Coal Bed Methane: A clean energy elixir forZimbabwe

A paper prepared by Norman J. Mukwakwami, HME(UZ)

January 2013

1.0 IntroductionCoal mine workers are well aware of the dangers posed by coal bed methane. The Pike River Mine disaster in New Zealand that claimed 29 lives in November 2010 brought this danger to the attention of the entire globe. What most people, and even a lot of coal mine workers, do not know is that coal bed methane has the potential to be a clean energy supply. Recent developments in technology are making it increasingly possible to extract and use it.

Coal Bed Methane (CBM) is a form of natural gas found in coal beds. It is mainly methane gas with trace quantities of ethane, nitrogen, carbon dioxide and a few other gases (which depend on the type of coal and the geographical location). It is nearly identical with natural gas (CH4), and can be used as an alternative to natural gas. However, unlike conventional natural gas, coal bed methane contains very little heavier hydrocarbons such as propane and butane, which makes it more environmentally friendly. In recent decades it has become an important source of energy in countries like the United States, Canada, China and Australia.

Virgin Coal Bed Methane (VCBM) is methane recovered from seams in which the coal will remain un-mined. The potential for future coal mining operations is largely dependent on the accessibility of the coal seams. Coal found at extremely deep depths is often not considered feasible for extraction because of practical, safety and economic considerations. In such cases, methane recovery activity is purely for the purpose of energy generation.

2.0 OccurrenceThere are two coal basins in Zimbabwe. One is in the western part of the country and the other is in the south east of the country.

Fig 2.1: The Kalahari and Zambezi coal basins of Zimbabwe

Zimbabwe has measured coal-bed methane resources that exceed the total measured resources in the rest of the Southern African Development Community put together1. The SADC gas resources amount to 420 billion cubic metres while it is estimated that the Hwange/Lupane basins have over 800 million cubic metres of CBM per square kilometer. This totals to about 765 billion cubic metres of sulphur free CBM. This is depicted below:

Fig 2.2: Comparison of Zimbabwes estimated reserves and those of the rest of SADC

Zimbabwe is believed to hold the largest known reserve of CBM in sub Saharan Africa. However there is need for further feasibility work to move from a Measured Resource to a Proven Reserve (i.e. a commercially mineable reserve).

Early in 2012, Mozambique discovered coal and coal bed methane in areas that border Zimbabwes Manicaland Province. The CBM is believed to flow into Zimbabwes Manicaland Province.

1 Promoting Coal Bed Methane Development in Zimbabwe,www.energy.gov.zwIn 2006 it was estimated that of global resources totalling 143 trillion cubic metres, only 1 trillion cubic metres was actually recovered from reserves. This is due to a lack of incentive in some countries to fully exploit the resource base, particularly in parts of the former Soviet Union where conventional natural gas is abundant.

CountryEstimated CBM Resource Base (trillion cubic metres)

Canada17 to 92

Russia17 to 80

China30 to 35

Australia8 to 14

USA4 to 11

Table 2.1: The Top Five Estimated CBM Resource BasesSource: IEA CCC 20053.0 ExplorationShangani Energy Exploration (Pvt Ltd) completed Africas first coal bed methane production well in 1994 at a site near the Shangani River, about halfway between Bulawayo and Victoria Falls. Three companies have been involved in exploration for CBM in Zimbabwe: Shangani Energy Exploration, Afpenn Lupane Developments and Terra Firma. Most of the active special grants are in the Lupane/Lubimbi Coalfield. The coals and carbonaceous shales in this area contain 2 to 5 cubic metres per ton in-situ gas. The CBM in this area is of a high purity of 95% methane. Water co-produced with the gas is clean and can be used for irrigation and domestic purposes.

4.0 Potential Markets and UsesZimbabwe currently has a negative balance of payments.Zimtradesays between January and September 2011 Zimbabwes top five imports were:

Fertilizers 18.5% (of total imports)

Petroleum products 13.7%

Motor vehicles 12%

Phone sets 5.3%

Wheat 1.5%

Zimbabwe consumes 1.4 million litres of petroleum products per day.

CBM has the potential to change Zimbabwes Balance Of Payments by reducing the imports of fertilisers and petroleum products, which together account for 32.2% of total imports. It can also revolutionize the Zimbabwean Energy market.

Potential uses for CBM include:

4.1 Power GenerationCBM is a cleaner, environmentally friendlier alternative to coal for hydro-thermal generation of electricity. The high quality of the gas recovered from unmined coal seams also renders it suitable for replacing or supplementing coal in power generation systems, such as gas turbines and gas engine systems. This utilisation option increases in viability the closer the generator is located to the methane recovery site. CBM supply cannot be switched on and off depending on demand, as wells that are shut-in start to water again thus some companies adopt the so called wellhead to wires strategy. In such a project the operator develops the upstream, pipeline and also installs and runs the associated power plant. The electricity generated is then sold directly into the national electricity market. Such projects provide higher revenue streams than upstream only projects. It is also attractive to power purchasers as it reduces their risk profile by negating their exposure to upstream uncertainties.

Currently ZESA has a monopoly on electricity supply. It generates 900 to 1200 MW against a demand of 1900 to 2200 MW. 35% of electricity consumed in Zimbabwe is imported from Mozambique and DRC. Zimbabwe is the third largest power consumer in Sub-Saharan Africa after Nigeria and South Africa.

The Zimbabwe Power Company (ZPC) recently invited bids for a tender to carry out a geological survey and establish the extent of the Lupane coal-bed methane deposit. Implementation of the Lupane gas project was granted National Project Status by the Zimbabwean Government in 2007.

4.2 Liquid Fuel ProductionCBM can be converted into diesel, petrol or ethanol. Recovered CBM can also be stored in gas canisters for local distribution as a domestic fuel and is also storable in compressed liquid form for utilisation as vehicle fuel. Other products include specialist lubricants and waxes. The Fischer Tropsch Synthesis model converts CBM into a product stream that includes petrol, high quality diesel, paraffin, fertilizers, specialist lubricants, waxes and aviation fuel. This model has been successfully implemented by South Africa Synthetic Oil Limited (SASOL). It is also the basis of the pharmaceutical and plastics industries.

4.3Domestic FuelMany households are already using gaseous fuels for heating and cooking purposes. CBM can be safely used as an alternative fuel without need for any modifications to these equipment.

4.4Industrial raw materialIn the production of fertilizers and petrochemical feed-stocks. With CBM, Zimbabwe can turn from a net importer of fertilizers to a net exporter. Fertilizers are Zimbabwes top import. CBM is used to produce hydrogen which in turn, is used in the manufacture of ammonia for fertilizer.

Globally, leading economies have recognized the importance of CBM as an alternative energy source. They have already made major strides in the development of wells, pipelines and downstream industries.

In the United States of America, the use of CBM has grown more than 65% since 1994, and represents approximately 7% of the total natural gas usage in the U.S. Natural gas usage in the U.S. represents 24% of the countrys energy needs, and 16% of electricity production. CBM joins natural gas as the fastest growing source of fuel for clean burning power plants. The Obama Administrations national energy plan includes CBM as an energy source that should be developed expeditiously with natural gas.

Chinas government, recognizing the value of this resource, named CBM development as one of 16 major projects in its 2011-2015 Five-Year Plan. To achieve this, production targets were set at 10 billion m3by 2010, 30 billion m3by 2015 and 50 billion m3by 2020.

Natural gas makes up 70 to 90% of the production costs for nitrogen based fertilizers.

5.0 Environmental ImpactsPotential primary impacts of the development, extraction, and transportation of CBM include:

Degradation of the land being drilled

Contamination of downstream waters

Contamination of land, wetlands and water bodies along pipeline routes

Ground disturbance during development of for roads, drilling pads, pipelines and utilities.

Water discharges however water from the exploration wells has been found to be clean and can be used for irrigation and for consumption by local people and their livestock.

Equipment noise

Compressor exhaust

Dust development

Wildlife habitat changes

Longer term water table issues

Irrigation water changes

Non native plant infestations

Overally, CBM is a low pollutant. One tonne of coal has the energy equivalent of 826 cubic metres of CBM. However this amount of CBM releases 12 tonnes of CO2less than one tonne of coal.

CBM produced water has the potential to affect groundwater quantity and quality. Coal seam aquifers may have competing water rights and be diminished as CBM production increases. Surface water quality could be altered by mineral-laden discharge, and agricultural productivity of soils could be reduced by irrigating with altered surface water. Riparian ecosystems may be negatively affected by the release of large quantities of produced water. Some produced water on the other hand, has the potential to be a prized source of fresh water in many arid regions.

6.0INVESTMENTConsiderations6.1 Legal FrameworkThe exploration and production of coal bed methane is addressed in the Mines and Minerals Act of the Zimbabwean Parliament (Chapter 21:05) Part XX: Subsections 297 to 307.

Subsection 298 states, Rights to mine coal, mineral oils ornatural gasesmay only be acquired under Special Grant.

Anyone is allowed to apply to the Mining Affairs Board for a special grant. This Board then makes a report and recommendations to the Minister of Mines and Minerals Development. Recommendations made will include: the minimum capital to beINVESTED; the time period in which production should start; the minimum rate of production of the coal bed methane; and the amount of royalty to be paid.

The Minister then submits the report and recommendations to the President. It is the Presidents sole right to grant or refuse the Special Grant. The President can extend or reduce the area to be covered under the Special Grant.

The law doesnt set a duration period for Special Grants. Terms and conditions of each special grant are specified when its granted. Historically, the Government of Zimbabwe has issued Special Grants on a five year renewable basis.

A Bill has been tabled to amend the Mines and Minerals Act. It makes four additions to Subsections 297 to 307 which have no effect on the process to obtain a Special Grant as described above.

The Zimbabwean Cabinet has approved the followingINVESTMENTmodels for CBM exploration and extraction:

1. Joint Venture/Public Partnership PrivateINVESTORforms a joint venture with government (or government designated organization).

2. Special BOT arrangement INVESTORprovides 100% funding with flexible shareholding arrangements.

3. Private Sector private companies with requisite resources are allowed to operate under specified conditions such as: minimumINVESTMENTcapital, technical skills, set lines for completion of certain tasks etc.

6.2 Fiscal Policy The accordance of National Project Status to CBM development projects means that all equipment and materials for the projects are imported duty free.

Royalty (which is not deductible for income tax purposes) is calculated as 2% of the gross fair market value of gas produced and sold.

Surface rentals (which are not deductible for income tax purposes) are charged at different rates during the different project phases; from exploration to development to production.

Income tax on mining operations is levied at a flat rate of 15%.

6.3 Infrastructure6.3.1 PipelinesTo transport the gas from the wells to the end user, pipelines will be required. The distances to be covered and geographical features have a major bearing on the economic feasibility of a project..

6.3.2 Power PlantsIf a decision is made to implement a wells-to-wires strategy there will be need to construct the power plant.