COAL-BED METHANE POISED TO BECOME AN IMPORTANT ALTERNATIVE ENERGY SOURCE

Coal-bed methane (CBM), widely regarded as an obstacle in the coal mining industry, is instead fast becoming known as a commercially viable energy source.

Indeed, the approach to CBM has changed radically over the past decade or so as global warming concerns and increasing coal prices highlight the need for alternative energy sources that are less detrimental to the environment.

Research in the United States, Canada, China, India and Australia has demonstrated that capturing methane and harnessing it into a productive energy source can dramatically decrease the detrimental effects on the environment – so much so that burnt or used CBM is 22 times less detrimental to the environment than when it is left to escape un-burnt. It also has 21 times greater heat trapping value when released into the atmosphere than carbon dioxide.

Based on its environmental footprint, every opportunity should be taken to remove CBM from the atmosphere. 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 requires a coal seam to be degassed before being mined – typically 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. 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 the world’s sixth largest coal producer and the industry is the nation’s second biggest mining sector after gold. Coal sales contribute 20% of 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 confirmed that interest in prospecting for CBM in South Africa has increased. It reports 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, South Africa’s most advanced CBM exploration project occurred in the Waterberg area, north of Limpopo.

In 2006 Anglo Coal completed its pilot-phase CBM project, located in the eastern portion of the Waterberg basin – an area containing up to one-trillion cubic feet of recoverable methane gas, enough 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., which comprises 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. Exploration has reportedly 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 the CBM players create a market for the gas it is important for governments to help get the industry off the ground.

CBM investors should be aware of the sector’s teething problems such as:

• Monopolies which 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 an advantageous niche created; and
• 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 major hurdles.

The Australian government supplies its mines with the tools to extract CBM, which is used to generate electricity for the mine itself. Surplus gas must be sold to nearby electricity companies.

In India, government incentives include no participating interest by the state, 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 options should be explored in Southern Africa. Governments need to be motivated to develop this industry by assurances of job creation, billions of investment rands, reduced fuel imports and new industries.

Conclusion
Although CBM energy delivery falls short of that provided by conventional coal mining, it is delivered with significantly lower social and environmental costs and in circumstances where coal resources cannot be practically or economically accessed.

Even so, CBM has not featured prominently as an alternative energy source.

The good news is that South Africa’s newly appointed Minister of Energy, in collaboration with the Minister of Mineral Resources, has undertaken to engage seriously in the development of this natural resource – hopefully, sooner rather than later.