Coal Seam Gas (CSG) now provides about a third of the natural gas consumed in Queensland. Early exploration (in the 70s) focussed on the Permian coals of the Bowen Basin, but early attempts to commercialise CSG in the 1980s were unsuccessful. Lessons were learnt from early exploration and the first commercial gas was produced in 1996. The Dawson Valley gasfield and Moura Mine both began producing and only a short connection was required to the Wallumbilla – Gladstone pipeline to bring this gas into production.

The Bowen Basin is in a compressive setting so the key to developing CSG in the basin is identification of zones with enhanced permeability. Much of the early exploration focussed on fracturing adjacent to faults, but the compressive nature of the faults offset any benefits from fracturing. The drilling techniques used were not suitable either. Recognition of the permeability issues and improved drilling techniques proved to be important factors in the subsequent successful exploration and production.

In 1998, the Fairview field came into production, once again via a short link to the Wallumbilla-Gladstone pipeline. The Fairview field unlocked the Comet Ridge which is proving to be a high quality gas fairway. The Fairview and Spring Gully (Durham Ranch) gasfields hold a large proportion of the coal seam gas reserves found to date. Peat and Scotia came into production in 2001 and 2002, respectively.
In 2002, the Queensland Government released a new energy policy which required 13% of Queensland’s electricity to be generated from natural gas by 2005. This policy acted as a catalyst for further exploration, as has increased industrial demand for gas. In 2004, additional production from the Moura area came from the Mungi gasfield. In 2005 the Moranbah project came on line, producing gas for electricity generation in Townsville. Moranbah was the first coal seam gas project to have a pipeline constructed just for coal seam gas transport. It also used innovative in-seam completions with up to 1 km of horizontal drilling.

The impetus for coal seam gas exploration opened up the lower rank coals of the Surat and Clarence Moreton basins. Although those coals have lower gas content, explorers were still able to obtain good gas flows. A number of projects have been established and contracts signed. Production from the Surat Basin may start later this year and by next year a number of fields will be producing.

In January 2005, the Petroleum and Gas (Production and safety) Act 2004 came into force. The new act deals specifically with CSG and provides a framework for dealing with overlapping interests of the coal and petroleum industries. Coal mines can use any methane they recover from methane drainage pre-mining for onsite energy use but, if they wish to sell energy off-site, they must then comply with the petroleum act.

One advantage CSG has is proximity to infrastructure, allowing incremental development to meet contracts. Queensland’s gas consumption is dominated by industrial use and electricity generation so the market is very much a contract market.

Another feature of the CSG industry is the variety of companies involved. Established petroleum companies Origin Energy and Santos Limited are major players and they have been joined by companies set up purely to explore for and produce coal seam gas. These companies have been very successful in floating on the ASX.

Exploration for CSG has highlighted the following:
• Coal rank is not a critical factor (offset by technology and logistics);
• Gas content is not critical – deliverability is the key;
• Coal composition is important – gas adsorption and permeability;
• Depositional setting and tectonic setting are important – set coal characteristics;
• Structural setting is important – enhanced permeability;
• Hydrodynamics is key to production; and
• Every play is unique and a learning experience.

The attached map shows the distribution of coal seam gas production and projects. It also shows the distribution of coal and of exploration wells, as well as the infrastructure, including power stations.