Cost Benefit Analysis of Coalbed Methane Recovery Activities in Australia and New Zealand- Implications for Commercial Projects and Government Policy

This paper presents drilling, completion and stimulation costs for Australia and New Zealand coalbed methane (CBM) wells and compares them with reference international costs from the USA, Canada and China to deduce the local “premium factor” faced by the fledgling Australian and New Zealand CBM industry. CBM exploration and development economics in the Queensland fiscal environment are then analysed with a 100-well designed and costed prototype model. It is concluded that CBM economics are sub-marginal and costs must come down to make the industry attractive to potential investors. As well, investment tax credits and royalty “holidays” are investigated in the context of government policy. They are recommended as efficient fiscal tools to “kick start” a vibrant CBM industry, thereby achieving economies of scale and favourable social return.