Coalbed methane development: A promising vision confronted by practical challenges

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Author/Source: China Coal News Date: 2009-4-8 -------------------------------------------------------------------------------- Taking Zhongliangshan Coal and Electricity Company as an example, the cost of gas extraction for this company in 2008 was 119 yuan per ton of coal, resulting in a total cost of 58.506 million yuan. However, the comprehensive selling price of coalbed methane was 0.9 yuan per cubic meter; as a result, the company suffered a loss of 0.3 yuan for each cubic meter of coalbed methane sold. Recently, a research meeting on financial subsidies for the development and utilization of coalbed methane was held in Chongqing by the Ministry of Finance. At the meeting, relevant enterprises suggested that coalbed methane is an important area for implementing clean development plans; **more policy support should be provided to create more opportunities for coalbed methane companies to obtain financial and technical assistance. Currently, a lack of funding has become the bottleneck preventing the large-scale commercial development of the coalbed methane industry. Taking Chongqing Energy Group’s Zhongliangshan Coal and Electricity Company as an example, the cost of gas extraction for this company in 2008 was 119 yuan per ton of coal, resulting in a total cost of 58.506 million yuan. However, the comprehensive selling price of coalbed methane was 0.9 yuan per cubic meter; as a result, the company incurred a loss of 0.3 yuan for each cubic meter of coalbed methane sold. Companies are not enthusiastic about selling gas. In terms of resource availability, the Zhongliangshan coalfield in Chongqing alone has a coalbed methane reserve at the current level of production amounting to 2.604 billion cubic meters, of which the recoverable reserve is 1.318 billion cubic meters. The total prospective reserves of coalbed methane in this coalfield amount to 40.6 billion cubic meters, with recoverable reserves as high as 25 billion cubic meters. Struggling to survive due to lack of resources, coal companies had to focus on using the resources within their own mining areas. At present, enterprises under Chongqing Energy Group such as Zhongliangshan Coal and Electricity Company, Songzao Coal and Electricity Company, and Tianfu Mining Company are making good progress in the extraction and utilization of coalbed methane, with the total number of residential users having exceeded 100,000. Chongqing Energy Group has built 3 biogas power plants, which utilize 30 million cubic meters of biogas each year. It plans to add another 14 biogas generators with a capacity of 500 kilowatts each, and is also planning to construct a biogas power plant with a capacity of 12,000 kilowatts for low-concentration biogas. Additionally, 10 million yuan has been allocated as funding for research on the utilization of coalbed methane. “In the early stages of coalbed methane development, **preferential policies should be provided. ”An industry expert noted that subsidies are the most viable approach; for example, in coal mine safety improvement projects, separate funding can be allocated for coalbed methane extraction and utilization, with a 50% **subsidy provided ； In terms of tax policy, enterprises engaged in the extraction and utilization of coalbed methane are exempt from corporate income tax, and the current policy of collecting value-added tax first and then refunding it has been changed to a system of immediate refund upon collection ； To support the use of domestic and international financing channels, local authorities **should also introduce policies to encourage the extraction and utilization of coalbed methane. Industry experts also suggest that incentives and support policies should be formulated and implemented as soon as possible for underground extraction systems for coalbed methane, surface drilling, pumping stations, gas transmission and distribution networks, as well as sites for the compression, purification, storage, and sale of coalbed methane ； For the exploration of coalbed methane resources, **it should be included in the budget ； Formulate **complementary incentive policies for the exploration, extraction, and utilization of coalbed methane resources.** Since most coalbed methane extraction wells are located in remote areas, local demand cannot meet the needs of large-scale commercial development. However, since coalbed methane and natural gas can be transported and used together, they share common market customers, and their resource distributions are also complementary geographically; therefore, this issue can be resolved through pipeline transportation. At present, Chongqing Energy Group’s coalbed methane supply network spans 400 kilometers and covers 6 districts (counties) in the city; successful attempts have been made at mixing and utilizing this gas. Experts suggest that **when planning the construction of urban gas pipelines and long-distance natural gas transmission lines, due consideration should be given to locations near coalbed methane production sites, with sufficient capacity reserved; over time, a long-distance coalbed methane (natural gas) transmission network should be established. At the same time, it is recommended to** implement reasonable natural gas pricing policies, and local authorities should **relax price controls on natural gas as soon as possible, so as to ensure that coalbed methane has competitive pricing on par with natural gas, city gas, and liquefied gas.