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China is turning to coalbed methane, a natural fuel, to help narrow the growing energy supply and demand gap and possibly reduce pollution.

 

Yesterday, China United signed a production-sharing contract with Canada-based Ivana Ventures Inc to jointly develop coalbed methane resources in Suzhou of east China's Anhui Province.

 

Established in 1996, China United was granted by the State Council the exclusive right to explore, develop and produce coalbed methane in cooperation with overseas companies.

 

The State Council granted the company favorable policies for the coalbed methane industry's development, such as tax reductions, duty exemptions on imported equipment, and the use of free market pricing for the sale of coalbed methane.

 

"Besides our own efforts, we have to beef up cooperation with foreign firms to develop the coalbed methane resources," said Sun Maoyuan, president of China United Coalbed Methane Corp Ltd.

 

China plans to produce 10 billion cubic meters of coalbed methane annually by 2010, from almost nothing now.

 

This was a goal set by the government in its 11th Five-Year Plan (2006-10) to increase the ratio of natural gas to total energy consumption.

 

In China, natural gas is currently a minor fuel in overall used energy.

 

However, China is rapidly expanding infrastructure to facilitate the consumption of natural gas throughout the country.

 

China plans to produces about 5 percent of its energy from natural gas by 2010 from the current 3 percent.

 

"This requires development and production of new natural gas fields and use of imported liquefied natural gas from countries such as Australia and Malaysia," said Sun.

 

Production of coalbed methane will also play an important role in achieving the goal, Sun said.

 

It is estimated that the country has around 37 trillion cubic meters of coalbed-methane resources, located no deeper than 2,000 meters underground.

 

Sun said, in addition to helping the current energy shortage problem, the emergence of the coalbed methane industry in China will help reduce the high incidence of coal mine accidents.

 

Yesterday's contract was the second one that China United signed with foreign firms so far this year.

 

It is also the fourth one it signed with foreign firms within four months.

 

Last month, it signed a similar contract with the London-headquartered Reflection Oil & Gas Partners Ltd to explore, develop, produce and sell coalbed methane in north China's Shanxi Province.

 

China United also signed similar contracts with two Canadian firms TerraWest Energy Corp and the Verona Development Corp last December and November, respectively.

 

The latest agreement covers about 856 square kilometers and is estimated to contain a potential resource of 120 billion cubic meters of coalbed methane.

 

The contracted block, in Suzhou, is also close to the west-east gas pipeline, which will facilitate the transportation and sale of coalbed methane in cities such as Hefei and Nanjing.

 

According to the contract, Ivana Ventures will shoulder risks and expenditure during a five-year exploration period.

 

The Canada firm will then share production with China United during the development and production periods according to its investment share.

 

(China Daily March 10, 2006)