China to accelerate CBM production during 12th FYP
Shanghai. July 19. INTERFAX-CHINA - China has made no secret of the fact that it is looking in all directions for potential alternative energy sources, both to fuel rapid urbanization and reduce emissions. While natural gas and renewable energy sources such as solar, wind and hydropower receive a lot of attention, the country is also looking to develop its massive coalbed methane (CBM) reserves during the 12th Five-Year Plan (FYP) period (2011-2015) to meet its lofty energy goals.
CBM, an unconventional gas that exists in a near liquid state within porous coalbeds, shares many of the same chemical features as natural gas, resulting in a cleaner alternative to coal that produces a comparable amount of heat. The same amount of heat can be generated from burning 1,000 cubic meters of CBM as from one ton of fuel oil or 1.25 tons of standard coal.
China currently has proven CBM reserves of 118.3 billion cubic meters (bcm), though it is widely believed that the country's total CBM resources could top 36.7 trillion cubic meters (tcm). Only Russia and Canada have more potential CBM reserves.
However, due to cost- and time-related risk factors, the country's CBM industry had failed to spark investor interest and is expanding at a snail's pace.
China began CBM exploration in 2004. The country was expected to produce 10 bcm annually by 2010, but mustered a mere 8.6 bcm that year, according to statistics released by China National Petroleum and Chemical Corp. (Sinopec), the country's second largest oil producer.
The table below details China's CBM output from 2006 to 2010.
China's estimated CBM output from 2006 to 2010
| CBM output (bcm) | 2006 | 2007 | 2008 | 2009 | 2010 |
| PRC | 0.03 | 4.7 | 5.3 | 6.4 | 8.6 |
Source: China National Petroleum Corp. (CNPC), Sinopec, Xinhua news agency
CBM exploration is commercially risky given the length of time and money necessary to extract the gas, according to a Sinopec report. Making matters even more difficult, Chinese companies currently lack the technical expertise and equipment necessary for exploitation. Without preferential policies and subsidies, domestic energy companies shied away from CBM exploration during the 11th FYP period (2006-2010), said the report.
Looking to address these concerns, the National Energy Agency (NEA), China's energy policymaker, will release a CBM development plan sometime in July, state-run China Daily quoted the NEA as saying in late June.
According to the plan, the NEA will set up a fund to protect domestic energy companies' CBM exploration activities, said the report. Details regarding the fund's structure and parameters were not available.
The NEA will also double CBM production subsidies to RMB 0.4 ($0.06) per cubic meter during the 12th FYP period, up from RMB 0.2 ($0.03) during the 11th FYP period.
China is targeting 21 bcm of annual CBM output by 2015.
When looking for a model of how CBM can be utilized, one need look no further than Jincheng City in Shanxi Province.
With proven CBM reserves of 104 bcm, Jincheng City boasts 3,700 CBM wells and an annual CBM production capacity of three bcm, according to a recently released report by Xinhua news agency.
More than 18 percent of Jincheng's 2.2 million population, or roughly 400,000 people, are CBM consumers. Meanwhile, more than 300 industrial firms and 3,000 vehicles in the city also utilize CBM, saving Jincheng more than five million tons of coal consumption yearly, the report said.
Jincheng's example will be promoted in other parts of China, particularly in other cities within Shanxi Province, said the report. Shanxi has CBM reserves exceeding 10 tcm, more than a quarter of China's total CBM reserves.
With China struggling to reach a natural gas supply deal with Russia, coupled with tension over energy supplies in the South China Sea, the country may best be served by looking inward to feed its voracious energy appetite over the long run. While questions remain whether China can play catch-up and develop its unconventional gas sector quickly enough to reach its ambitious targets, Beijing seems intent on increasing CBM's role in the national energy mix.
-WV/JB
