Size doesn't matter - at least when it comes to coal-based natural gas reserves.

It isn't the extent of the total coalbed-methane (CBM) reserves that industry and government should focus on, but rather how easily the gas can be produced, says Dave Russum, a technical specialist with AJM Petroleum Consultants.

"That number is very much smaller," Russum told delegates at a Canadian Institute-sponsored CBM conference in Calgary last week.

"The question is, how fast can we convert the ultimate resources into producible reserves? And that conversion rate depends on how accessible is the gas, what technologies we have available to produce the gas and at what price the producer is willing to buy the gas."

Russum, a geologist by profession, says he believes unconventional gas - in which he includes tight gas found in many deep wells that prove big producers - accounts for roughly one-third of all gas produced in the Western Canadian Sedimentary Basin (WCSB).

Tight gas, said Russum, has estimated reserves of about 600 trillion cu. ft. (tcf); CBM follows close behind at around 400 tcf, with the difference being that most of that gas is currently uneconomic to produce.

The CBM expert said the hydrocarbon resource can be an important contributor to the solution; however, so far average well capability has been considerably less than average conventional wells.

"When we look at sources of coalbed methane we look at the Ardley coal (seam), the Horseshoe Canyon coal and the Mannville coal ... but the only one where we're getting commercial economic gas production would be the Horseshoe Canyon, aided by the fact that it's dry gas.

"With the other ones we have challenges that we need to solve."

Of the different coal seams, the Mannville seam in west-central Alberta - and to a lesser degree in northeast B.C. - has perhaps the most potential, with reserves far greater than the Horseshoe Canyon in the same region.

Unfortunately, CBM producers actively working the Mannville have so far been unable to "hit the sweet spot," due in large part to the high volumes of water produced along with the gas, Russum said.

On average, for every one million cu. ft. of gas production, 2,000 barrels of water is produced along with it, whereas water produced with Horseshoe Canyon gas is negligible.

That's why the shallower, less spectacular Horseshoe Canyon is attracting so many Canadian explorers and producers to central Alberta. Most all of the 3,000-odd wells targeting coal-locked gas in 2005 are seeking this formation, even though average output from these wells is around 100,000 cu. ft. per day.

Some, however, are looking to buck that trend. Trident Exploration Corp., while still overwhelmingly focused on the Horseshoe Canyon (the company will spend millions sinking around 600 wells into the seam this year), will drill some holes into the deeper Mannville in hopes of determining if it can be conquered.

"(The Mannville) is a much more challenging formation, but it contains many times more gas reserves than the Horseshoe Canyon," Trevor Thompson, manager of reservoir engineering at Trident, said following his presentation at the conference.

Other companies are also keeping an eye on the Mannville. MGV Energy Inc., the Canadian branch of U.S.-based Quicksilver Resources Inc., has drilled 26 vertical Mannville wells to date without any commercial success, but hopes for better luck with a pair of horizontal wells planned this year.

Ember Resources Inc., presenting at the Canadian Association of Petroleum Producers investor symposium in Calgary last week, also indicated it has its own plans for the Mannville in central Alberta.

The company, in a 50/50 joint venture with Burlington Resources Canada Ltd., has so far drilled 10 wells and plans a pair of horizontal holes in the third quarter of 2005 as part of a pilot project. If all goes well, full development could begin in 2006 and call for more than 300 wells at a capital cost of $400 to $500 million.

CBM has generated a lot of buzz among Canadian explorers and producers in the last couple of years, but also in thirsty end-user markets in Canada and the U.S. David Hughes, a geologist with the Geological Survey of Canada, said CBM can play a role in alleviating North American gas supply declines, but only to a point.

"Will coalbed methane be able to make up for falling supply? In my opinion, probably not, but CBM is an important and growing contribution to the solution," said Hughes.

He noted the overall decline rate of the WCSB has increased from 13 per cent in 1992 to 21 per cent in 2003, which translates into 3.3 billion cu. ft. per day of production that must be replaced each year to keep production flat - something that hasn't occurred since 2001.

"There are clearly big challenges ahead in meeting demand expectations for North American natural gas," Hughes said.

"The bad news is, we're on a gas production treadmill to keep up with demand and it looks like we may be losing."

And the good news?

"The good news is that the gas-price outlook looks promising for the foreseeable future, so in those terms the future for CBM looks good, too."

(John Ludwick can be reached at ludwick@businessedge.ca)