Production last year failed to meet target of 10 billion cubic meters

SHANGHAI - China, the world's largest energy user, plans to more than double production of its coal-bed methane by 2015 to cut reliance on oil and coal.

The country aims to increase its annual output to 21 billion cubic meters (cu m) by 2015 from 8.6 billion cu m in 2010, according to China Petrochemical Corp, the nation's second-largest oil and gas producer, in its online newsletter on Friday, citing a five-year plan. The fuel, also known as coal-seam gas, is a form of natural gas trapped in coal beds.

China wants to triple the use of gas to about 10 percent of energy consumption by 2020. The country, which failed to reach a target for coal-bed methane production last year, will see a rapid development of the industry in the coming five to 10 years, according to Friday's statement from China Petrochemical, alos known as Sinopec Group.

The country is likely to double the subsidy for the exploration of coal-bed methane to 0.4 yuan (6 cents) a cubic meter and increase government payment for power generated by coal-bed methane to 0.35 yuan a kilowatt-hour from 0.25 yuan currently, it said. The nation also plans to set up a fund for exploration of the fuel, it said, without giving details.

China's production last year was below a target of 10 billion cu m.

Low returns and difficulty in delivering the gas to users have dampened investment in the industry in the last few years, Hu Wenrui, chairman of the China Petroleum Enterprise Association, said in May 2010.

The country aims to add 1 trillion cu m of coal-bed methane reserves by 2015 and 2 trillion cu m by 2020, according to Friday's statement.

Coal-bed methane, gas in shale and tight gas, known as unconventional gas resources, may account for 30 percent of the nation's gas output by 2020, said Jie Mingxun, president of PetroChina Co's coal-bed methane unit, in May 2010.

Annual shale-gas output in China may reach 20 billion cu m by 2020, according to Pan Jiping, a researcher at the Ministry of Land Resources, on June 30.

Bloomberg News

(China Daily 07/16/2011 page10)