.

"It will be a very similar project in terms of scale, scope, size and profile to the one at PEDL 133," Uliel explained. "So there, we've done early exploration work. We've drilled some core holes. We need to know about the coal and the gas content and permeability. So the next thing we would need to do there, which is on our agenda for either this year or early next year, is to put down a couple of pilot wells and run a production test, and see how well the coal there will produce."

The Canonbie project could also produce between 10 and 20 billion cubic feet of gas per annum, according to Uliel, who pointed out that while such numbers represent a "drop in the bucket" in the context of the overall energy equation for the UK, they will also help the country reduce its dependence on imported gas.

"Every molecule of domestically-produced gas means a molecule less of Russian or Norwegian gas that needs to be purchased," he said.

"The UK is blessed with considerable shale gas resources and considerable coal-bed methane resources, and if they can be sensibly tapped over the next several years they will make a big difference to the energy dynamic here. That's for sure!"

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here