More than half of all U.S. coalbed methane wells were drilled in 1990.
Last year's flurry of coalbed drilling stemmed from an effort to beat the then impending Jan. 1, 1991, deadline of the federal Section 29 tax credit. The tax credit since has been renewed.
The pace of activity put a strain on the industry's infrastructure.
As a result, less than half of U.S. coalbed methane wells are producing.
Those are among the key findings of a study by consultants Ammonite Resources, New Canaan, Conn.
"Despite some initial disappointments, most operators are encouraged by the results to date, particularly those who were not dazzled by the tax credit and took a conservative and scientific approach to evaluating the resource," said G. Warfield Hobbs, Ammonite managing partner.
WELLS DRILLED
There are 5,996 coalbed methane wells in the U.S. Of those, 3,600 were drilled in 1990.
The San Juan and Black Warrior basins account for more than 90% of coalbed methane wells drilled. Ammonite reports activity is starting to pick up in the Raton, Piceance, greater Green River, and Powder River basins and in Southeast Kansas.
The consulting firm predict a 51% increase in the total number of coalbed methane the next 3 years.
Greatest increases are expected to occur in less developed areas, with Ammonite predicting the number of coalbed methane wells in western Washington will increase to 100 wells by the end of 1994 from the current nine. Increases of more than 500% are expected in the Appalachian area, Raton basin, and Powder River basin.
The number of coalbed methane wells in the San Juan basin is expected to increase 29% to 2,500 by the end of 1994.
The Black Warrior basin is expected to see the smallest increase, 14%, in coalbed methane wells the next 3 years.
PRODUCTION
As of Dec. 31, 1990, only 40% of coalbed methane wells in the Black Warrior basin were on production. The figure is not much better for the San Juan basin, with 49% of the wells producing.
Even so, 935 coalbed wells in the San Juan basin were producing a total of 490 MMcfd by September 1990, accounting for one third of the basin's gas production, Ammonite said. The Black Warrior basin's coalbed methane production averaged only 110 MMcfd from 1,435 wells in the same period.
Wells tapping thick, overpressured coals in the San Juan basin often yield more than 1 MMcfd each and are thought to have much higher reserve potential than those in the Black Warrior basin, where average peak flow is closer to 150-200 Mcfd.
Ammonite notes that economic success of the Black Warrior and other areas with low production rates hinges on the Section 29 tax credit.
Western Washington and the Raton and Green River basins have yet to see coalbed methane commercial production. However, the Green River basin may be a sleeping giant, Ammonite contends, citing reserve potential at 2.5 bcf/well, the same as in the Piceance basin, which was producing 11.5 MMcfd from 62 wells at the end of September 1990.
PROSPECTS
Even with the rapid pace of coalbed methane drilling last year, many drilling programs were not launched, particularly in areas outside the San Juan and Black Warrior basins.
That's because operators weren't able to raise capital due to uncertainty over the survival of the tax credit and concerns over projected production profiles, Ammonite said.
The electrical power generation industry is showing interest in the play because of the low cost, long term supply potential.
More operators are becoming involved in coalbed methane since the tax credit was extended, but the level of drilling activity likely will drop dramatically in 1991 while operators step back to evaluate last year's results, Ammonite said.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.