NZ energy players mull CSM, CTL options

NEW Zealand companies Solid Energy and L&M Group are making slow but sure progress investigating the economics of using the country’s brown and black coal resources for gas and liquid fuel production. But no decisions are expected before 2008 at the earliest on any development proposals to develop either coal seam methane or lignite-to-liquids.
NZ energy players mull CSM, CTL options NZ energy players mull CSM, CTL options NZ energy players mull CSM, CTL options NZ energy players mull CSM, CTL options NZ energy players mull CSM, CTL options

L&M Group managing director Greg Hogan says geologists believe improved technology and New Zealand's significant coal reserves mean that CSM gas could supply up to 10% of the country's needs from 2010 onwards

And the lignite (brown coal) resource is even larger. Late last year a government-commissioned report, by New Zealand international consultant David Natusch, found the South Island's lignite could provide the bulk of the country's transport fuel and petrochemical requirements for many decades.

New Zealand is second only to Australia in terms of total brown coal reserves and the South Island's vast lignite reserves are possibly the country's most strategic future energy resource, containing some 100,000 petajoules, or about 20 times the energy content of the original Maui gas field, according to Natusch.

He said if developed at the rate of 20 million tonnes per year, lignite could provide energy and feedstock for most of New Zealand's transport fuel and petrochemical requirements for more than 300 years.

"New Zealand's lignite resource will still be available long after most nations have exhausted their hydrocarbon feedstocks," he said. “This will place New Zealand in a future strategic position not dissimilar to that of the oil-rich nations today.”

L&M’s Hogan said his Christchurch-headquartered company was still continuing pre-feasibility studies on its five South Island lignite exploration permits, which cover 210 square kilometres.

He could not set a date on any possible commissioning of what might be New Zealand’s first coal gasification plant until the completion of those studies.

L&M is investigating the economics of several billion-dollar lignite projects, with one involving the production of significant quantities of diesel, synthesised using the Fisher-Tropsch process, in volumes of up to 50,000 barrels per day, for perhaps 20 years or longer.

It is also considering other coal-to-liquids plants producing other end-use products, such as petrol and aviation fuel, or methanol and other petrochemicals.

L&M has identified recoverable resources of about two billion tonnes in its permits, while Solid Energy has rights to over 3.4 billion tonnes and is undertaking preliminary work into using lignite to produce methanol or ammonia, electricity generation and co-generation facilities for industry.

Solid Energy chief operating officer Barry Bragg said a six-month exploratory drilling program now underway was the first step to deciding how best to develop the resource.

Associate Energy Minister Harry Duynhoven said he was confident lignite would one day play a strategic role in New Zealand's energy industry.

But no one is exactly sure when that day will come. Lignite is a low-sulphur, low-ash resource but emits large amounts of carbon dioxide, and the New Zealand Government has signed the Kyoto Protocol and has stated a preference for non-fossil fuelled energy.

Meanwhile, Solid and L&M are also examining the potential of local CSM, a much less problematic resource.

L&M Group has 100% interests in five CSM licences – four in Southland, and one in northern Waikato in the upper North Island.

“We consider there is potential for commercial quantities of gas, up to 300 petajoules within five seams,” L&M’s Hogan said.

“However, further studies, including additional drilling and the construction of pilot plants, will be necessary to determine if this gas identified in these permits is commercial. We are still determining the location of any pilot plants.”

Hogan said all work program obligations were up-to-date and commercial extraction and production could start next year. Possible uses included using CSM to fire a small local power station, for on-site compression for later shipment or piping to industrial users.

Solid Energy spokesperson Vicki Blyth told that CSM could be found in many New Zealand coal resources.

Solid Energy’s initial CSM work had indicated that methane in the North Huntly (Waikato) coal field could contain up to 25-200 petajoules of gas.

Exploration there in 2005 by Coal Bed Methane Ltd – a joint venture between Solid Energy and US independent petroleum company Resource Development Technology – produced encouraging results.

Blyth said CBM Ltd had now begun a five-well appraisal campaign to provide information about the quantity and quality of gas flows.

Following its recent discovery of gas associated with coals within the Maryville coal measures in PEP 38614, Solid Energy applied for and won a petroleum exploration licence, PEP 38778, immediately south of PEP 38614.

Solid Energy considered PEP 38778 to be prospective for CSM as numerous coals, with gas shows, were identified within Mokau Group sediments in the Puniwhakau-1 petroleum wildcat well drilled in 1965 and located in the south of the lease.

“If coal and associated gas is present between the Puniwhahau-1 well and the northern boundary of PEP 38778, this would represent a significant coal seam gas resource,” Blyth said.

Solid Energy aims to drill step-out wells south of the currently defined Taranaki coalfield margins towards Puniwhakau-1. The company has committed to drilling three such wells per year for the first three years of the permit duration.

The planned exploration is unlikely to locate coal at mineable depths and is focused on measuring gas content.

The earliest Solid Energy anticipated making any CSM field development decisions was the end of 2007, and field development was expected to take another five to seven years, she said.

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