Focus turns to Bowen Basin gas

David Kiefer, Arrow Energy

The Surat Basin has been Queensland’s natural gas powerhouse – supplying the east coast gas market and underpinning a massive LNG export industry – but the Bowen Basin has a longer gas history and a significant gas future.

International Energy Agency data shows:

• Natural gas supplies 22% of energy used worldwide, and makes up nearly a quarter of electricity generation, as well as playing a crucial role as a feedstock for industry.

• World natural gas consumption grew by an estimated 4.6% in 2018, its largest increase since 2010 when gas demand bounced back from the global financial crisis.

• The growth was driven by growing energy demand and substitution from coal. The switch from coal to gas accounted for over one-fifth of the rise in gas demand.

Natural gas is predominantly methane, and coal seam gas (CSG) has one of the highest proportions of methane of any natural gas. The Bowen Basin is already producing CSG for power generation and industrial use. The Moranbah Gas Project has been producing gas since 2004. Owned 50-50 between AGL and Arrow Energy (Arrow is the operator), it feeds the North Queensland Gas Pipeline that supplies large industrial customers in Townsville, including the Yabulu gas-fired power station.

Coal seam gas advantages

CSG is a very portable energy source, transportable as gas via pipelines or, if cooled to minus 161 degrees, then as liquefied natural gas (LNG) that can be carried in ships to anywhere in the world. That’s why CSG is an important Queensland export commodity.

CSG is an industry that can co-exist with Central Queensland’s two great pillars – agriculture and mining. With CSG, the wells go in the ground, drain the gas for 15 to 25 years and, afterwards are plugged with cement, cut off below-ground, and normal activity resumes above. Or below. While the wells are running, they mean additional income from the same land.

CSG is a transition fuel that can help carry the world through to next-generation technologies like renewable power and clean coal power generation.

Coal seam gas challenges

Against global LNG competition, CSG suffers the economic disadvantage of being quite a pure energy source. A CSG well produces no commercial liquids, like oil, unlike other LNG projects where up to 50% of the income can come from liquids produced from the gas wells.

With CSG, all the revenue must come from the gas. To illustrate the comparative energy, a tonne of good, black Bowen coal – roughly three-quarters of one cubic metre – has around 27GJ of energy, so about 36GJ per cubic metre. To get the same amount of energy from natural gas requires the production of about one thousand cubic metres of CSG.

Accordingly, a CSG project needs a large tenure. For example, the Moranbah Gas Project has 600km2 of petroleum leases – and this is a domestic-scale CSG project. Arrow Energy’s proposed world-scale Bowen Gas Project has about 5600km2 of exploration tenure. It’s a large area, and that’s what’s needed to get enough energy from the ground to make a viable project.

Whereas a coal mining lease might overlap one CSG proponent’s tenure, about 90% of Arrow Energy’s Bowen Basin tenure overlaps mining tenures, including all the big coal mining operations like Rio Tinto, BMA, Yancoal, Vale, Glencore, New Hope and Pembroke. Arrow presently has 37 co-development agreements with 23 major coal parties across the Bowen – some detailed and complex, and some simple and straightforward, but all fit-for-purpose.

CSG and coal – taking advantage of synergies

On the face of it, it’s a great match - coal and CSG have areas of common interests with drilling, degassing, subsurface data and water, so the way is open to share and combine for mutual benefit. Coal companies need to degas before mining, and the CSG industry wants to extract that gas.

The devil is in the details – sequencing, access, health and safety, pipelines being affected by subsidence, and so on. However, both sides have approached the issue with goodwill and, a few years ago, hammered out an excellent win-win structure that acknowledged and balanced the interests of both parties.

The existing Arrow/AGL Moranbah Gas Project, and Arrow’s proposed Bowen Gas Project, target the Blackwater Group of coals – the Rangal, the Fort Cooper and the Moranbah coal measures. This means wells down to 750 to 800 metres, although the shallowest ones will only be to about 350 metres below the surface. From a CSG point of view, the target coals in the Bowen are quite different to the Surat Basin and require different drilling techniques.

The Bowen seams, while much thicker than in the Surat, are deep and dense, and not particularly free-flowing for normal, through-seam, vertical CSG wells. Typically, hydraulic stimulation – fraccing – would be used in this situation to get sufficient gas to flow. But that’s expensive.

Introducing multi-lateral well techniques

For some years, Arrow has been developing and refining deviated, in-seam wells – drilling a bore that angles away from the vertical it descends, until it runs horizontally along the target coal seam, for maybe a couple of kilometres.

This method exposes much more of the seam than a fracced, vertical well, so flows more gas. Its use means less wells in total, and wider spacings between them, with resulting lesser impact on surface activities like farm operations. And it reduces the need for the expensive fraccing option.

Arrow has extended the basic idea to drilling multiple side-branch bores off the main bore, exposing even more of the coal. These new well types – known as ‘multilaterals’ – can be less expensive than fraccing and reach more coal per well. The design is evolving as techniques are proved and disproved, and lessons are learned from long-term operation.

This evolution of design is one of the strengths of CSG. Whereas traditional oil and gas operates very much in the bespoke development, one-shot, right-first time, major-spend-up-front space, unconventional development does not.

CSG business growth is not about gas volumes; it’s about extraction costs - about proving an ability to drive down unit costs everywhere. A project can begin at a current best point and then improve with techniques, experience and equipment that aren’t available at the beginning. This drives business growth – from a start-up production hub, a field development can then radiate outwards as incremental investment opportunities are proved.

A resource that is marginal or unviable today might become core production in 10 years’ time. Or 20 years, or 30 years, as technology and technique is refined.

The Bowen Basin stands, potentially, as Queensland’s next natural gas powerhouse, supplying a valuable transition fuel towards the looming lower-carbon future. 