Coal-bed Gas Target: Mission Impossible?

Chinaproduced 12.5 billion cubic meters of coal-bed methane (CBM) in 2012, increasing by only one billion cubic meters from 2011 and falling short of the year's target of 15.5 billion cubic meters.

Industrial experts are worried that considering the current situation of CBM production, it is "extremely difficult" for the country to reach its five-year goal of producing 30 billion cubic meters of CBM by 2015, according to a report in the latest issue of Caijing Magazine.

In 2011, the National Energy Administration (NEA) issued the 12th five-year plan for CBM development, aiming to produce 16 billion cubic meters of CBM by surface extraction and 14 billion cubic meters by coal mine drainage.

In the State Council's 12th five-year plan for energy development issued on Jan. 29, the commercial volume of CBM was set at 20 billion cubic meters by 2015. If the utilization rate remains at last year's level of 41.53 percent, it would translate into an output of 50 billion cubic meters by 2015.

China's geological resources of CBM is estimated at 36.81 trillion cubic meters, ranking it the third in the world. The exploration of CBM not only provides clean energy for the country's economic development but also helps cut coal mine disasters and lowers the mining death rate.

Chinastarted to exploit CBM in the early 1990s but progress has been lagging far behind expectation due to a number of reasons: requirement of huge investment, elongated pay-off cycle, insufficient incentive policies and government subsidy, and technological bottlenecks.

To reach the target in the five-year plan, the NEA designed output quotas for major CBM producers, including China CBM, 3.5 billion cubic meters; CNPC, six billion cubic meters; and Jincheng Anthracite Mining Group, 5.5 billion cubic meters.

However, few of those enterprises believe they can match the quota. Taking CNPC as an example, the daily output of each of its 5,300 wells stands at 1,000 cubic meters. To meet the quota, it should raise the output to 3,100 cubic meters, or drill 11,138 new wells in less than three years, which is almost impossible.

Experts advised that, to effectively push forward the development of CBM industry, the government should largely improve its policies in subsidy, pricing, taxation and mining administration.

At present, government subsidy for each cubic meter of CBM is 0.2 yuan, only some 20 percent of the production cost. Compared with oil, natural gas and coal, CBM is far less profitable for its producers.

To make the output target in the five-year plan possible, the government should sharply raise its subsidy and improve CBM pricing system, the report said.