Gazprom Begins Operations of Russian Coal Bed Methane Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Global energy major OAO Gazprom (OTC:OGZPY) (Moscow, Russia) recently launched Russia's first coal bed methane (CBM) production facility at the Taldinskoye coal field. The CBM project is expected to ensure sustained energy supplies to the southwestern region of Siberia and assist in socioeconomic development.

The Taldinskoye coal mine, located about 65 kilometers from Novokuznetsk in southwestern Siberia's Kemerovo province, is part of the Kuznetsk Basin, which is considered one of the biggest mining areas in the world. The basin contains about 13 trillion cubic meters of gas and accounts for 15% of the world's total gas reserves. The Taldinskoye coal field contains about 45.8 billion cubic meters of gas reserves.

CBM is clean fuel found in coal that is produced by biological and geological processes. The coal seams hold the gas, which is released by drilling wells and pumping out water by lowering the hydrostatic pressure. Several energy utilities such as Gazprom are focusing on adding unconventional fuel sources to their energy portfolios.

In 2005, Gazprom identified the eastern part of the Taldinskoye field as the site for the proposed CBM production facility. After drilling seven wells and starting exploratory work, Gazprom carried out pilot operations in 2009. The company initially plans to increase CBM production capacity to 4 billion cubic meters per year and then to 18 billion to 21 billion cubic meters per year.

The new technology for production of gas from coal beds and shale is a threat to conventional gas producers. Earlier, Gazprom decided to defer the development of its $15 billion Arctic Shtokman gas fields to 2016. The delay was attributed to the slump in European natural gas demand and the growing popularity and output of shale gas in the U.S. In the last 10 years, shale gas, which is found in sedimentary rocks, has emerged as a popular energy source in the U.S. However, Gazprom has also expressed concern about the impact of shale gas production on drinking water.

In a related development, Mistui & Company Limited (NASDAQ:MITSY) (Tokyo, Japan) acquired a 32.5% stake in the Marcellus shale gas fields from Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas) for $1.4 billion. Mitsui also announced that it would invest up to $4 billion in this venture to produce 460 cubic feet per day of natural gas. Anadarko Petroleum, which is the largest holder of leased state forests in Pennsylvania, is expected to drill about 4,500 wells in the next couple of years. Currently, about 1,100 wells have been drilled as part of the Marcellus shale project.

Industry forecasts suggest that by 2020, shale gas will account for about 50% of global natural gas production.

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