Page 356 - Advanced Mine Ventilation

Economics of Coal Mine Degasification 333

20.5 Economic Analysis

Three measures of profitability are commonly used to decide if a CBM project is
economically viable. They are

1. Cash flow method.
2. The net present value (NPV).
3. Discounted cash flow rate of return (DCFROR).
One or more methods are used to finally decide if the project is profitable [6].

20.5.1 Cash Flow Method
In this method, the capital investment is the most important parameter. It indicates
when the investment will be returned. It is important for small, independent operators
especially if they are operating in politically unstable areas.
Undiscounted cash flow (payout) is described by Eq. (20.3).
n
X
NCF x ¼ I (20.3)
x¼1
P n
where n ¼ number of years when I ¼ NCF x ,x ¼ years, NCF x ¼ net cash flow
for year x, and I ¼ total investment. x¼1
Table 20.3 shows the capital investment for a gas production of 100 MMCFD for
5 years. Total gas production in 5 years is 180 BCF. Assumed price of gas ¼ $5/MCF.
The cash flow over 5 years is shown in Table 20.4.
Table 20.5 shows the cash flow for drilling the same area horizontally. The total
investment in this case is $381.6 million.

Table 20.3 Capital Investment for Vertical Wells

Item Investment (in Millions)
G & G acquisition 7.2
Drilling and completion 39.6
Lease equipment and gas gathering 21.6
Water disposal 14.4
Well stimulation 21.6
Engineering and G & A 10.8
Compressors 36.0
Gas processing 180.0
Total 331.2