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Coal-bed methane (“CBM”) is no longer regarded as an obstacle in the coal mining industry. Instead, it is fast becoming known as a commercially viable energy source. The approach to CBM has changed radically over the last decade or so as concerns regarding global warming and increasing coal prices highlight the fact that there is a need for alternative energy sources which are less detrimental to the environment. Research prepared in countries such as the United States, Canada, China, India and Australia have demonstrated that capturing methane and harnessing it into a productive energy source has the ability to dramatically decrease the detrimental effects on the environment. It has been proven that burnt or used CBM is twenty two times less detrimental to the environment than when it is left to escape un-burnt. It also has twenty one times greater heat trapping value when released into the atmosphere than carbon dioxide. Based on its environmental footprint it is clear that every opportunity should be taken to remove CBM from the atmosphere and one of the best ways to do this is to use it in energy production.
CBM Extraction Methods
CBM is a naturally occurring methane gas trapped inside coal. Historically, it is viewed as one of the primary dangers in coal mining due to its highly flammable nature. Usually, the presence of CBM meant that a coal seam needed to be degassed before it was mined. This is typically done by drilling vertical boreholes down to the coal seam, or horizontal holes into the seam ahead of the face. By reducing the natural pressure within the coal seam CBM, which is lighter than air, was allowed to escape into the atmosphere. Admittedly, CBM is technically challenging to extract and can be costly. The CBM mining method directs the gas, once released from the coal seam, to a well where it flows to the surface is compressed and then transported through natural gas pipelines. Once extracted, CBM can be used for electric power supply, co-firing boilers, district heating and mine heating. It can also be converted into liquid diesel fuel.
Future of CBM Mining in Southern Africa
There are calls for change to coal mining activities to ensure that this resource is used effectively. South Africa is sixth largest coal producer in the world and the industry is the second biggest mining sector after gold. Coal sales contribute 20% toward South Africa’s mineral sales with South Africa currently ranked as the third largest coal exporter in the world. Simply put, the potential for CBM extraction exists and there is budding market for energy.
The Department of Minerals and Energy has confirmed that interest in prospecting for CBM in South Africa has increased. They report that there have been a large number of applications for rights to explore for this resource and that CBM empowerment entities, such as Badimo Gas a black economic-empowerment company focused on CBM, are emerging. Since CBM mining is still in the exploration phrase, the full extent of the resource in South Africa is still to be defined. Recently, the most advanced CBM exploration project in South Africa took place in Waterberg area, north of Limpopo. In 2006 Anglo Coal completed its pilot-phase CBM project, located in the eastern portion of the Waterberg basin. It was reported that the area contains up to one-trillion cubic feet of recoverable methane gas. To put this number into perspective one-trillion cubic feet of CBM is enough natural gas to provide gas to 10 million homes for one year. There are also large coal reserves in the western part of Limpopo Province and these are associated with significant quantities of CBM.
In Botswana the Karoo coal basin is attracting the interest of companies keen to sell energy into the Southern African region. It is on the edge of this basin that CIC Energy wants to locate its multibillion-dollar Mmamabula Energy Project. The Project comprises of a coal mine, a power station and possibly a Sasol-like transport fuel factory. Coal on the basin’s edge is relatively shallow and accessible, but it is in the deeper seams of the basin’s inaccessible core that CBM resides. The Project is viewed as having sufficient scale potential to host the world’s largest commercial CBM venture. The company exploring the core of the basin is Saber Energy Corporation which, like CIC Energy, falls under the umbrella of the TSX-listed Tau Capital. Saber has reportedly been on site since December 2007, and has been drilling since March 2008 to ascertain the extent of the CBM resource at three concessions spanning over 14,6 million hectares, near Mahalapye, in Botswana. Saber drilled 65 first-phase holes to test the coal’s gas content, study the mechanics of the rock and gauge its permeability. It is reported that exploration has exposed several thick coal seams that contain 98% pure methane. The CIC Energy Project and the Saber Project, combined, are poised to help Botswana lower its dependence on diamonds and herald a new era of economic diversification.
Role of Government
While theCBM players create a market for the gas it is important for governments to assist the industry in getting off the ground.
CBM investors should take cognisance of the teething problems currently experienced in the sector. The general opinion is that monopolies must be broken down to facilitate the best use of this energy source. For a new energy resource to emerge a gap in the energy market needs to be opened and a niche which will be advantageous to the country needs to be created. In addition, delays in rights conversions and the lack of expertise in unconventional gas deposits within governmental authorities as well as the lack of incentives for developing gas businesses are a few of the major hurdles facing the sector at the moment.
In Australian coal mines the Australian government supplies mines with the tools to extract CBM, which in turn, is used to generate electricity for the mine itself and according to agreements with the government, surplus gas must be sold to nearby electricity companies. In India some of the attractive terms offered by the Government, include, no participating interest of the Government, no upfront payment, no signature bonus, exemption from payment of customs duty on imports required for CBM operation, freedom to sell gas in the domestic market and a seven year tax holiday.
To attract new CBM players and sustain the existing industry these option should be explored in the context of Southern Africa. Governments need to be motivated to develop this industry. Motivation for such development can, arguably, be found in the guarantee that the unfolding of this industry will bring with it job creation, billions of rand in investment, reduce fuel imports and new industries.
CBM energy delivery is less than that provided by conventional coal mining. However, CBM energy is delivered with significantly lower social and environmental costs and also in circumstances where coal resources cannot be practically or economically accessed at all by mining. A significant shortcoming in the current energy debate is that CBM, as an alternative energy source, has not featured more prominently. It is, however, anticipated that South Africa’s, newly appointed Minister of Energy in collaboration with the Minister of Mineral Resources will engage seriously in the development of this natural resource.
Written by: Megan Rodgers of Bowman Gilfillan