The President of Park Place Energy: We would like to produce gas from coal deposits in Dobrudja, not shale gas

Thursday 17.7.2014

The American company Park Place Energy has received a permit from the Bulgarian Government for exploration and prospecting of coal gas in Blok Vranino with area 397.42 square meters. After proving of the commercial discovery the permit can become a license for exploitation for term of 35 years. The possibility the company to produce gas from coals has provoked serious apprehensions among the ecological organizations and public not only in the region but in the country as well. has contacted with management of the American company Park Place Energy to receive answers on the questions regarding the activity of the company in Dobrich District and the area of Vranino village, Kavarna Municipality. Scott Larsen, the President of Park Place Energy corp. has given answers of our questions.

He informed us that Park Place Energy finalized the agreement for an exploration license covering the Block 1-11 Vranino about three months ago (April 1, 2014). “We then prepared and submitted an overall work program for the 5 year term of the license and the work program and budget for the first year. These work plans are presently undergoing review by the Ministry of Environment and the Ministry of Economy and Energy. Once the government approves these work plans, then the term of the license will commence. Until the license term commences. Until the license term commences, Park Place Energy can only focus on reviewing existing data from historic government records and academic studies. As we have not yet received the government’s approval on our overall work program and first year annual program, we are in the position to provide only general and provisional information on the contemplated activities in Block 1-11 Vranino”, explains Scott Larsen. He explains that the work plans that are to determine if natural gas can be produced from the coal resource may only be incremental in nature at this stage. “Over the five year license period (which license period can be extended for up to 5 additional years), permit holders, such as Park Place Energy usually envision three phases of activity: 1-Initial Technical Review, 2-Appraisal by Coring Boreholes, 3-Pilot Test and then, if all the previous three phases have been successful, a subsequent Commercial Development.

The first phase usually involves a comprehensive review of existing data. Since the Vranino area was extensively explored by the Bulgarian government during the period 1964-1990 with over 200 wells drilled, most of which penetrated the coal formations, we expect that there will be extensive data to review and evaluate. The second phase will likely involve drilling vertical boreholes to depths of up to 2500 meters with the primary objective of obtaining cores of the targeted coal formations (generally located 1200 to 2500 meters below the surface). We expect to retrieve the cores to surface for analysis to determine the gas content and other characteristics that will permit us to determine whether the characteristics of the coal (e.g. coal structure, quality and permeability) are of such quality that they could produce natural gas and therefore warrant further investment.

If this appraisal phase proves encouraging, the Company will develop a pilot production program, which of course will be subject to proper governmental approval, to test the ability of the coal seams to produce commercial volumes of gas. This will typically involve a number of boreholes in a concentrated area on the License. This will likely include horizontal wells (wells that are drilled horizontally through the coal seam in order to open up the surface area of the coal to improve the production process) or radial horizontal drilling (smaller horizontal boreholes drilled into the coal seams). Commercial production will be determined by the volume of gas being produced when the volume of water that is being produced has reached a plateau”, explains the President of the Company. He indicates too that If the initial pilot program is successful, then the Company would apply to the government for an exploitation concession. This would involve drilling additional wells in order to scale up the production and commerciality of an area.

Regarding the technology that Park Place envisage to be used, he explains that: “the technologies that the Company may use to appraise the natural gas potential in the coal seams may be only essentially the same as the government used when it previously drilled in the Dobrudja Coal Field (to ascertain if the coal could be mined) – the drilling of boreholes and the geophysical measurement of the properties of the rocks found in the boreholes. The main differences allowed by contemporary technology are that today’s boreholes can be of a smaller diameter, oriented in a variety of angles, and can be completed more quickly by smaller, quieter drilling rigs from fewer, smaller surface locations. In addition, the materials used by the industry to drill, case and cement the boreholes are more robust and environmentally friendly” and adds that In the development phase, new production technologies allow drilling horizontal boreholes from a central site, installing downhole pumps, reducing the downhole pressure by pumping out water and allowing methane gas to desorb from the coal. Depending on the gas production rate, gas may be collected and delivered to nearby gas pipeline grids.

“Usually, once a well is drilled and completed, it will initially produce some volume of water. At present, we don’t know how much and this will be one of the questions we try and answer in the appraisal phase. Industry standards and applicable law prescribes that produced water is handled strictly in accordance with Bulgarian laws and regulations. Plans for treatment and disposal of produced water depend on its volume and quality. The Bulgarian Waters Act and its subordinate legislation provide guidance on how such waters may be treated and deposited and Park Place Energy will be complying with these requirements strictly”, assures us the President of the Company.

On our question, if the Company is going to use the technology “hydraulic fracturing” or fracking he explains that Park Place has no plans to use “fracking” and will not consider using “fracking” as a possible completion technology and will strictly observe the Bulgarian ban on the “fracking”technology. “Moreover, it is not necessary to hydraulically stimulate the coal seams. Coals have a natural pattern of microfractures (called “cleats”) that provide pathways for the migration of natural gas from the formation into the wellbore and ultimately to the surface.

Regarding the apprehensions that Park Place Energy Corp. is going to use the technology „underground coal gasification” the answer is that “there is absolutely no truth to the rumor”. “Underground Coal Gasification (“UCG”) is an in-situ gasification process carried out in non-mined coal seams using injection of oxidants, and bringing the natural gas together with other gases released in the UCG process to surface through production wells drilled from the surface. Park Place Energy Corp does not intend to employ UCG techniques”, additionally states Larsen.

Topnovini has set the questions is the technology that the company envisage to use related to any ecological risks for the territory of Dobrich District, which region is the main producer wheat for Bulgaria, are there any dangers for pollution of the underground waters, as well as are there any dangers that your activity activates processes, connected with the seismic zone Shabla? The answer of Park Place is that the area in which Park Place Energy’s exploration license is situated has previously been the subject of intense drilling by the Bulgarian State Authorities in the period 1964-1990. During this time over 200 wells were drilled to search for coal deposits. In the period 2005-2008 a further two deep wells were drilled in or near the area by former licensees. This large volume of drilling activity did not impact the agricultural sector, nor has it affected the shallow aquifers that are used for drinking water and irrigation. And more: “. Accordingly, we believe the extensive previous drilling which did not result in ecological damage to the area demonstrates that the planned appraisal and development activities of Park Place can be safely done without adversely impacting either the agriculture, the shallow aquifers or the local environment. A number of protected habitats (“Natura 2000” zones) exist on or near the license. Quite correctly, the Company will not and is not permitted to drill in or interfere with these zones. The Shabla Fault Zone is located a substantial distance away from any boreholes planned by the Company, so it is unlikely that our activity will have any effect on the behavior of the fault zone. In the past a number of deep wells have been drilled nearer the fault zone with no recorded effect”, says the President of the American Company.

He explains that at this early stage it is difficult to assess the full local or national benefits of the project. Prior to the grant of an exploitation concession, the benefits would be, for example: Improvement of local roads and access to the area, purchase or lease of local goods, services and land, personnel employment related to construction, storage depots, etc., a potential source of natural gas for local use, whether as CNG (compressed natural gas) or as a supply to local gas distribution systems.

Provided that commercial development takes place, the local and national benefits would be much greater: increased employment both as part of the production operations and with support contractors, ability of local industrial users with a reliable, long-term source of supply of natural gas to build and expand, VAT, Income tax and royalty payments to the state as provided for in the license, a domestic source of natural gas which will reduce the need for importing substantially all natural gas (as Bulgaria currently does) which also increases the energy security for Bulgaria and may eventually reduce the market price for natural gas.

“Plans for gas sales will depend on the volume of gas discovered and the rate at which gas can be produced. It is possible that small volumes would either be sold as CNG or transported via pipeline to local natural gas distribution systems. These sales will be negotiated sales with the purchasers. If the project moves to larger scale, then the gas would be transported to connect into the Bulgartransgaz pipeline system and could supply more users anywhere in Bulgaria.

It is clear that Bulgaria’s energy demand is rising and that now and in the future there are many local firms willing to purchase gas for industrial and private use. Accordingly, it is possible this gas may reduce Bulgaria’s energy dependence but the extent is unknown at this time”, points in his answer Scott Larsen in addition.

He underlines that it is important to note that producing gas from coal seams is not the same as unconventional gas exploration from shale (“shale gas”). “It is critical that Park Place explain we are not exploring for shale gas which can only be accessed using “fracking””, states the President of the Company.

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