Ukraine is a large country, 233,000 sq. mi. (603,000 square kilometers, or slightly smaller than Texas) that has some of the largest potential in the world for utilizing its coal bed methane (CBM) resources.
The Donbas-Dnieper Basin, also known as Donets Basin, is the most important coal mining region in eastern Ukraine, mined since the 1700s. Almost all the coal fields of this basin have high coal bed methane (CBM) content, and this basin is seeing the most CBM development so far.
Lviv-Volyn, or Lublin Basin, in western Ukraine is also the focus of a boom over the last decade, especially on the Polish side where several of the world’s largest oil companies have licenses to drill.
Ukraine is believed to contain between 11 and 12 trillion cubic meters of CBM. By some estimates, Ukraine has four times that in Russia’s Shtokman gas field.
The initiative from Ukrainian companies and the government itself is clearly in place. In fact, Sept. 14, 2011, Ukrainian Prime Minister Mykola Azarov said publicly, “I met the leaders of one of the largest corporations in the world—Chevron. They want to invest in production of shale gas in Ukraine. These are difficult deposits for exploration and large investment is needed here.” At the same time, other large oil companies have been meeting to work out plans for extracting shale gas and CBM in Ukraine.
But they need equipment and drillers. The United States—with 2 trillion cubic meters in reserves—has taken the forefront globally on CBM production so far, but for Ukraine, this could be the time to step up operations. Gas prices are higher in Europe, so there is economic incentive for production; there are reduced transportation costs because of shorter distances from the well head to the end market; there is greater accessibility to existing pipelines near the source of CBM; and there is a desire to reduce gas imports from Russia and the Middle East since they have raised their prices to Ukraine substantially (from $2 per gallon up to $14 per gallon) in the past three years.
Making the country even riper for CBM production is the fact that the geological landscape has thicker gas-bearing formations. In Ukraine, 330 seams and layers have been identified and each well is expected to produce for 20 to 50 or more years.
Dr. David Kahn, longtime leader in the international CBM field, serves on a number of industry-related boards and is the Vice President of Technology and Business Development for Iskander Energy inUkraine. Active on many fronts, Kahn is involved with other gas businesses as well. He has focused on unconventional resources for much of his career and has been a leader in North America in identifying, securing and commercializing various unconventional resources including heavy oil, shale gas and CBM.
Kahn said, “There is support for CBM in Ukraine. In July 2009 it was determined to be a strategic resource so there is zero income tax, zero import duty on CBM and the government has made it easier to get permits.”
The structure of Ukrainian CBM reserves requires less fracking than, for example, those in the eastern United States, so there are fewer environmental concerns generally. The gas comes from coal beds that are more concentrated and are a grade of coal four to five times higher than in the U.S. In fact, the CBM efforts in Ukraine are seen as an environmental plus—removing the methane gas from coal mining areas where 500,000 people work to produce 120 million tons of coal a year. Degasification of the mines saves the mines ventilation costs, reduces delays and enhances safety while capturing a resource.
Another oil company is looking for drilling contractors to work on its six fields with 10 leases approved. And that’s just the beginning.
The right people with the right equipment
Atlas Copco Vice President of Marketing for Geotechnical Engineering Drilling and Exploration Johan Kempe said, “In Ukraine, there are several companies holding substantial gas assets. These companies would prefer to contract out the well drilling work, but there are currently few contractors with modern, deep-hole well drilling equipment here.”
Kempe said Atlas Copco’s equipment is ideal for the market. “Atlas Copco is ready and willing to support any contractor who wants to get started. This includes matchmaking with operators and a gas company. We need to find a rig investor to step up.”
When it comes to the geology of Ukraine, Kahn said it is at the same time advantageous and a challenge for CBM drilling. “It is easier to cement wells with hard rock, but it is harder to drill. This is why we love the Atlas Copco RD20 and drilling with air hammers.”
Until recently, drilling with air was not done in Ukraine, but Kahn said it’s made the difference. “It has reduced the cost of our wells. We use air in the first 300 to 500 meters (984 to 1,640 feet). And we used to have only huge triples or platform rigs or else old-style drills. The RD20 has a smaller footprint and is mobile. On sites in North America we have reduced our time from two months to just two weeks per site, so that is a savings of four to five times.”
Kahn said production begins at 980 to 3,200 feet (300 to 1,000 meters). That’s within the capacity of the Atlas Copco RD20 drilling rig, which is unusual in that it can drill vertically and horizontally to reach CBM up to 5,000 feet (1,524 meters) deep. In another investment area, Kahn purchased 18 of the RD20 rigs for gas drilling. “We love those rigs,” he said.
Ukraine as a country hopes others will seize the opportunity to develop CBM with equipment like the Atlas Copco RD20 so the country can become more energy independent and profit from a resource it’s known about, but didn’t know how to capture, until recently.