China Allows More Firms to Cooperate with Foreign Companies in CBM

SHANGHAI (Dow Jones Newswires), Dec. 3, 2010

China Friday issued a long-awaited statement allowing three more firms to cooperate with foreign companies in developing domestic coal-bed methane resources.

China National Petroleum Corp., China Petrochemical Corp. and Henan Provincial Coal Seam Gas Development & Utilization Co. will be allowed to work with foreign companies, according to a statement jointly issued by the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Land and Resources and the National Energy Administration.

The central government had in 2007 ordered the end of China United Coal Bed Methane Co.'s monopoly in working with foreign partners to develop CBM projects, a move that analysts interpreted as a sign Beijing was impatient with the slow development in the sector.

China has ambitious targets for producing coal seam gas as conventional gas production isn't enough to meet the nation's robust demand amid its efforts to sharply raise the share of the cleaner-burning gas in its energy mix.

Extracting methane from the mines is also expected to reduce the number of coal mine accidents in China, the highest in the world.

The nation had aimed to achieve an annual production of 10 billion cubic meters by the end of this year, but annual CBM output had only reached 700 million cubic meters at the end of 2009 despite proven reserves of 170 billion cubic meters then. China consumed 88.7 billion cubic meters of natural gas last year.

Shell and ConocoPhillips are among majors with CBM acreage in China, along with smaller companies such as Green Dragon Gas.

CNPC and Sinopec Group, the nation's largest oil and gas producers, have both said they will expedite development in alternative energy sources with a focus on CBM.

CNPC, for example, aims to produce 4.5 billion cubic meters a year of CBM-based gas in the coal-rich Shanxi province by 2015, compared with 600 million cubic meters in 2009, after bringing online its first major CBM project last November in the Qinshui basin.

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