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CBM producers might see favorable policies
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China's coal bed methane (CBM) producers and coal miners will be encouraged to work together to produce more methane gas as a clean energy source while also ensuring mine safety.

"The government will revise the existing Mineral Resources Law, which will cover a change of licensing for CBM production and coal mining," said Chen Xianda, deputy director of the department of geological perambulation with the Ministry of Land and Resources.

"The revision will be a piece of good news for CBM producers," Chen said.

The Ministry of Land and Resources has provided separate licenses to CBM producers and coal miners.

However, since local governments also have the authority to issue coal-mining licenses, CBM producers have suffered from coal-mining companies that vented the gas first as a safety precaution before allowing CBM producers to capture it as a clean energy source.

"We are looking forward to the tough role the government will play in the coordination of coal miners and CBM producers," said Sun Maoyuan, executive chairman of China United Coalbed Methane Co Ltd (CUCBM).

"As the country's major coal bed methane producer, the company is facing a good opportunity. It will accelerate gas production in the next few years by also working together with foreign companies," Sun said.

The company now operates more than 1,440 CBM drainage wells in 15 provinces with an exploration investment of 4.5 billion yuan ($660 million). It has partnerships with 17 foreign companies that have attracted foreign investments of 3.4 billion yuan ($500 million).

Coal bed methane is a form of natural gas extracted from the seams of coal beds as a cleaner source of energy than coal.

China has the world's third-largest CBM reserves - 73.5 billion cu m - behind only the United States and Canada.

In 2008, China extracted 5.8 billion cu m of CBM, of which 1.8 billion cu m was burned for commercial use.

Still, this is far from the target of 10 billion cu m of CBM production for 2010 established by the 2006-10 CBM Development Plan.

Every year, about 20 billion cu m of CBM have been released into the atmosphere without being captured and converted to clean energy, which is equivalent to 26 million tons of coal.

If used for power generation instead, the CBM could produce as much power as the massive Three Gorge Dam power generation plant.

"In recent years, as the value of CBM has been gradually realized, an increasing number of coal miners began to drain the gas not only for ensuring mine security, but also for making money," said Yang Jian, a senior economic professor at CUCBM.

"The lack of orderly licensing of coal miners and CBM producers has prevented the effective use of this clean energy resource," Yang said.

CUCBM hopes to learn from the experience of CBM and coal-mining companies in Australia, which faced similar challenges.

Dave Mathew, executive director of Australia's Arrow Energy Ltd, told a recent forum in Beijing that he had been a coal miner before joining the CBM business.

"My personal experience showed that proper regulations make the CBM producers and coal miners cooperate well," Mathew said.

The Australian approach allows a company to have both CBM and coal exploitation licenses.

When two licenses belong to different companies, the CBM producer vents the gas first.

Although the coal-mining company can also extract the gas at the same time, the coal miner in Australia is not allowed to use the gas for commercial purpose during the first five years.

The Australian approach met strong resistance from Chinese coal miners when first discussed as a potential answer in China.

Many complained it was unfair to allow CBM, but not coal-mining concerns, to sell CBM in the marketplace.

"Currently, 1 cu m of CBM could bring a profit of about 0.6 yuan (7 cents)," Yang said.

(China Daily August 24, 2009)

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