From coal-bed methane (CBM) for an LNG project in Queensland, Australia, to CBM resources on the island of Sumatra in Indonesia, Santos is set to ride a wave of unconventional gas in Australia and Asia.

The Cooper Basin in Australia is where Santos began operating about 60 years ago.  Now, the promise of unconventionals in the Cooper Basin could keep Santos going for decades.  

“The Cooper Basin offers excellent growth opportunities for our company through unconventional resources, which we will pursue aggressively,” said Chris Longwell, senior drilling engineer, Santos International, during a panel presentation on “International Unconventionals -- Taking The World By Storm” at the Hart Energy DUG 2012 Conference in Ft. Worth, TX, on April 24.

Santos has a three-prong strategy for company growth.  “First, we’re perfectly situated to take advantage of the growing Asian energy market.  Second, the looming introduction of a carbon tax in Australia is expected to move power generation from coal to natural gas.  Finally, the huge unconventional resource potential of Australia and Asia is something we must be part of to continue to succeed in growth as a company,” Longwell explained.

To take advantage of those strategies, Santos has shale, tight gas and deep coal opportunities in central Australia, a coal-bed methane (CBM) to liquefied natural gas (LNG) project in Queensland and a CBM exploration program in Indonesia.

“As you can see, there are unconventional opportunities spread out all over Australia.  Unfortunately, most of those leases are pending or already taken up,” he said.

“The Cooper Basin has been revitalized with these new projects.  It will increase production to meet growing international and domestic demand,” he emphasized.  “We’ve been drilling tight gas wells in the Cooper Basin for a number of years.  Now we’re beginning to drill from multi-well pads as spacing gets tighter.”

The company has also drilled to produce gas from deep coal but has not developed that program yet.

“As for shale, we’ve just drilled and fraced a vertical well.  Later in the year, we’ve got our first horizontal well, and we’re getting ready to go with a rig there,” Longwell stated.

In a typical cross section of the Moomba field, “the upper section contains conventional oil and gas reservoirs taht we’ve been developing for decades.  Below that it is the REM (Rose Epsi Mtre) shale where we have a vertical well and we’ll be drilling a horizontal well later this year.  At the bottom, we have tight sands we’ve already been producing and deep coals already tested with gas to the surface,” he explained.

For its CBM-to-LNG project, Santos is developing a two-train LNG project in Queensland.  The project includes building a 264-mile, 42-inch pipeline.  

Santos’ partners are Petronas, Total and Korea Gas Corp.

“By coupling CBM reserves with an LNG plant, we opened the Asian market to our gas. The $16 billion plant includes developing CBM in the Bowen and Surat basins,” Longwell noted.

“Our main area of reserves are in the Roma, Fairview and Scotia fields where we have large acreage positions.  Production rates vary significantly across the basins.  There is also a large variation in types of drilling and completing -- vertical, directional, horizontal,  cased hole, open hole, fraced, cavitated, etc.,” he said.

“Currently, we’re running six drilling rigs and six completion rigs from a mixture of single and multi-well pads depending on well spacing and land access issues,” Longwell added.

There are a number of challenges for Australia to overcome to realize the full potential of unconventional resources.

“Currently, there is a limited market for service providers in Australia, which leaves limited availability of people and equipment.  That, in turn, leads to slow introduction of new technology and a lack of innovation that is normally driven by competition,” he noted.

Water is also a challenge in Australia.  CBM fields produce large amounts of water.  “We have to come up with innovative ways to utilize large amounts of water from the dewatering process.  Currently, reverse osmosis plants, disposal wells and managed aquifer recharge projects utilize or dispose of this produced water.”

In other parts of Australia, lack of water is a big problem.  

“Most of central Australia is remote and will require significant infrastructure investments that may challenge the conventional economics,” he stated.

“Now, the biggest challenge is people.  Almost all the unconventional experience in the world is with people who live in the U.S. or Canada.  To remedy this, we need to actively recruit good people with relevant experience in North America to help us along the learning curve.  It just so happens we have a recruitment booth here,” Longwell laughed.

Indonesia ranks fifth right behind the U.S. in CBM potential reserves with 450 Tcf.  “Availability of a domestic market and access to oil and gas pricing through existing LNG plants make this an attractive area with huge growth potential,” he stated.

“Our exploration program is located in South Sumatra where 189 Tcf out of 450 Tcf is located.  It is just north of Jakarta and has infrastructure established with both onshore and offshore development,” Longwell continued.

“Our six-well exploration program will determine the permeability, gas composition, gas content and saturation of the coal bed.  This data will allow us to build a development plan for Indonesian CBM,” he said.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.