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Beyond China's Coal Fields: Expanding Its
Gas Resources
by James Finch 17-08-2006 |
page 3 |
China's Coalbed Methane Development
What can China do about its coal mines which drive the country's electrical
production? Although official figures are lower, as many as 6000 Chinese die in
the country's 30,000+ coal mines every year. More suffer from air pollution and
black lung. By comparison in the United States, the American Lung Association
estimates about 24,000 premature deaths are caused every year by air pollution
from coal-fired power plants. About 40 percent of the emissions of carbon
dioxide, which contribute to greenhouse gases and global warming, come from coal
burning. Imagine how much larger a problem this has become for the Chinese?
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Nonetheless, coal mining will stay with China for at least the entire 21st
century. More uses from China's coal mines could make these resources
indispensable. Rising petroleum costs have forced China to move forward to
convert coal to oil products. Thirty coal liquefaction projects are now in the
detailed planning or feasibility study stage. The Chinese plan to spend more
than $15 billion in order to produce 50 million tons of oil from coal
liquefaction by 2020.
Chinese Premier Wen Jiabao, a former mining engineer, has been sympathetic to
the plight of coal miners. New restrictions and regulations have increased the
safety for coal miners. One of those upon which there is greater emphasis is
capturing the methane from coal seams before the mining process begins. Meth ane
gas in coal seams is the culprit behind widespread pollution and coal mining
deaths. Nearly a decade ago, China United Coalbed Methane (CUCBM) was formed to
capitalize upon the wasted methane released into the atmosphere during the
mining process. Following the developments in New Mexico's San Juan Basin and
Wyoming's Powder River Basin, the Chinese are determined to utilize the
'unconventional gas,' also known as coalbed methane (CBM) as an important energy
source.
In early July, Jimmy Rogers told us, "Longer term, natural gas production is
declining in North America." A few weeks later, in our interview with Sprott
Asset Management CBM research analyst Eric Nuttall he echoed those remarks,
saying, "North American natural gas production has been in decline for several
years." Nuttall added, "Most incremental production is coming from smaller, more
expensive-to-drill, thinner economic, higher decline pools and reservoirs." He
pointed to CBM as where the action would be, "The growth areas have largely been
unconventional." And that is where the Chinese may be headed in order to obtain
additional gas reserves.
A researcher for China United Coalbed Methane (CUCBM) wrote, "By 2010 and
2020, the shortage for the natural gas supply in China will be 30 billion to 40
billion cubic meters and 90 billion to 100 billion cubic meters respectively."
Professor Sun Maoyuan wrote on behalf of the CUCBM, "It is estimated that the
coalbed methane resource is between 30 trillion and 35 trillion cubic meters,
which is equivalent to the resource of natural gas. In China's 13 major
coal-bearing basins, 10 coal-bearing basins are located in North China with
22.27 trillion cubic meters of coalbed methane resource, accounting for 68% of
the total coalbed methane resource in China." He explained China's goal was to
reach 10 billion cubic meters by 2010 and double that goal five years later. He
wrote, "It is estimated conservatively that coalbed methane will account for 20
- 25 percent of the gas energy."
Since 1998, when CUCBM signed its first production-sharing contract (PSCs)
with Texaco, nearly thirty such CBM concessions have been awarded. Major oil
companies, and those with the closest connections to Chinese government
officials, were the earliest awarded, such as Arco, Phillips, Greka and
Australia's Lowell oil. Smaller U.S. firms, such as Far Eastern Energy, were
later invited to participate. |
