Strategic Land Position
During the past year the Company has positioned itself to become a player in the CBM development by acquiring leases and options to purchase on several key prospects in the Northern Appalachian Basin of West Virginia.
Sharpe has completed an evaluation of the coal resources on the property with the help of an independent coal resource consulting firm.
This property offers an opportunity for development of a large coalbed methane (CBM) program encompassing the ability to drill and complete a several hundred well drilling program. Additionally some of the coal resources are potentially mineable, as indicated some of these coal resources have been mined previously. In addition to the CBM program, this effort will include the evaluation of the potential to mine some of this coal.
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Coal Bed Methane and Shale Gas
Coal bed methane (CBM) has become an important source of pipeline-quality gas in the United States beginning with the development in the San Juan and Pieance basins in the Western US and the Black Warrior basin of Alabama in the 1980's. Today one of the biggest gas plays in US history is occurring in the Powder River basin of Wyoming and southern Montana, namely the discovery of commercial amounts of methane gas associated with coal beds. Natural gas production from coal bed reservoirs has grown from virtually nothing a decade age to more than five percent of the total US gas production today. The Appalachian Basin development is one of the more successful development programs outside of the Powder River basin and other western coal basins. The Gas Research Institute and USGS have indicated that the resource potential is more than 60 tcf for this region. The focus of the effort to date has concentrated on the Central Appalachian region of southwestern VA and adjoining West Virginia. The focus of the development work has been on the Pocahontas coals in this region. In the Northern Appalachians the development of the Freeport and Kittanning coals in Pennsylvania and adjoining WVA has been underway on a much smaller scale for several years.
The Marcellus Shale Gas production has accelerated strongly in the Northern Appalachian Region with major production coming from New York, Pennsylvania, West Virginia and Virginia. Horizontal drilling and completions have greatly enhanced the economics of these projects.
The allure of CBM and shale gas development to operators and investors alike is that it offers a large gas resource with low geologic risk and extremely attractive unit finding and development cost. Wells can be completed in a couple of days utilizing mobile, truck mounted drilling rigs at a cost that is substantially below the cost of drilling and developing conventional oil and gas properties.
The accepted volumetric profile for an average well indicates an economic life of 10+ years. Well payout for a project of this type can be from a period of months to 1-2 years depending upon testing results. Internal rate of return for projects of this type for those that perform to expectations are attractive.
Coal gasification is an old technology with new commercial viability, coal gasification is becoming widely accepted as a clean coal method of generating electricity. Currently, this method of power generation is more expensive coal fired power plants, the excess cost is decreasing as test programs improve upon the gasification and power generating systems while significantly decreasing the amounts of pollutants released into the air such as carbon dioxide.
Coal gasification can take place either above or below ground. Gasifying coal below ground eliminates the need to mine the coal. Underground coal gasification (UCG) has the potential to provide a clean convenient source of energy from coal seams where traditional mining methods are either impossible or uneconomic to develop.
At this time there is significant government and private sector support for the development of coal gasification projects in the
The Company plans to take a serious look at coal gasification as a viable option to develop some of its coal properties.