CSG, Markets, Projects, Technology

Certifying CSG

Consultants are generally engaged to conduct studies of a company’s gas reserves and resources when there is a need for an independent or third-party assessment.

“Reserves certification is typically associated with relatively mature projects that have sufficient technical information to establish the operators’ intent to develop the project,”? says Netherland, Sewell & Associates, Inc. (NSAI) engineer Dan Paul Smith.

The certification process

NSAI geoscientist John Hattner says that the evaluation of CSG projects is complex and involves extensive data collection and technical analysis.

“The sources of data can be atypical compared to conventional project analysis, as is the workflow for reservoir characterisation, resource assessment, reserves estimation, and new well location selection.”?

NSAI commences certification projects with a data gathering phase, which involves meeting with a client’s staff.

An assessment of the gas reserves is generally dependent on this data, which includes historical gas and water production, gas composition data, individual well completion information, laboratory reports developed from desorption tests, and reservoir pressure and permeability measurement data.

Mr Hattner says that project analysis initially focuses on geological mapping of the prospective coals to delineate their structure and thickness. At the same time, analysis of core information, including absorption isotherms and desorption tests, is undertaken.

“Pressure correlations are developed to determine the coal pressures, which are combined with core information to estimate the gas content of the coal. Original gas-in-place per spacing unit is then estimated along with recovery efficiencies to determine reserves per well,”? he says.

Other key issues that must be met to achieve reserves classification include:

  • Establishing the lateral continuity of the coals
  • Confirming coal permeability and permeability/pressure communication between wells
  • Calculating gas-in-place
  • Establishing sufficient gas contents
  • Considering depth limitations
  • Confirming commerciality.

“We typically determine the permeability or producibility of the coal from pressure build up/fall off tests and from pilot or full-field production histories. By using analogy and long term production tests, we can assess the ability to dewater or depressure the coal, which is necessary for gas desorption.

“This data, in combination with original gas-in-place estimates, production analogy information and in some cases, reservoir simulation models, can be used to determine a range of expected well spacing and recovery efficiencies,”? says Mr Hattner.

The assessment of reserves also requires a commercial test to establish that reserves can be economically recovered. As such, operating cost and capital cost estimates are combined with fiscal regimes and product pricing to confirm the economic viability of reserves.

“In the case of CSG reserves,” says Mr Smith, “we will typically use a forward price scenario based on monetisation of the reserves through domestic markets – including power generation opportunities, direct sales to end users, and wholesale and retail channels to market – or through sales directly to export LNG plants.”?

The difference between reserves and resources

Mr Hattner says “It is important to distinguish between reserves and resources, since these classifications differentiate the risk associated with a project or a portfolio of oil or gas assets.”?

Reserves categorisation conveys the relative degree of certainty, and sub-categorisations are based on the development and production status of reserves.

“For our Australian CSG projects, the proved reserves are generally estimated for the existing producing wells and the direct offsets in the same coal to these wells,”? says Mr Smith.

He adds that estimates of proved but undeveloped reserves for these locations are based on volumetric calculations of the original gas-in-place and estimates of recovery efficiencies exhibited by the existing wells intersecting a particular coal seam. Incremental probable reserves are estimated for certain producing wells to reflect the potential for better performance.

Possible reserves are estimated for an additional offset distance from the original producing well, to a nominated depth, or to a lateral limit determined by technical and economic criteria.

Involvement with Australia

Both Mr Smith and Mr Hattner say that it is an exciting time to be involved in the Australian CSG industry, with operators implementing complex multi-seam, multilateral surface-to-inseam well designs that show promise for unlocking other low permeability CSG reservoirs worldwide.

Mr Smith says that being involved in the evolution of CSG in Australia has been one of the more interesting projects undertaken by NSAI.

“Over the last ten years, developments in the CSG extraction methods used in Australia have unlocked the mysteries surrounding economic production of gas from many eastern Australian coal.

“Following the success of open hole CSG projects in the Powder River and San Juan basins in the United States, operators in Australia began drilling open hole vertical wells in the late 1990s. Over the next few years, the ingenuity, creativity, and flexibility of the early Australian CSG operators led to evolutions in well designs previously unseen in other CSG development in the world,”? he says.

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