In order to meet the rising demand for energy, China has
quickened its pace in developing coalbed methane (CBM), a clean
fuel.
CBM is more commonly known as coalmine gas. With components
similar to natural gas, it is a practical and reliable alternative
energy source, said Sun Maoyuan, president of China United Coalbed
Methane Co Ltd.
"Last year our company drilled 391 CBM wells in the nation," he
said. "And we achieved the production capacity of 200 million cubic
meters. This year we aim to drill more than 400 wells and increase
our production capacity to 450 million cubic meters."
China started to develop CBM in the 1990s. Established in 1996,
China United Coalbed Methane has exclusive rights to form
Sino-foreign cooperation to explore, develop and produce CBM in the
country.
Last year, the National Development and Reform Commission
(NDRC), China's top economic planning body, drafted a five-year
plan for the development of CBM.
Under the blueprint, China is to increase its annual CBM output
to 10 billion cubic meters in 2010. The country will explore and
locate an additional 300 billion cubic meters of CBM reserves by
2010. An industrial system will be gradually set up to develop and
utilize CBM.
In January, the NDRC outlined the 11th Five-Year Plan (2006-10)
for the coal industry. The development and use of CBM was an
important element of this plan.
Also this year, China adopted new preferential tax policies for
CBM. Under these new policies, which took effect on January 1, CBM
producers will enjoy a full rebate on the value-added tax they pay
for CBM production.
Producers will also enjoy corporate income tax exemption on
incremental CBM output arising from the application of new
technology through research and development funded by their tax
rebate.
"These moves will greatly encourage the development and adoption
of CBM in China," said Sun. "In 2005 and 2006, China drilled as
many CBM wells as it did between 1990 and 2004."
Foreign investment
China boasts 37 trillion cubic meters of CBM reserves, the third
largest in the world, after Russia and Canada. No wonder then, an
increasing number of foreign companies have the huge Chinese market
in their sights.
This month China United Coalbed Methane signed a contract with
Hong Kong-based Longmen Hui Cheng Investment Ltd to develop CBM in
Northwest China's Shaanxi Province. The two companies will jointly
develop the Hancheng block, in Hancheng City. The block covers
460.93 square kilometers and has CBM reserves of 404.87 billion
cubic meters, said a company statement.
"It was the 28th such contract that we inked with overseas
investors since 1996," said Sun. "We have worked with a number of
foreign companies on exploration, mining and processing of CBM,
including those from the US, Canada and Australia."
Several foreign companies have been seeking opportunities in
China's CBM sector, including Royal Dutch Shell PLC, US-based Asian
American Gas and Canada's Ivana Ventures, he said.
Asian American Gas (AAGI), formed by a number of US energy
companies and financial institutions, has been working in China's
CBM market for over 10 years.
"AAGI has signed two product-sharing contracts (PSC) with China
United Coalbed Methane for Panzhuang and Mabi concessions in
southern Qinshui Basin of Shanxi Province, the most promising CBM
basin in China," said Stephen Zou, president and CEO of AAGI. The
company's CBM well in its Panzhuang project produces about 40,000
cubic meters per day, the highest in China, he added.
"Having gained valuable experience working on CBM in China, AAGI
and Chinese CBM technical service company Orion have jointly
developed the multilateral Drilling (MLD) CBM well in Panzhuang,
which has 40 times the productivity of conventional vertical CBM
wells in the country," said Zou.
The success of the MLD technology in Panzhuang has triggered
enormous enthusiasm in starting a commercial CBM industry in China,
he said. "The aim is to increase our production to 200 million
cubic meters in 2008," said Zou.
(China Daily March 23, 2007)