Solid Energy reports four-fold rise in Taranaki coal seam gas

BUSINESSDESK: State-owned coal miner Solid Energy's estimate of potentially recoverable coal seam gas reserves in its onshore Taranaki permit areas has identified a four-fold increase and will see the company concentrate its CSG activities there.

However, general manager of gas developments Steven Pearce says the company expects to use conventional directional drilling to extract difficult-to-access gas reserves, rather than using the controversial hydraulic fracturing technology known as fracking.

While CSG extraction has often involved fracking, he says the low permeability coals in the Taranaki region lend themselves to the use of traditional drilling techniques to release both underground water and gas.

The coal is "quite a long way away from any decisions on that", he said after the company announced a new estimate of resources available in its onshore Taranaki permits by Dallas-based Netherland, Sewell and Associates.

"The gas resource sits in multiple thin coal seams, so this will require some innovative technical solutions to be trialled through appraisal," Mr Pearce said.

"The latest information from Australia is it appears that fracking can be effective in high permeability coals, but with low permeability coals like ours, it is not effective."

Fracking could release gas in a radius of 50-60m from a drill hole, whereas deviated directional drilling could release it up to a kilometre from a drill head.

The latest analysis raises estimated contingent reserves of CSG to 858,000 million cubic feet, equivalent to 900 petajoules of energy - close to 20 years of supply for the 1000 Megawatt Huntly power station. That compares with previous estimates equivalent to 190PJ.

"Contingent" reserves are defined as "discovered, sub-commercial" but may be proven for production with further exploration.

"The best estimate (2C) resources have a reasonable chance of being commercial,” Mr Pearce said.

"Solid Energy is applying to New Zealand Petroleum and Minerals (NZPM) for a five-year extension of its Taranaki permit to allow the project to move to an appraisal/discovery phase, while at the same time considering future options for our Huntly petroleum exploration permit (PEP)."

The Huntly CSG trial "proved we can produce high-quality coal seam gas which generates electricity. This was achieved in an environmentally acceptable way in New Zealand while meeting Solid Energy’s health and safety standards".

“However, given the soft short- to medium-term gas price outlook and the expected cost of gas production in Huntly, further commercial scale-up of coal seam gas production is not justified at this time."

A company spokeswoman confirmed Solid Energy had used fracking at the Huntly CSG site, and had paid a premium to use fracking fluids that did not contain chemicals criticised for their potential impact on the environment.

Fracking involves pumping a compound fluid under pressure to fracture geological formations and release natural gas. The practice faces increasing international opposition as it is linked to groundwater pollution and minor earthquakes, which its supporters say are manageable.

Commissioner for the Environment Jan Wright is undertaking a report into fracking, for publication by the end of the year, reflecting growing public disquiet in New Zealand, where the issue has been taken up strongly by the Green Party, which wants a ban.

"Work programmes will continue in the Huntly permit to assess cost-effective technology advances and niche high-value market options ahead of changes in market conditions, justifying commercial expansion of the Huntly coal seam gas plant," Mr Pearce said.

Solid Energy's underground coal gasification project at Huntly is unaffected by the announcement, but the company said it would release several exploration permits in the South and North Island as a result of the decision to focus on Taranaki.