Coal-bed gas deal concluded

A PETROCHINA Co unit has agreed with Shanxi Energy Industries Group to develop coal-bed methane, a cleaner-burning fuel, in the northern research-rich Shanxi Province.

PetroChina Huabei Oil Field Co and Shanxi Energy signed the development deal on Sunday. It is expected to lead to the production of 240 million cubic meters of CBM per year, some of which will be processed into 200,000 tons of liquefied CBM, according to a Shanxi Daily report.

The 1.45 billion yuan (US$191 million) project at Qinshui coal mine will be partially financed by a World Bank loan of US$80 million.

The report didn't specify the project's equity structure or schedule. PetroChina, the nation's top oil and gas firm, and Shanxi Energy, could not be reached for comment yesterday.

CBM, a natural gas extracted from coal seams, contains methane that contributes to global warming. It is harmful to the environment when released into the atmosphere, but it is a highly clean fuel when burned because its combustion doesn't produce sulfur dioxide or particulates, and it emits less carbon dioxide than other fuels.

PetroChina and China National Coal Group have formed China United Coal Bed Methane Corp, which leads the nation's CBM development.

The government has been encouraging the use of natural gas, including CBM. Under its development plan, China is set to produce 10 billion cubic meters of CBM by 2010, or 10 percent of its gas consumption. China produced 1.4 billion cubic meters by the end of 2006, or three percent of gas use.

Currently, more than 1.3 billion cubic meters of CBM is emitted each year without being harnessed and is thereby wasted, according to a Merrill Lynch research report.

Much of the proven reserves of CBM are associated with coal mining operations. As gassy mines in China are exposed to explosion risk, so the government effort to harvest the flammable gas from coal mines could also help reduce accidents.