News Room - Business/Economics

Posted on 14 Jan 2009

Australian firm begins Vietnam drilling for gas from coal

        

Arrow Energy Ltd. said it has begun exploratory drilling in northern Vietnam, aiming to become the first company to produce natural gas in the country from deposits found in coal seams.

 

The first of eight wells near the province of Thai Binh, about 80 kilometers (50 miles) south of Hanoi, is scheduled to be drilled to a depth of about 600 meters, Brisbane-based Arrow said Monday in a stock exchange statement. A second drilling phase may follow if the initial program is successful, according to Chief Executive Nicholas Davies.

 

“We know there is a lot of coal in the area, and some conventional drilling there in the past showed signs of gas,” Davies said in a telephone interview Monday from Singapore. “The projections that we see for Vietnam for gas show a continuous gap in supply, so there should be plenty of demand.”

 

Arrow signed an agreement last year for Royal Dutch Shell Plc to take a stake in an Australian venture to extract natural gas from coal seams, and is also targeting areas in China, India and Indonesia. Shell, Europe’s biggest oil company, said last week that coal-seam gas has the potential to contribute to the global energy supply. Shell owns 10 percent of Arrow’s international unit.

 

The Vietnamese government’s projections that power demand may increase 16 percent annually until 2011 “might prove to be conservative,” the Asian Development Bank said in 2007.

 

Miocene age

 

Vietnam was Asia’s fourth-biggest coal producer after China, India and Indonesia in 2007, when output increased for an eighth straight year, according to BP Plc. Coal was Vietnam’s 10th biggest export last year, and the government has said that it wants to double the percentage that coal contributes to the national power output.

 

Total possible coal reserves in northern Vietnam’s Red River Basin may be 212 billion tons, according to a 2005 estimate by Canada’s Keeper Resources Inc., which cited a Vietnamese government publication.

 

Arrow has a 70 percent stake in the exploration area in Vietnam.

 

“Drilling is targeting the thick, Miocene age coal-bearing sequence above an existing conventional gas target,” Arrow said in Monday’s statement. “Coal thickness is estimated to be 15 to 30 meters. Drilling of the eight-well program is expected to take approximately six months.”

 

Should any find prove to be commercial, Arrow would probably target industrial users in the Hanoi area, Davies said.

 

“Producing gas from coal seams is an established business in the US and in Australia,” Davies said. “It has barely got started in the rest of the world and we are trying to get it started in Vietnam.”