The perception of coalbed methane (CBM) has changed in recent years from a mining hazard to a valuable energy source.
For comparison, the U.K. Department of Trade and Industry (DTI) reckons CBM represents 17% of U.S. gas reserves. An estimate of Britain's CBM reserves is not firm, but DTI said their value to the nation could be about 50 billion ($75 billion).
London's U.K. Onshore Operators Group (Ukoog) represents a number of oil and gas companies keen to get their drillbits into Britain's coal fields. Concerned that only two CBM wells have been drilled in the U.K. while 34 CBM exploration licenses have been issued since September 1991, Ukoog has begun to lobby Parliament in a bid to speed exploration.
Ukoog points out that most of the world's CBM production is from coal that likely will never be economically mined and complains about the delay of CBM development in the U.K.
PERMISSION
All U.K. coal belongs to state monopoly British Coal Corp., whether economically workable or not, Ukoog explained in a briefing document for members of Parliament. Producing CBM from coal involves obtaining a license from DTI and gaining permission from British Coal to tap coal seams.
"In the past, British Coal was content to grant permission for drilling through coal on condition that the licensee shared data and took sensible precautions not to endanger or impede coal working," Ukoog said.
"Now British Coal demands a large element of operational control over proposed CBM wells, extensive access to valuable and confidential data, and substantial annual payments in respect of each CBM well drilled."
Experience in the U.S. is said by Ukoog to show that CBM exploitation is unlikely to be so profitable as to allow for royalties for the coal owner. U.K. operators were said to be outraged to find British Coal bringing CBM development to a halt by imposing unreasonable conditions.
MISTAKE
Ukoog concluded it would be a grave mistake to allow British Coal, in its last months as a statutory monopoly, effectively to kill the emerging CBM industry in the U. K.
British Coal said it does not accept Ukoog's argument that CBM operations are likely to take place only where coal mining is uneconomic.
"We have always been willing to negotiate with the onshore operators," said British Coal, "but regrettably it appears from their media campaign they are not prepared to acknowledge British Coal's interests."
DTI has been acting as go-between but sees only two ways to get out of this impasse: "One of the parties could bring a high court action, which could result in a change to legislation, but that would be expensive. It would be better if they came to some arrangement."
Meanwhile, Ukoog will push for CBM to be made government property when British Coal is privatized, but that could be at least 2 years away.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
