&EPA
           United States
           Environmental Protection
           Agency
Air and Radiation  EPA 430-R-96-005
6202J       July 1996
         REDUCING METHANE EMISSIONS
         FROM COAL MINES IN CHINA: The
         Potential for Coalbed Methane
         Development
               Public Review Draft

-------
Reducing Methane Emissions From Coal Mines in China:
    The Potential for Coalbed Methane Development
                  Public Review Draft
                      JULY 1996
         ATMOSPHERIC POLLUTION PREVENTION DIVISION
           U.S. ENVIRONMENTAL PROTECTION AGENCY

-------
                                    Disclaimer

This document  has  been reviewed in  accordance with the U.S. Environmental  Protection
Agency's and the Office of Management and Budget's peer and administrative review policies
and  approved for publication. Mention of trade  names or commercial  products does  not
constitute endorsement or recommendation.

-------
                              ACKNOWLEDGMENTS

The U.S. EPA acknowledges Raven Ridge Resources,  Incorporated, the Coalbed Methane
Clearinghouse at the China Ministry of Coal Industry, and the Research Division at the China
Coal Information Institute for authoring this report. The U.S. EPA also acknowledges members
of the  Fushun Branch  of  the  Central Coal Mining Research  Institute for their important
contributions to the report.

-------
                         TABLE OF CONTENTS

Acknowledgments	i
List of Figures	vi
List of Tables	vii
List of Boxes	vii
Abbreviations and Acronyms	viii

CHAPTER 1 - COALBED METHANE IN THE ENERGY ECONOMY OF CHINA
1.1 INTRODUCTION	1-1
1.2 THE ENERGY SECTOR IN CHINA	1-2
      1.2.1 OVERVIEW	1-2
           1.2.1.1 Economic Growth	1-2
           1.2.1.2 Energy Production and Consumption	1-3
           1.2.1.3 Sectoral Energy Consumption in China	1-5
      1.2.2 PRIMARY ENERGY SOURCES OF CHINA	1-7
           1.2.2.1 Coal	1-7
           1.2.2.2 Oil	1-11
           1.2.2.3 Conventional Natural Gas	1-14
           1.2.2.4 Hydroelectric Power	1-15
           1.2.2.5 Other Energy Sources	1-17
      1.2.3 CHINA'S CURRENT ENERGY STRATEGY	1-17
      1.2.4 GOVERNMENT ORGANIZATION OF CHINA'S ENERGY SECTOR	1-20
1.3 THE ROLE OF COALBED METHANE 	1-22
      1.3.1 HISTORICAL PRODUCTION WORLDWIDE	1-23
      1.3.2 COALBED METHANE RESOURCES AND POTENTIAL FOR DEVELOPMENT	1-26
      1.3.3 CHINA UNITED COALBED METHANE COMPANY, LTD. AND ORGANIZATION
           OF THE COALBED  METHANE SECTOR	1-28
      1.3.4 MULTIPLE BENEFITS: ENVIRONMENT, ENERGY, SAFETY	1-29
      1.3.5 FOREIGN INVESTMENT IN CHINA: IMPLICATIONS FOR COALBED
           METHANE PROJECTS	1-31
      1.3.6 SOURCES OF ADDITIONAL INFORMATION	1-31

CHAPTER 2 - COALBED METHANE RESOURCES OF CHINA	2-1
2.1 INTRODUCTION	2-1
2.2 TECTONIC FRAMEWORK OF CHINA'S COAL BASINS	2-1
2.3 COAL RESOURCES 	2-6
      2.3.1 INTRODUCTION	2-6
      2.3.2 NORTHEAST REGION	2-11
      2.3.3 NORTH REGION	2-13
      2.3.4 SOUTH REGION	2-15
      2.3.5 NORTHWEST REGION	2-17
2.4 COALBED METHANE RESOURCE AND EMISSIONS ESTIMATES	2-17
2.5 OVERVIEW OF FACTORS AFFECTING RESOURCE RECOVERABILITY IN CHINA	2-20

CHAPTER 3 - POTENTIAL FOR INCREASING COALBED METHANE RECOVERY AND USE
 IN CHINA	3-1
3.1 INTRODUCTION	3-1
3.2 METHANE ACCIDENTS IN CHINA'S COAL MINES	3-2

-------
                 TABLE OF CONTENTS (CONTINUED)

3.3 COALBED METHANE RECOVERY	3-2
      3.3.1 TRENDS IN METHANE DRAINAGE IN CHINA	3-2
      3.3.2 METHANE DRAINAGE METHODS	3-4
      3.3.3 OPTIONS FOR INCREASED RECOVERY	3-10
3.4 COALBED METHANE USE	3-12
      3.4.1 DIRECT INDUSTRIAL AND RESIDENTIAL USE OPTIONS	3-13
      3.4.2 NATURAL GAS PIPELINE SYSTEMS	3-14
      3.4.3 POWER GENERATION OPTIONS	3-14
      3.4.4 VENTILATION AIR USE OPTIONS	3-17
      3.4.5 IMPROVING GAS QUALITY	3-18
      3.4.6 GAS STORAGE 	3-20
      3.4.7 NATURAL GAS VEHICLES	3-21
3.5 CHINESE ACHIEVEMENTS IN COALBED METHANE RECOVERY AND USE	3-23

CHAPTER 4 - PROFILES: SELECTED REGIONS WITH STRONG COALBED METHANE
                POTENTIAL	4-1
4.1  INTRODUCTION	4-1
      4.1.1 SELECTION CRITERIA FOR PROFILES	4-1
      4.1.2 CMA PROFILES USER'S GUIDE	4-2
4.2  FUSHUN CMA	4-3
      4.2.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-3
      4.2.2  METHANE LIBERATION, VENTILATION, RECOVERY AND RESERVES	4-4
      4.2.3  PRESENT AND PLANNED USE OF MINE METHANE	4-4
4.3  TIEFA CMA	4-5
      4.3.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-5
      4.3.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-5
      4.3.3  PRESENT AND PLANNED USE OF MINE METHANE	4-7
4.4  HEBI CMA	4-7
      4.4.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-7
      4.4.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-7
      4.4.3  PRESENT AND PLANNED USE OF MINE METHANE	4-8
4.5  JINCHENG CMA	4-8
      4.5.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-8
      4.5.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-8
      4.5.3  PRESENT AND PLANNED USE OF MINE METHANE	4-9
4.6  KAILUAN CMA	4-9
      4.6.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-9
      4.6.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-9
      4.6.3  PRESENT AND PLANNED USE OF MINE METHANE	4-10
4.7  PINGDINGSHAN CMA	4-11
      4.7.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-11
      4.7.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-11
      4.7.3  PRESENT AND PLANNED USE OF MINE METHANE	4-12
4.8  YANGQUAN CMA	4-12
      4.8.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-12
      4.8.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-12
      4.8.3  PRESENT AND PLANNED USE OF MINE METHANE	4-13
                                                                      in

-------
                 TABLE OF CONTENTS (CONTINUED)
4.9  HUAIBEI CMA	4-13
     4.9.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-13
     4.9.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-13
     4.9.3  PRESENT AND PLANNED USE OF MINE METHANE	4-15
4.10  HUAINAN CMA	4-15
     4.10.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-15
     4.10.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-15
     4.10.3  PRESENT AND PLANNED USE OF MINE METHANE	4-15
4.11 SONGZAO CMA	4-16
     4.11.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-16
     4.11.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-17
     4.11.3  PRESENT AND PLANNED USE OF MINE METHANE	4-18
4.12 HEDONG COAL BASIN	4-19
     4.12.1  COAL GEOLOGY, RESERVES, AND PRODUCTION	4-19
     4.12.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES	4-20
     4.12.3  PRESENT AND PLANNED USE OF METHANE	4-20

CHAPTER 5 - SUGGESTED APPLICATIONS OF TECHNOLOGY AND ISSUES
     RELATED TO PROJECT DEVELOPMENT	5-1
5.1  CRITERIA FOR SELECTION OF APPROPRIATE TECHNOLOGY	5-1
     5.1.1 APPLICATIONS OF TECHNOLOGY SUITABLE FOR GEOLOGIC AND MINING
         CONDITIONS IN CHINA	5-1
     5.1.2 SUGGESTED APPLICATIONS OF NEWTECHNOLOGY FOR IN-MINE
          RECOVERY	5-1
     5.1.3 SUGGESTED APPLICATIONS OF NEWTECHNOLOGY FOR RECOVERY
          USING SURFACE WELLS	5-2
     5.1.4 MARKETS FOR METHANE	5-3
5.2  ISSUES RELATED  TO PROJECT DEVELOPMENT	5-3
     5.2.1 PROJECT IDENTIFICATION AND DEVELOPMENT THROUGH STRATEGIC
         TEAMING	5-3
     5.2.2 DISCUSSION OF KEY INVESTMENT, PERMITTING AND TAX ISSUES	5-4
     5.2.3 GUIDELINES FOR POTENTIAL JOINT VENTURE PARTNERS	5-6
     5.2.4 A HYPOTHETICAL COALBED METHANE PROJECT	5-7

CHAPTER 6 - POLICIES  TO ENCOURAGE COALBED METHANE DEVELOPMENT
     IN CHINA	6-1
6.1 DISCUSSION OF INTERNATIONAL POLICIES	6-1
     6.1.1 INCENTIVES	6-1
     6.1.2 LEGAL NEEDS	6-4
6.2 FOREIGN SUPPORT AND INVESTMENT IN CHINA'S COALBED METHANE	6-5
     6.2.1 UNITED NATIONS GLOBAL ENVIRONMENT FUNDS (GEF)	6-5
     6.2.2 US ENVIRONMENTAL PROTECTION AGENCY (USEPA)	6-6
     6.2.3 US DEPARTMENT OF ENERGY (USDOE)	6-6
     6.2.4 US INITIATIVE ON JOINT IMPLEMENTATION (USIJI)	6-7
6.3 POLICY OPTIONS FOR CHINA 	6-7
     6.3.1 REVIEWOF CHINA'S POLICIES ON RECOVERY AND USE OF METHANE	6-7
     6.3.2 THE COAL  INFORMATION INSTITUTE'S POLICY SUGGESTIONS TO
           PROMOTE DEVELOPMENT OF COALBED METHANE IN CHINA	6-10
                                                                      IV

-------
                 TABLE OF CONTENTS (CONTINUED)

CHAPTER 7 - CONCLUSIONS AND RECOMMENDATIONS FOR FURTHER ACTION	7-1
7.1 OVERVIEW	7-1
7.2 FOLLOW -UP TECHNICAL ACTIVITIES	7-1
     7.2.1 FEASIBILITY ASSESSMENTS	7-1
     7.2.2 TRAINING	7-2
7.3 OUTREACH: THE COALBED METHANE CLEARINGHOUSE	7-3
7.4 DEMONSTRATION PROJECTS	7-4
7.5 INVESTMENT CONSIDERATIONS 	7-4
7.6 CONCLUSIONS AND RECOMMENDATIONS BY THE CHINA COALBED
     METHANE CLEARINGHOUSE	7-5

REFERENCES CITED	REF-1
APPENDIX A: LIST OF CONTACTS	A-1
APPENDIX B: EXPLANATION OF CHINESE COAL AND COALBED METHANE RESOURCE
     CLASSIFICATION SYSTEMS	B-1
APPENDIX C: METHANE EMISSIONS DATA	C-1
APPENDIX D: PROVISIONAL REGULATIONS AND RULES FOR MANAGEMENT OF
     EXPLORATION AND DEVELOPMENT OF COALBED METHANE	D-1
APPENDIX E: FOR MORE INFORMATION	E-1

-------
                     TABLE OF CONTENTS (CONTINUED)


                                  LIST OF FIGURES

Figure  1.     Energy Consumption and Gross Domestic Product, 1980-1993	1-3
Figure  2.     Fuel Mix of Selected Countries, 1993	1-4
Figure  3.     Energy Demand by Sector, 1992	1-5
Figure  4.     Industrial Sector Energy Sources in China, 1992	1-5
Figure  5.     Domestic Sector Energy Sources in China, 1992	1-6
Figure  6.     Transportation Sector Energy Sources, 1992	1-6
Figure  7.     Map of China Showing 1993 Coal Production From Major Coal Producing
              Provinces	1-9
Figure  8.     Oil and Gas Deposits, Refineries and Petrochemical Complexes	1-13
Figure  9.     Existing and Planned Hydroelectric Stations in China	1-16
Figure 10.     Organizational Structure of China's Energy Industry	1-21
Figure 11.     U.S. Coalbed Methane Production (In Million Cubic Meters)	1-23
Figure 12.     Principal Coal-Bearing Basins of the U.S. and  Estimates of In-Place Coalbed
              Methane Resources	1-25
Figure 13.     Tectonic Framework map of China	2-2
Figure 14.     China's Coal Basins and Estimated Methane Resources	2-5
Figure 15.     Stratigraphic Correlation Chart	2-7
Figure 16.     Location of the Four Coal Regions	2-8
Figure 17.     Location of Coal Mining Administrations in the  Northeast Region	2-12
Figure 18.     Location of Coal Mining Administrations in the  North Region	2-14
Figure 19.     Location of Coal Mining Administrations in the  South Region	2-16
Figure 20.     Location of Coal Mining Administrations in the  Northwest Region	2-18
Figure 21.     Increase in Methane Emissions at State-Run Coal Mines	2-19
Figure 22.     Location of High-Gas Coal Mining Administrations	2-22
Figure 23.     Coalbed Methane Generation Potential and Storage Capacity	2-23
Figure 24.     Annual Methane Recovery from CMAs	3-4
Figure 25.     Location of Coal Mining Administrations that Recover Methane	3-5
Figure 26.     Placement of Boreholes Within Coal Seam in the Xie No. 2 Mine	3-7
Figure 27.     Placement of Cross-Measure Boreholes for Methane Recovery	3-7
Figure 28.     Impact of Mining on Overlying Strata	3-8
Figure 29.     Cross Section of Longwall Roof and Floor Strata	3-8
Figure 30.     Borehole Placement for Recovery From Adjacent Seams	3-9
Figure 31.     Borehole Placement for Recovery From Gob Areas	3-9
Figure 32.     Location of Coalbed Methane Projects in China	3-24
Figure 33.     Plan View of Borehole Placement for Methane Recovery From Gob Areas	4-6
Figure 34.     Borehole Placement for Recovery From Adjacent Seams 	4-10
Figure 35.     Methane Drained and Vented 1981 -1990 (Songzao CMA)	4-17
Figure 36.     Effect of Increasing Competition on Natural Gas Prices	6-2

Figure B-1.    Correlation of Chinese, German, and US Coal Classification Systems	B-2
                                                                                      VI

-------
                    TABLE OF CONTENTS (CONTINUED)

                                  LIST OF TABLES

Table 1.     Coal Production and Consumption in China	1-8
Table 2.     Crude Oil Production and Consumption in China	1-12
Table 3.     Natural Gas Production and Consumption in China	1-15
Table 4.     Summary of 1994 U.S. Coalbed Methane Production For Use	1-24
Table 5.     Worldwide Coal Production, Estimated Methane Resources, and Estimated
                Emissions from Coal Mining (1990)	1-26
Table 6.     Summary of Major Coal-Producing Areas of China (1993)	2-9
Table 7.     Summary of 1994 Methane Emission Data	2-19
Table 8.     Key Data for High-Gas Mines 	2-21
Table 9.     Gas Explosions and Outburst Fatalities at Key State-Run Coal  Mines	3-2
Table 10.     Methane Recovery at Coal Mining Administrations	3-3
Table 11.     Summary of Options for Reducing Methane Emissions from Coal Mining	3-6
Table 12.     Recovery Efficiencies at Chinese Mines	3-7
Table 13.     Status of Coalbed Methane Projects in China	3-25
Table 14.     Estimated Coalbed Methane Resources Contained in Profiled Areas	4-3
Table 15.     Methane Drainage at the Songzao CMA	4-18
Table 16.     Coalbed Methane Use at the Songzao CMA	4-19
Table 17.     Section 29 Coalbed Methane Production Tax Credit	6-3


Table B-1.    Relation Between Coalbed Methane and Coal Resource Classification
               Systems in China	B-3
Table B-2.    Predicted Gas Contents for Coal Seams at Depths >1,000 M	B-4
Table C-1.    1992 Methane Emissions from China's Key State-Run Mines, By Province	C-1
Table C-2.    1994 Methane Emissions from China's Key State-Run Mines, By Province	C-4
Table C-3.    1993 Specific Emissions of Local Mining Areas  (High Gas) 	C-7
Table C-4.    High Gas CMAs in China and their Respective Specific Emissions	C-8

                                  LIST OF BOXES

Box  1.       Summary of Oil and Gas Development in Major Chinese Basins	1-12
Box  2.       China's Increased Focus on Coalbed Methane Recovery and Use	3-12
Box  3.       Industrial Use of Coalbed Methane in China	3-13
Box  4.       Generation of Electrical and Thermal Energy for Mine Use: Ukraine	3-15
Box  5.       Cofiring of Methane at the Zofiowka CHP Plant, Poland	3-16
Box  6.       Gas Turbine at Fushun CMA, China	3-17
Box  7.       Incentives  in the U.S. for Increased Use of Natural Gas Vehicles	3-21
Box  8.       Methane Recovery From Working Seams at the Laohutai Mine	4-4
Box  9.       TheXiaonan Mine: Methane Recoveryfrom Gob Areas	4-6
Box 10.       Enhancing Permeability at the Hebi CMA No. 2  Mine	4-7
Box 11.       Zhaogzhuang Mine:  Recovery From Adjacent Seams	4-10
Box 12.       Surface Recovery of Methane at the Taoyuan Mine	4-14
Box 13.       Providing Assistance to Foreign Companies: A Clearinghouse Activity	7-3
                                                                                   VII

-------
                 ABBREVIATIONS AND ACRONYMS

         Weights and Measures:  All units are metric system (S.I.)

      cm                      centimeter- = 10"2 meter
      GJ                      gigajoules = 109 Joules
      GW                      gigawatts = billion Watts = 109 Watts
      EJ                       exajoule =  1018 Joules
      kg                       kilogram =  103 grams
      kJ                       kilojoules = 103 Joules
      km                      kilometer = 103 meter
      km2                      square kilometer
      kt                       kilotons = 103tons
      kW                      kilowatt = 103 Watts
      kWh                     kilowatt hours = 103 Watt hours
      m                       meter
      m3                      cubic meter
      md                      millidarcies =  10"6Darcies
      MJ                      megajoules = 106 Joules
      mm                      millimeter = 10"3 meter
      MPa                     megapascals = 106 Pascals
      Mt                       megatons = 106 tons
      Mtoe                     million tons oil equivalent = 106 tons oil equivalent
      MW                      megawatts = 106 Watts
      MWh                     megawatt hours = 106 Watt hours
                               megawatts of electricity
      MWhth                    megawatts of thermal energy
      t                        ton = metric ton = 103 kg

                             Acronyms

      BMP                     bottom hole pressure
      EOT                     build-operate-transfer
CAAA             Clean Air Act Amendments
      CBM                     Coalbed Methane
      CCAO                    Central China Administration of Oilfields
      CM                       China Coal Information Institute
      CCMRI                   Central Coal Mining Research Institute
      CMA                     Coal Mining Administration
      CNAGC     China National Administration for Coal Geology
      CNCC                    China National Coal Corporation
      CNG                     compressed natural gas
      CNOOC     China National Offshore Oil Company
      CNPGC     China National Petroleum and Gas Corporation
      DCPU                    Department of Coal Processing and Utilization
                                                                        VIII

-------
                              Acronyms (Continued)

DRCCU             Department of Resource Conservation and Comprehensive
Utilization
      EIA                      Energy Information Administration
      EIC                      Energy Information Center
      EIU                      Economist Intelligence Unit
      ERNGC      Eastern Regional Natural Gas Center
      FYP                     Five Year Plan
      GDP                     Gross Domestic Product
      GEF                     Global Environment Facility
      GRI                      Gas Research Institute
      1C                       Internal Combustion
      IEA                      International Energy Agency
      IPCC                     International Panel on Climate Change
      LMA                     Local Mining Area
      MEPI                     Ministry of the Electric Power Industry
      MGMR                   Ministry of Geology and Mineral Resources
      MOCI                     Ministry of Coal Industry
      MSHA                    US Mine Safety and Health Administration
      NCPBG      North China Bureau of Petroleum Geology
      NGV                     natural gas vehicle
      PPP                     purchase power parity
      PSA                     pressure swing adsorption
      REI                      Resource Enterprises,  Incorporated
      RMB                     Renminbi (yuan)
      UK                      United Kingdom
      UNDP                    United Nations Development Program
      USDOE      United States Department of Energy
      USEPA      United States Environmental Protection Agency
                                                                         IX

-------
                                  CHAPTER 1


      COALBED METHANE IN THE ENERGY ECONOMY OF CHINA


1.1 INTRODUCTION

The Peoples Republic of China (China) produces and consumes the largest quantity of coal in
the world.  In 1992, an estimated 12.5 to  19.4 billion cubic meters (8.4 - 13 teragrams)  of
methane were emitted to the atmosphere from coal mining activities in China, contributing one-
third of the world's total from this source (USEPA, 1993).  Not only is  China the largest coal
producer  in the world; it is unique in that underground  mines produce  over 95 percent of the
nation's coal. Underground mines tend  to have higher methane emissions. Coal mines are
located throughout China, with the greatest number of large mines located in the north  and
northeast.

Methane  is a major greenhouse gas, second in global impact only to carbon dioxide (CO2).  It
tends to increase tropospheric ozone and smog formation, and may contribute to stratospheric
ozone depletion.  Increasing methane emissions are associated with population growth  and
human activities that release methane to the atmosphere.  Major human-related sources  of
methane  include  rice cultivation, livestock, biomass burning, coal mining, oil and natural  gas
operations, and landfills.  It is estimated  that coal mining accounts for about 10 percent of the
total human related methane emissions (Kruger, 1993).

The production and consumption of over one billion tons of hard coal  annually in China has
serious environmental  impacts. The resulting emissions of methane  and CO2 are of global
significance. China also  suffers from severe  local air pollution problems due to intense coal
use, characterized by high levels of SO2, NOX and particulate  emissions.   In 1993,  the total
amount of SO2 emitted was 17.95 million tons, of which coal combustion caused an estimated
90 percent (DRCCU, 1994). Chinese cities, such as Shenyang  and Chongqing, have some of
the highest particulate and SO2 concentrations in the world.   Acid rain  is another serious
environmental problem resulting from the intense coal use.

Coalbed  methane,  a  natural  gas,  is  detrimental  to the environment  if  vented to  the
atmosphere, but is a remarkably clean fuel when burned.  Natural gas combustion produces
no SO2 or particulates, and only half of the CO2 associated with coal  combustion.  In many
countries, methane produced  by  coal  mines has historically been vented and become a
wasted resource. China, on the other hand, has one of the longest histories of using coalbed
                                                                                1-1

-------
methane recovered from its  mines.  Recent experience in the US confirms  that coalbed
methane represents a low cost energy source and  emission reduction opportunity.  Methane
can be  recovered either before, during,  or after coal mining and used as a fuel for power
generation or consumed directly for industrial and residential energy needs.

In addition to its value as an energy source, drainage and  use of methane from coal mines
increases mine safety and productivity.  Methane released during underground  mining is not
only an environmental concern, but also is a serious safety hazard due to the explosive nature
of methane in  relatively low concentrations (5-15 percent in air).  In the US and other coal-
producing countries, mines install ventilation systems, supplemented in highly gassy mines by
recovery systems to reduce methane concentration in the mines' workways.

Worldwide,  several  thousand  fatalities  have been recorded from  underground  coal mine
explosions,  where methane was a contributing factor.  As coal mines deplete shallower coal
reserves, there is a shift to mining deeper, gassier coal beds.  In general, underground mines
release  more methane than surface mines because methane storage capacity increases with
greater depth and pressure. In China, where underground mines produce over 95 percent of
the coal,  and half  of the  largest state-run  mines are  considered highly gassy or  prone to
outburst, mine  ventilation and  methane drainage is critical for mine safety.  Since the 1980's,
China's  coal  mines have greatly improved their safety  record.  From 1980 to 1993, mines
reduced  the fatality  rate from 8.2 to 4.6 people per 1  million  tons of coal mined (DRCCU,
1994). The goal of the "Mine Safety  Law", implemented in 1992, is to further increase safety in
the coal mines, especially at township and village mines.  The Chinese government recognizes
the importance of  mine safety, and  plans  to  increase drainage and recovery of coalbed
methane associated with mineable reserves of coal as a major strategy for the industry.

This report focuses  on the potential for expanding recovery and use of coalbed methane in
China.  It includes a  review of China's primary energy sources, current energy strategy, and an
assessment of the potential role of coalbed methane in meeting China's future energy needs.
The report describes the  magnitude and location of coalbed methane  resources, and analyzes
factors affecting  recoverability of resources, use options, and profiles of specific regions with
high potential  for coalbed  methane  development.  Finally, the report identifies   actions
necessary to encourage development of coalbed methane in China and overcome existing
barriers.  It also  recommends  follow-up technical assistance activities to help ensure efficient
use of this resource.

1.2 THE ENERGY SECTOR IN CHINA

1.2.1 OVERVIEW

1.2.1.1  Economic Growth

China is currently the  fastest growing major  economy in the world.   In 1993, gross domestic
product  (GDP) increased 13 percent over the previous year, reaching 3,138 billion Renminbi
(RMB) yuan ($US 545 billion).  For nearly every year since 1982,  China  has  averaged an
economic growth rate of over 10 percent. Even when compared to other fast-growing Asian
economies  such as Thailand  (averaging 7  percent annual  increase in  GDP)  or Indonesia
(averaging 6 percent),  China's  economic growth rate is truly impressive.
                                                                                  1-2

-------
As incomes grow, however, so does the use of automobiles, appliances and the need for new
power plants. China's energy sector thus suffers significant shortages, because supply has not
kept pace with economic growth.  For example, China's continued reliance on  coal requires
that by the year 2000, total coal production will increase by 22 percent over current levels to
1.4 billion tons (according to Ministry of Coal Industry projections). Three-fourths of the nation's
electricity is generated from coal, and with electricity demand growing by 3 percent per annum
(IEA,  1994), large increases in coal production will be required to meet electricity demand
alone. These burgeoning energy demands are creating serious air quality problems in China,
whose efforts to control air emissions have been frustrated by its rising use of coal, as well as
automobiles.  Concern  is also spreading  about  China's contribution to global warming. Its
heavy reliance on coal—the fossil fuel with the highest carbon content—makes it  the second
largest contributor to rising levels of  carbon dioxide. It is also the world's largest contributor to
methane emissions from coal mining.

The following subsections examine China's energy production and consumption trends in more
detail. Section 1.2.3 discusses how coalbed  methane can  help China meet the challenge of
reducing its dependence on coal, without relying heavily on imported fuels.

1.2.1.2  Energy Production and Consumption
China's   energy   production   and
consumption  have increased  over the
past several years, and because of its
tremendous  economic   growth,  will
likely continue rising. Until the 1960's,
China was still primarily an agriculture-
based  economy.  The overall growth
rate of the economy, and especially of
industry,  increased  following  reforms
of the late 1970's.  Industry, especially
the  collective  and  private  sectors,
experienced  the fastest  growth rate.
Private companies and township and
village  enterprises now produce about
half of China's industrial output. Since
the 1970's, China's energy consumption and economic growth have been steadily increasing.
Figure  1 shows growth in energy consumption and GDP from 1980 through 1993.

Figure  2  shows the 1993 fuel mix for China and  other selected countries. Of the countries
shown  in Figure 2,  China is  most similar to India in its  primary energy consumption;  both
countries receive more that half of their energy from coal.  India, however, uses slightly larger
percentages of each of the other primary  fuels. The developed countries of Japan, Australia,
and the United States, as well as Russia,  differ from China in their much larger reliance on oil
and gas,  which account for over half  of their primary energy demand. The United States and
Russia consume relatively large amounts  of oil and natural gas, and relatively small amounts
of nuclear energy and hydroelectricity.  Due to insignificant fossil fuel resources,  Japan's fuel
mix differs most from China's, with Japan  relying heavily on nuclear energy, imported oil, and
hydroelectricity.
FIGURE 1. ENERGY USE AND GDP, 1980-1993
600 "
— 500


c400 "
o
"i300
0_
Q
CD200 j
,y
GDP jr ^Jm^
^^/^^^
— \r~~* Energy Consumption*
I
•Energy data for years 1981-1984 not available
I




Energy Consumption (EJ)
OT-cM«^ioeoi*-coo>OT-cMeo
00 00 00 00 00 00 00 00 00 00 O) O) O) O)
O) O) O) O) O) O) O) O) O) O) O) O) O) O)

                                                                                   1-3

-------
       Figure 2- FUEL MIX OF SELECTED COUNTRIES, 1993
     RUSSIA
      HARD
      COAL
      10%
(B
  nA.O—'	•—^ 9R%
  48%
GAS
11%
      JAPAIS^
      RD
         COAL
UCLEAR
13%
  57%
                        II R DOF/FIA
               NUCLEAR
                1%
                 HYDI
                  8%
                    LIGNITE
                    2%
                   AUSTRALIA
                               .IGNITE
                               20%
                       HYDRO
                        5%
                                         CHINA
                                         GAS
                                   LIGNl
                                    3%
                            UNITED STATES
                                              LIGNITE 1%
                                              HYDRO 3%

                                              IUCLEAR
                                              8%
                                                    1-4

-------
From 1980 to 1993, China's per capita energy consumption increased more than 34 percent
(USDOE/EIA, 1995). Despite this increase, per capita energy consumption in China is still low
(27.8 GJ/person) compared to that of westernized "neighbors" Japan (160.8 GJ/person) and
Australia (224.7 GJ/person). As economic growth and industrialization continue, however, the
amount of energy consumed per capita in China is likely to continue climbing.

1.2.1.3 Sectoral Energy Consumption in China
China's final energy demand in 1993 was
33 exajoules1 (EJ), up from 31  EJ in 1992
(USDOE/EIA,  1995).   Figure 3  shows
1992 sectoral end use  divided into three
categories: Industry  (includes manufac-
turing,    mining,   and   construction);
Domestic  (includes  residential,  agricul-
ture, and  commercial  enterprises); and
Transportation (includes rail, road, water,
and air).   In 1992, the industrial sector
was the largest consumer at  67 percent
of total demand  (DRCCU,  1994); the
domestic sector used 27 percent, and the
transportation sector  used  6  percent  of
the total energy.
                                         FIGURE 3. ENERGY DEMAND BY SECTOR, 1992
                                           INDUSTRY
                                            67%
                                                                    DOMESTIC  27%
                                                               TRANSPORTATION 6%
  FIGURE 4. INDUSTRIAL SECTOR ENERGY
         SOURCES IN CHINA, 1992
  COAL 60%
                                          China is intensely industrialized. As shown  in
                                          Figure 4, coal dominates the industrial sector's
                                          fuel mix (60 percent), followed by electricity (27
                                          percent)  and oil and gas (13 percent).   The
                                          chemical, metallurgical, smelting,  and building
                                          materials  sub-sectors   represent  the  largest
                                          industrial  end-users.  These  industries  are
                                          centered in northern and northeastern China,
                                          near  the   largest  coal  mining  complexes.
                                          Industry's share of energy consumption is much
                                          larger than that of any other country, including
                                          the  former  Soviet  Union,   on  which China's
                                          development  was modeled. This is related  to
                                          the  fact that China's energy intensity is three
                                          times the world average.

Projections indicate that the industrial sector's energy demand will fall from  its current share  of
67 percent to just over 50 percent by 2010 (IEA, 1994). This decline will reflect the small drop
in  the  share of  industry  in GDP, as well  as the transport sector's increasing share. The
absolute  level  of industrial energy demand,  however, is expected  to grow  by  3.3 percent
annually through 2010. Given that industrial output is projected to grow by close to 10 percent
annually through 2010, this implies further declines in industrial energy intensity.
                          IL AND GAS
                           13%
                          ELECTRICITY
                            27%
1 1 EJ = approximately 1 quadrillion (1015) BTUs = 277.7 terawatts
                                                                                  1-5

-------
In  1991, over 80 percent of China's electricity was generated from thermal, mostly coal-fired,
plants, while 18.3 percent was hydroelectric. At the end of 1992, power generating capacity in
China was 165 GW and  included around 40 GW of hydroelectricity, just under 115 GW of
coal, 9 GW of oil and very little  gas. The  IEA  (1994)  projects that  by 2010, China's power
generating capacity will  be 428 GW;  of this, thermal plants  will account for  294 GW,
hydroelectric plants for 124 GW, and nuclear plants for less than 11 GW.
                                                FIGURE 5. DOMESTIC SECTOR ENERGY
                                                      SOURCES IN CHINA, 1992
                                                COAL 75
The domestic sector is the second largest end-
user of energy in China.  As with industry, coal
is  the  dominant  fuel consumed  (75  percent);
electricity  (much  of  which is  generated using
coal) has recently grown in  importance to  15
percent, and oil and gas represent 10 percent of
the total (Figure 5).  Of the three components of
the domestic  sector  (commercial,  agricultural,
and residential), residential users comprise by far
the largest share,  using twice as much energy as
the  commercial  and  agricultural  sub-sectors
combined.

While direct use of coal will remain dominant in
this sector, it will decline, replaced by increased
electricity  consumption. Projections show that residential and commercial energy demand is
forecast to increase from 10.2 Mtoe in 1991  to 65.7 Mtoe in 2010 (IEA, 1994). This  growth
stems from the increase in appliance use  and  electrification of rural areas. The share of gas in
the residential and commercial sub-sectors could rise significantly, as new government policies
promote increased use of natural gas.  The overall trend for these two sub-sectors is reduced
coal use (IEA, 1994).
                                                                        I LAND GAS
                                                                          10%
                                                                         ELECTRICITY
                                                                          15%
  FIGURE 6. TRANSPORTATION SECTOR
        ENERGY SOURCES, 1992
     ELECTRICITY
           7%
                        COAL 17%
                               OIL AND
                                AS 76%
                                         Oil  and gas provide 76 percent of the energy
                                         consumed  by  the  transportation sector.  Coal
                                         comprises  17   percent,  and  electricity  the
                                         remaining 7 percent (Figure 6).  The rail system
                                         consumes  approximately  one-third   of  the
                                         transportation sector's total energy, and most of
                                         its   coal   and   electricity.   China's   steam
                                         locomotives are  rapidly  being  phased  out,
                                         replaced by cleaner and more efficient diesel
                                         and electric locomotives (Sinton, 1996).

                                         Based on the growing economy and associated
                                         increase in  road travel, number of vehicles, and
                                         truck freight, projections show energy demand in
                                         the transportation sector increasing substantially
over the next decade.  The demand for oil in the transportation sector will increase about 7
percent per annum.  By the year 2010, the transportation sector will use only oil products and
some electricity, phasing out coal entirely (IEA, 1994).
                                                                                  1-6

-------
1.2.2  PRIMARY ENERGY SOURCES OF CHINA

1.2.2.1 Coal

Since 1985, China has been the largest producer and consumer of coal in the world.  Of the
4.4 billion tons  of coal produced worldwide in 1993, China accounted for 1.2 billion tons,  or
more than 27 percent (USDOE/EIA,  1995). Of the total coal produced in China, more than 95
percent is hard  coal,  and the remainder is lignite2.  Currently,  coal accounts for 74 percent of
China's total primary energy production and 73 percent of its total primary energy consumption
(DRCCU, 1994).

As of 1992, demonstrated reserves of coal in China were 986.3 billion tons, of which proven in-
place  reserves, as defined  by the World  Energy Commission, accounted for 30 percent,  or
295.9 billion tons  (see Appendix B for further explanation of  reserve classification systems).
Recoverable reserves were 114.5 billion tons (DRCCU, 1994). Of the economically minable
reserves, about 75 percent are  bituminous (40 percent steam coal and 35  percent  coking
coal),  12  percent  are anthracite, and  13 percent are lignite.  Despite the vast  reserves,
production has  been  impacted by the scarcity of adequate modern mining equipment.  While
tunneling, extraction,  loading, and conveying are over 95 percent mechanized in most Western
countries, the level of mechanization in China, even in the large, modern, state-run mines, is
only about 50 percent (EIU, 1993).

For the past several  years, China's  coal production has grown steadily, and it reached  1.15
billion tons in 1993 (Table 1). China  exports only a relatively small quantity of coal, since coal
production  and  consumption are approximately equal. In 1993, China exported 19.8  million
tons of coal, or less than 2  percent of the coal produced. Currently,  about 75 percent of the
coal is directly burned;  only  25 percent is  converted  to secondary energy. Demand for
electricity generation  is growing rapidly, however, and the IEA (1995) predicts that by 2000,
power stations will account for about half of the total coal demand in China.

Rail is the primary means of coal transport in China.  Over sixty percent of the coal produced is
transported by  rail, and coal uses 40 percent of China's railway system capacity (Yunzhen,
1991).  In 1993, only  about 18 percent (230 million tons) of raw coal was washed; nearly all
washed coal is used  in coking.  Therefore 80 percent of the coal is transported with large
amounts  of non-coal material,  which  not only increases the burden on the rail system, but also
may result in inflated  coal production values. Major rail projects are currently underway, which
should improve  China's coal distribution and export capacity (IEA, 1995).

Over  95 percent  of  coal  production  is  from  underground  mines.    Many  of the  large,
underground  mines are located mostly in northern  and northeastern China. Figure  7  shows
that in  1993, there were seven provinces whose annual production exceeded 50 million tons:
Shanxi (306.6 Mt); Henan (92.8 Mt); Sichuan (79.4 Mt); Heilongjiang (72.3 Mt); Shandong
(68.0 Mt); Inner Mongolia (55.2 Mt); and Liaoning (52.6 Mt). In 1993, there were a total of 16
large mining areas containing state-owned key coal mines that produced over 10 million tons
of coal each.
2 Lignite is a low rank, low quality soft coal, with generally higher moisture content and lower heating
value (4,240-8,800 kJ/kg) than hard coal. It is intermediate in rank between peat and sub-bituminous
("old brown") coal.
                                                                                   1-7

-------
         TABLE 1 - COAL PRODUCTION AND CONSUMPTION IN CHINA *
                                (IN MILLION TONS)
YEAR
1985
1986
1987
1988
1989
1990
1991
1992
1993
PRODUCTION (By Type of Mine)
State-Run
406.3
413.9
420.2
434.5
476.8
N/A
480.6
482.5
458.0
Local
182.8
181.4
181.1
193.9
205.3
N/A
247.8
251.3
204.0
Township
283.2
298.7
326.8
351.5
365.3
N/A
355.9
380.7
**482.8
TOTAL
872.3
894.0
928.1
979.9
1047.0
1080.0
1084.3
1114.5
**1 149.7
CONSUMPTION
816.0
860.1
928.0
993.5
1031.4
1038.5
1092.0
1092.4
1140.0
* Includes both hard coal and lignite; hard coal accounts for about 95% of total
** 1993 data includes 52.93 Mt of coal that was mined from privately owned small
mines, a category that was not included in previous years
Source: China Coal Industry Yearbook, 1993; USDOE/EIA, 1994; DRCCU, 1994
The remaining 5 percent of coal production is from surface mines.  Modern, large-scale open
pit mining methods were introduced to China in the 1980's.  The proportion of coal produced
by surface mines is not expected to increase significantly in the future, however, because only
7 percent of China's total coal reserves are suitable for open pit mining.

In 1993, China consumed 1.14 billion tons of coal;  of this, approximately 1.10 billion tons were
hard coal and the remaining 40 million tons were lignite. Approximately 32 percent of the total
coal consumed was used for power generation.  The outlook for coal  consumption in China is
continued growth, approximately 3 percent per year between 1994 and 2010  (IEA,  1994).
Much of the growth will be in the electricity generation sector.  Coal will also continue to be
important in the residential sector, replacing traditional rural (biomass) fuels. Constraints  to
growth include the existing transportation and  distribution  networks, which  need  to  be
modernized and expanded to meet current and future demand.

China's overall dependence on coal has actually  decreased over  the past decades.  In the
1950's, 96 percent of China's  total  energy output was from  coal.  During the  1960's, this
percent fell to 89 percent, and has stabilized over the past  several years at around 75 percent.
However, a steady increase in coal production is expected  to continue, with an annual average
increase of 5 percent from 1985 to present.  As shown in Table 1, China's coal production has
grown  steadily since  1985, with over 1.1  billion  tons  produced  in  1993.  The  Chinese
government has set 1.4 billion tons of coal as a production  target for year 2000.
                                                                                  1-8

-------
O5138O11
                    1-9

-------
Coal Industry Organization
The coal industry of China has recently undergone major reform and  restructuring.  Prior to
1993, the China National Coal Corporation (CNCC), a company under the Ministry of Energy,
administered the industry in China. Later, several other regional coal companies controlled the
state-run mines  in northern and northeastern  China. The China  National  Local Mine
Development Corporation managed China's thousands of small local and provincial mines; its
primary function was enforcing government safety regulations (JP International,  1990).

In March 1993, the Chinese government established the  Ministry of Coal Industry (MOCI) with
the intent of restructuring the coal industry.  According to the China Coal Industry Yearbook
(1993), the MOCI's main functions are to develop policies for the coal industry related to:

       •   increasing use of coal resources;
       •   conducting coal industry science and technological research;
       •   optimizing production; and
       •   creating more diversity in coal markets and economic systems to make the industry
          more efficient.

The establishment of the MOCI will encourage efficient and cost-effective use of China's coal
resources, and may help eliminate existing barriers to increase coalbed methane development.
Sections 1.2.4 and 1.3.3 of this report discuss the organization of China's energy and coalbed
methane sectors, respectively.

China  has  three  principal types of coal mines,  as  shown  in Table 1:  State-run (central
government);  Locally-controlled; and Township and Private mines.  Through the 1970's, state-
run mines accounted for all coal  production in China. Since the 1980's, however,  local and
township mines  have  become  increasingly  important,  and now over one-half  of all coal
produced comes from these smaller mines.  The fastest  growth in  production has  occurred in
the township  mines.  In 1993, the production from state-run key coal mines decreased by 5
percent, while total production from township and  privately owned mines exceed production
from all of the state-run  mines.

State-Run Mines
As of late 1993, there  were 105 Coal Mining Administrations (CMAs) operating 626 state-
owned mines, which produced about 40 percent of China's coal (458.0 million tons in 1993, as
shown in Table 1) (DRCCU, 1994). State-run mines employ more than 3.5 million workers.

China established  these mines to meet production quotas for coal defined under the central
plan, and placed them under control of the CNCC.  In general, state-run  mines are larger, more
modern and  relatively  highly mechanized,  many using longwall  mining  methods.  Typical
mechanization includes cutting equipment and hydraulic  pumps, and the more modern mines
have power roof supports and mechanized loading equipment. However, many of the state-run
mines still lack mechanization, with extraction by drilling and blasting or pneumatic pick and
shovel.  Due to the overall low degree of mechanization,  coal production at government mines
averages about  1.4 tons per man  shift. Annual production in these mines typically ranges from
100 thousand tons to  5 million tons of coal, with  production at the largest state-run CMAs
exceeding 10 million tons per annum.
                                                                                 1-10

-------
Historically, the state allocated all of the coal produced according to the coal distribution plan.
Today, the government allows a considerable amount of coal to be freely traded on markets,
while maintaining  some control of  sales  activity to  ensure necessary  supplies for key
infrastructural projects.

China  removed  coal price controls  in early 1994 (Dorian,  1995). The  price of coal has
increased because of transport shortages, and the government has  made great efforts to solve
this infrastructural deficiency. Along with price reform,  the government has  implemented other
measures, including  laying off surplus laborers and  developing lucrative  businesses,  in an
effort to reduce costs and improve efficiency.

Locally-Controlled Mines
There  are approximately 1800  locally-controlled mines in  China,  which include  county,
provincial, and prefectural mines. Typically,  a local  mining area (LMA) contains several  of
these mines, and may span an entire coal-producing area between two or more cities.  These
LMAs employ more than 1.3 million people. As shown in Table 1, local mines produced 204.0
million tons of coal in 1993, or nearly 18 percent of the  total coal produced (DRCCU, 1994).

The  larger locally-run mines operate  similarly to the non-mechanized  government mines and
their annual  production ranges from 50 - 100 thousand tons.  These mines are financed and
owned  by local governments, with  a minimum  of  central  government  investment.  Coal
produced from these mines is  used locally, with a portion allocated to the state coal distribution
plan.  These mines  operate with more local  control  and options,  but are  significantly less
mechanized than the state-run mines.

Township (Collective) and Private Mines
In the past several years, the number of township mines has grown tremendously (there are
currently an estimated 79 thousand).  In 1993, township mines produced 429.9 million tons of
coal  (DRCCU, 1994). These are collective, privately financed and  operated mines.  There is
essentially no  government investment involved. Though the production of coal from township
mines is increasing, they have the lowest level of mechanization, as well as  the poorest safety
records.  The  smallest township and  private  mines mine coal seasonally by hand pick and
shovel.

Private  mines  are  a  recent development in  China, with coal  production data  available only
since 1993.  In 1993, privately owned, small coal  mines produced 52.9 million  tons of coal,
accounting for 5 percent of the total coal  produced. These  mines may  become larger as
reforms within the coal industry create competition in coal markets.

1.2.2.2  ON

China  is the world's  fifth largest oil producing country, with  approximately  2 - 3 percent of
global reserves.  Oil production was 20 percent of China's total energy supply in 1993. There
are 151 oil-bearing basins onshore and on the continental shelf of  China.  Total estimated oil
resources are 40-60 billion barrels, and proven oil reserves are 24 billion barrels (West, 1994).

The  first oil production  in China was at the Daqing oilfield, Manchuria  (now Heilongjiang
Province)  in 1959. Another large field, the Shengli field in Shandong Province, also  added
significantly to total production in the early  1960's.   Although both of  these fields showed
                                                                                  1-11

-------
 strong growth through the 1970's, their production appears to have peaked.  Many other oil
 fields have since developed, mainly in the north and northeast (Figure 8; Box 1).  Production
 reached an initial peak in 1979 at 106 million tons, declined in the early 1980's, then gradually
 increased to 145 million tons in 1993 (Table 2).
   BOX 1. SUMMARY OF OIL AND GAS DEVELOPMENT IN MAJOR CHINESE BASINS

According to the DRCCU (1994) and West (1994) there are several basins with significant oil and gas
activity underway, and additional exploration and development is planned:
•  Tarim Basin, Xinjiang. The Tarim Basin, in southern Xinjiang Ugyur Autonomous Region, is the
   most prospective in China. Forty drilling rigs were working in this basin at the end of 1993. The basin
   contains eleven oil fields which produced approximately 2.4 Mtoe in 1994. Most of this oil was
   produced from five fields in the northern and central portions of the basin.
•  Junggar Basin, Xinjiang. The Junggarwas the earliest basin developed in northwestern China. In
   the 1990's, several other oil fields were discovered in the central and outer parts of this basin.
•  Sichuan Basin. In recent years, there have been some exploration breakthroughs in Chuandong. In
   Daianchi, a series of large gas fields have also been found. Gas fields have also been discovered in
   Chuanzhong and Chuanxi.
•  Ordos Basin. The gas field in the central portion of this basin (sometimes called the Shaan Gan-
   Ning Basin) shows strong potential for development to meet the gas needs of large cities.
•  Songliao and Bohai Bay Basin. Several undeveloped fields have been found in the Fuyang oil
   reservoir in the Liangjiang area, the beaches of Bohai Bay, and the Kailuan Basin and Erlian Basins.
        TABLE 2 - CRUDE OIL PRODUCTION AND CONSUMPTION IN CHINA
                                   (IN MILLION TONS)
YEAR
1980
1985
1986
1987
1988
1989
1990
1991
1992
1993
PRODUCTION
105.9
124.9
130.7
134.1
137.1
137.6
138.3
139.6
141.1
145.2
CONSUMPTION
87.6
91.7
97.3
103.1
110.9
118.6
114.7
124.6
131.2
155.2
Source: China Energy Databook, USDOE/EIA, 1994; Oil and Gas
Journal, 1994; USDOE/EIA 1995.
 Exploration, development and production of onshore oil and natural gas in China is planned
 and managed by the China National Petroleum Corporation (CNPC). It administers 20 oil and
 gas enterprises. In the  1980's, China began  developing offshore oil  with  the assistance of
 Western  companies.   To  provide incentives for  foreign investment,  the  China  National
 Offshore Oil Corporation (CNOOC) was established to explore, develop, produce and market
 offshore  oil.   Current activity is  near Hainan  Island  and the  Pearl  River Mouth Basin.
 Exploration is also  underway in the Wan'an Bei area (Spratly Islands) of the South China Sea,
 although China is  disputing  ownership of these  waters with Vietnam  (China Energy Report,
 1994).
                                                                                    1-12

-------
    EXPLANATION


'
-------
Recent discoveries in the Tarim Basin in northwest China may shift onshore activity westward.
China's  largest new discovery, it has proven in-place reserves  of 3.6 billion barrels, and has
attracted foreign  investment. There are barriers  to  developing the  Tarim Basin,  however,
particularly its remote location, lack of infrastructure, and associated developmental costs.

Rapid economic  growth has caused  a  significant increase in the  demand for petroleum
products.   In  1993, import  of crude oil  and petroleum products  increased sharply, export
decreased, and China became a net importer of crude  oil (Table 2) and petroleum products.
This occurred at least two years earlier than most energy analysts had predicted,  caused by
substantial increases in  the use of motor gasoline, diesel fuel,  and fuel oil. Despite domestic
shortfalls,  China continues to export crude oil (an estimated 15  million tons in 1995) because
of desperately needed foreign exchange earnings.  China imported  an estimated 23 million
tons of  crude in  1995,  primarily  from  Indonesia, Oman and  Malaysia. China also imports
petroleum products from Singapore, South Korea, the  US, and several other countries.  The
long-term  projection for  oil  demand  by year 2000 is 200 million tons (Oil and Gas Journal,
1994), of which China will import 65 million tons (Ryan and Flavin, 1995).

1.2.2.3 Conventional Natural Gas

The earliest significant natural  gas production in China  was in  1960.  Associated  gas (gas in
association with oil) was produced  at the Daqing  oil field in Sichuan  Province.   Since the
1970's,  Sichuan has become the  dominant gas-producing region of China, and accounts for
almost one-half of total  natural gas production.   Recent discoveries in the Tarim Basin of
northwest China and off  Hainan Island show great potential.

As shown  in Table 3, China produced nearly 16 billion cubic meters of natural gas in 1993. The
Chinese government plans to increase natural gas production, but at present it still represents
little more than 2 percent of China's total energy mix. Industry  consumes over 80 percent of
the total natural gas produced. The main end-uses include  feedstock and fuel for chemical
fertilizer manufacturing and ammonia plants. A  large portion of  consumption occurs within the
oil production  industry itself. Over the past several  years,  however, use by the  residential
sector has been increasing.

According to recent estimates, China's proven reserves of natural gas  may be in excess of 1.5
trillion cubic meters (Dorian, 1995);  undiscovered  gas resources are  estimated at 8.5  trillion
cubic meters (Sinton, 1996). Despite large resources  of natural  gas, China's gas industry has
received only a fraction  of the  funds provided to the oil industry.  On an oil-equivalent  basis,
the ratio of oil to gas production in the United States and the former  Soviet Union is roughly
1:1; in China, it is 10:1 (East-West Center, 1993).

From the 1950's to the 1980's, China's natural gas prices were frozen,  even though production
costs doubled over this  period.  As the Chinese government recognized the value of natural
gas resources in the mid-1980's, it adopted some changes in policy that provide incentives to
revitalize the industry. However, natural gas prices are still significantly below operation and
financing costs.  Along  with reforms affecting  the market price of coal, China plans to  free
prices of natural gas to provide production incentives.  Now the  government also promotes the
use of natural gas for residential sector and municipal activities.
                                                                                  1-14

-------
     TABLE 3 - NATURAL GAS PRODUCTION AND CONSUMPTION IN CHINA
                             (IN BILLION CUBIC METERS)
YEAR
1980
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
PRODUCTION
14.4
13.0
13.6
13.9
13.9
14.4
14.4
15.0
15.0
15.9
16.7
CONSUMPTION
14.2
12.9
13.7
14.0
14.2
14.3
14.4
14.9
15.1
15.8
NA
Source: USDOE/EIA, 1995; Dorian, 1995
Principal barriers to increased gas production in China are insufficient pipeline and gathering
systems to transport gas from  fields to markets.  Pipeline construction peaked in the 1970's,
and  most existing pipelines are concentrated in Sichuan Province.  Long-distance pipeline
transport is still relatively  rare.  Chapter 3  (Section 3.4.2)  contains additional information
regarding gas pipeline systems in China.

1.2.2.4  Hydroelectric Power

Hydropower accounts for over 5 percent of China's total energy consumption, and about 19
percent of  its electricity generation.  The nation's hydroelectric potential is the largest in the
world.  According to official figures, this potential amounts to 676 gigawatts (GW), of which 380
GW  is suitable  for exploitation (DRCCU,  1994).  The current available  capacity is about 40
GW, but official  plans project that it will double to 80 GW by 2000. Figure 9 shows the location
of existing and planned hydropower developments.

The  majority of existing hydroelectric  plants are very small  scale.  According to the Asian
Development Bank, around 60  percent of the 2000 counties in China have  their own mini-
hydroelectric schemes, and over half of them rely solely on  hydroelectricity for their power.
Over the period 1980 to 1990, production of hydroelectric power in China more than  doubled,
increasing from  58.2 billion kilowatts to 126.4  billion kilowatts.  Consumption is keeping up with
production, and  demand is expected to increase into the next century.

Approximately one-third of the 60 GW of electricity generation plants in China currently under
construction are hydroelectric (IEA,  1994). About 80  hydroelectric power stations are under
construction, with a total projected capacity of over 20 GW. The majority of large sites are in
southwestern China, which possess two-thirds of the country's generation potential. To provide
auxiliary operation for large thermal  power stations and  nuclear power stations with peaking
capacity to the power system, a group of pumped  storage stations are also under construction.
                                                                                  1-15

-------
Source:
                                                                                                                     1-16

-------
Several large hydroelectric projects are planned; of these, the largest is the Three Gorges
project on the Yangtze  River. With a capacity of over 17 GW, it could make a significant
contribution  to  China's  electricity  demand.  The  project,  however,  is  not  proposed  for
completion until 2010. The large hydroelectric projects tend  to be in remote areas that are
difficult and  expensive to develop.   Potential problems  include flooding of agricultural lands,
dislocation of villages, and degradation of adjacent lands and deltas.  Several  medium-scale
hydroelectric projects are also planned, as are small scale, local power stations.

1.2.2.5 Other Energy Sources

Nuclear and biomass energy comprise less than 1 percent of the fuel mix in China. China
possesses nuclear fuel  resources, but until 1993,  had only one  small nuclear plant  in
operation. The first phase of the Qinshan Nuclear Power Station (300 MW) in  Zhejiang, and
two units of Daya  Bay Nuclear Power Station in Guangdong Province are operational.  The
second phase of Qinshan Station and a second nuclear power station in Guangdong Province
will be constructed  by the year 2000. A number of coastal provinces are conducting feasibility
studies, and other plants may be established in the future (EIU, 1993).

In certain regions of China with intense energy demand, particularly eastern,  southern, and
northeastern coastal regions, nuclear  power can potentially  increase local energy  supplies.
Official plans for the year 2000 have targeted 6 GW of available capacity and 6 GW under
construction, to increase to 1.2 GW per annum after 2000 (IEA, 1994).  If the installed capacity
after 2000 can  grow at  this  rate,  production will reach 15  GW by 2010.  These may be
optimistic targets, given the long periods of construction required for nuclear plants, but the
importance of nuclear energy will continue to increase in China.

Biomass, a renewable energy source, is the main source of energy for many rural households;
wood, crop wastes, and dung  are the primary fuels.  While rural  industry uses some of this
energy, the residential sector consumes the majority, primarily for space heating and cooking.
Over the past 10 years, the annual growth rate of energy  consumption in  rural  areas was
about 9 percent, higher than the nationwide energy production growth rate.

Approximately 4.6  million biogas digesters, producing 1 to 1.5 cubic meters  of  biogas per
digester per day for six to eight months per year, are currently in use, mainly in southwestern
China (Sinton, 1992). There were 5.25 million  users of biogas digesters in 1993, producing an
average of 273 m3 per  household  in rural areas.   Most serve individual families, but some
community and factory digesters are also in operation.  There are over 600 large scale projects
treating organic sewage from industries and agricultural  operations, which can provide biogas
to over 84,000 households in urban  areas year around (IEA,  1994).

1.2.3  CHINA'S CURRENT ENERGY STRATEGY

In its drive for modernization, China is confronted with serious challenges  in its energy sector.
Energy production  is insufficient to meet the needs of  its rapidly growing economy, and China
faces population,  environmental, and resource pressures,  as well as the need for updated
technology.  In order to  solve these problems, China must undertake a  new,  non-traditional
development strategy aimed  at maintaining sustained development. According to  the Coal
Information Institute,  China's new development strategy, which will differ from  those used in
both developed and developing nations, is basically conceived as follows:
                                                                                  1-17

-------
Energy Conservation: A Priority

Since the early 1990's,  China's  government  has taken various steps toward conserving
energy.  Reforms in energy pricing, taxes and financing have improved  energy savings. The
government has also invested large amounts of capital in energy conservation programs. Much
remains to be done, however. If  China's energy efficiency  were increased to the levels of
developed  countries,  energy consumption  could  be reduced  by  at least  30  percent.
Implementation of this strategy  is  key to maintaining  sustained, stable  and coordinated
development of China's economy,  and is the most economical means of reducing air pollution
and CO2 emissions.

Improvements to the Energy Sector

At present, the main challenges in China's energy sector are:

•  heavy dependence on coal;
•  under-use of electricity and natural gas;
•  low level of conversion of primary energy into electric energy;
•  low rate of electric power consumption;
•  high rate of industrial sector energy consumption,  relative  to that of the communication and
   transportation sectors;
•  heavy dependence (70 percent) on biomass energy consumption in the rural areas;
•  lack of coordination between the coal, electricity and transportation industries ;
•  inefficient  energy industry infrastructure, with too many small-scale coal mines and thermal
   power plants;
•  lack of coordination between the oil extraction and refining industries;
•  a serious  imbalance in the distribution of energy from producing regions  to consumers;
   and,
•  excessive export of crude oil, despite a domestic supply shortfall, because  of the need for
   foreign exchange earnings.

Therefore, China's energy strategy will focus on optimizing resource use and diversifying the
energy mix, using recent scientific and technological advances. This is also  a fundamental
means  of ensuring that  energy  and  the   economic  development  take   place in an
environmentally  sound manner.   The  main  features of China's energy  strategy  include
improvements in:

•  coordination of scientific and technological advances to optimize energy use to the greatest
   benefit of the economy and society;
•  maximizing benefits from the diverse primary and secondary energy types that can be used
   in China;
•  coordination of energy production with transportation and consumption needs;
•  balancing  energy development and consumption with preservation of the environment;
•  coordination of the pace, magnitude, and sequence of energy development projects;
•  optimization of capital distribution;
•  use of rational economic policy; and,
•  use of appropriate technologies.
                                                                                 1-18

-------
End User-Oriented Principle

The energy strategy proposed by the Chinese government is based on end user consumption.
Energy needs should be determined by the energy value  of a given fuel in relation to the
overall cost to produce  and distribute that  fuel. In most cases, fuel needs  can be met by
various forms of energy; it is therefore  necessary to select the  best fuel both  in terms of
technology and economy in order to provide energy services to end  users at  the lowest cost.
With the current shift from a planned economy to a market economy in China, there exists a
favorable environment for implementing this strategy.

Developing Natural Gas Resources, Including Coalbed Methane

Since the  1960's, the worldwide growth rate of natural gas exploration and production has
been higher than that of petroleum. During the period 1971 to 1990, the annual growth rate of
natural gas production was 3.68  percent, while that of petroleum was only 1.31 percent. The
annual growth rate of proven natural gas reserves  was 5.5  percent,  compared to  a 3 percent
growth rate for petroleum. Natural gas accounts  for 25 percent of the world's primary energy
production,  and  22 percent of  its  consumption.  In  China,  however,  consumption  and
production of  natural gas account for only  about 2 percent of the nation's total energy mix.
China must place strong emphasis on the development of natural gas, and must adopt pricing,
taxation and  investment management policies that will promote development of  the natural
gas industry.

Coalbed methane has great potential in the China's future. The United  States uses surface
wells  to recover coalbed  methane from non-mining areas, and  a  variety of techniques to
recover coalbed methane from mining areas. Production of coalbed methane in the United
States began in 1982 and increased to more than  21 billion cubic meters in 1994, exceeding
the current production of natural gas in China.  Given  its abundant  coal resources,  and the
gassy nature of that coal, it is not  unrealistic to expect that China could achieve similar coalbed
methane  production  levels over  a comparable  time period. This would more than double
China's current natural gas production,  and increase the share  of natural gas in  its  fuel mix
from the  current level of 2 percent to  4.6  percent. In  addition,  because coalbed  methane
liberated during the mining process is a greenhouse gas, recovery  of this methane will help
protect the global environment.

Developing Clean  Coal Technology

China's coal consumption accounts for about 24 percent of total world coal consumption. Coal
constitutes 75 percent of China's primary energy consumption, and provides 76 percent of its
electric energy. It also provides 75 percent of the energy required by  China's industrial sector,
60 percent of the raw materials for its chemical  industry,  and 80 percent of the energy used by
the commercial and residential sectors. The predominance of coal  in the  energy mix  is not
expected to change significantly in the near future.

The environmental problems associated with coal combustion are severe, seriously restricting
social and  economic development in China.  This is particularly  true in large cities and in
regions  where high sulfur  coal  is  burned.  China's  neighboring  countries have  already
expressed their deep concern over emissions of  SO2 and NOX resulting from high  amounts of
                                                                                 1-19

-------
coal combustion in China. In addition, global warming associated with emissions of CO2 from
coal combustion has become a focal point of the international community.

Even if China is successful  in its attempts to diversify its fuel mix, the nation will continue to
consume large quantities of  coal. Given that fact, China believes that the most practical way to
address associated pollution  problems  is to develop clean coal technology, thus  reducing
pollutant emissions. MOCI has stated that China must adopt clean coal technology as part of a
mid- to long-term energy strategy.

1.2.4 GOVERNMENT ORGANIZATION OF CHINA'S ENERGY SECTOR

In 1993,  China restructured the government organization of  its energy sector in order to
expedite the shift from a planned economy to market economy. At the central government
level, China created  a  National  Economic and Trade  Commission; dissolved the Ministry of
Energy; and reestablished the Ministry of Coal Industry and the Ministry of the Electric Power
Industry.  Concurrently,  six  specialized  investment corporations,  including  the  Energy
Investment  Corporation, that were all under the State Planning Commission were merged into
the State Development Bank.

Figure  10 is a schematic of the organizational structure of China's energy industry. The key
components of the industry are discussed below.

State Planning Commission

This commission oversees the Energy and Transportation Department, which is responsible for
formulating  national development policy and strategy. The department also formulates annual-
and long-term plans for the energy sector,  and reviews and  approves key  construction
projects.

State Economic and Trade Commission

This commission  includes the Department  of Resource Conservation and  Comprehensive
Utilization (DRCCU), which manages the use of energy and raw materials (including renewable
energy). It will be involved in formulating the national energy development strategy policies and
plans,  as  well  as reviewing and  approving key  projects for  technical  modernization  in
collaboration with  the State Planning Commission. It also oversees the prevention of industrial
pollution.

State Science and Technology Commission

This commission  oversees the Department of Science and Technology,  which is involved in
the formulation of science and technology development strategies, policies and plans related
to energy sector,  in collaboration with the State  Economic and Trade Commission and State
Planning Commission. It is also responsible for organizing and coordinating the implementation
of important science and technology  programs,  with input from various central departments,
local organizations and technical universities.  It  is in charge of organizing  and implementing
the international exchanges  and co-operation at the governmental  level.
                                                                                 1-20

-------
                                         State Council
                              Vice Premier  in charge of Energy
                                           Industry
                                         Zou Jiahua
Corporations  under State
         Council
Energy related  ministries  and
    atfiliated  corporations
                                                                     State Planning Commission
                                                                      Chairman:  Chen  Jinhua
                                                                                            O5139OO1
                                                                                      1-21

-------
Ministry of Coal Industry (MOCI)

As noted in Section 1.2.2.1,  MOCI  is the leading organization of China's coal sector, whose
responsibilities include formulating coal industry development strategy,  policies,  and annual-
and long-term plans. MOCI also formulates regulations and rules for the coal industry; reviews
and approves  projects; manages key personnel in the enterprises under its direct control;
supervises of mine safety throughout  the country; supervises and manages national assets in
large coal enterprises; develops coal markets; manages science, technology, and education
work within  the  coal  sector; supplies  information services; and  organizes and  manages
governmental and international economic and technical co-operation.

Ministry of Electric Power Industry

In 1993, the Ministry of the Electric Power Industry (MEPI) was established with the dissolution
of the Ministry of Energy.  MEPI is an administrative organization that manages the national
electric  power  sector in  China, and its responsibilities are similar to those of MOCI  for the
electric power industry. MEPI is charged with direct management of five electric power groups
in Northeast China, North China, East China, Central China and  Northwest China; direct
control of electric companies in the six provinces of Shandong, Fujian, Sichuan,  Guangxi,
Guizhou and Yunan; and management of Huaneng Group's electric company and South China
Electric  Corporation. The Ministry also performs sectoral  management  of electric power
companies in Guangdong, Hainan and Tibet.

Other Energy Organizations

Several  other  national  corporations perform administrative functions as  authorized  by the
central government. These ministry-level corporations report directly to the State Council and
are responsible  for the business aspects  of  energy production.  They include the China
National  Offshore Petroleum Corporation, China National  Petroleum and  Gas  Corporation,
China National Petrochemical Corporation, China Nuclear Industry Corporation, and the China
United Coalbed  Methane  Company,  Ltd.  (China CBM).  Formed in  1996,  China  CBM has
exclusive authority for administering coalbed methane development in  China. Section 1.3.3
contains additional information on this new company.

1.3 THE ROLE OF COALBED METHANE

As the world's largest coal producer, China has  enormous coalbed methane reserves, and
great  potential to  recover this energy source.   Recovery and  use  of coalbed  methane
contained in coal seams in conjunction with mining results  in the production of two resources
instead  of just one.  Coal  mine methane drainage  and recovery allows increased  coal
production and safety in the mine environment.  China's  vast coal  reserves also create an
opportunity for  coalbed methane recovery in unmined areas.

This section  provides a brief history of coalbed methane production and use worldwide, with a
special focus on recent coalbed methane production in the  United States as a potential model
for China.
                                                                                 1-22

-------
1.3.1  HISTORICAL PRODUCTION WORLDWIDE
Historically, methane has been collected and vented from coal mines worldwide, primarily for
safety reasons. The earliest experience with  methane drainage is from Europe, where coal
mining has a long history. The first attempts to isolate  and pipe gas from a coal mine in Great
Britain occurred as  early as  1733.   In an explosion  at  another coal  mine  in  1844, an
investigation determined  that gas accumulations in the gob was  the  cause.   Investigators
recommended that in the future, pipes should drain the gob, carrying gas to the surface. In-
mine, cross measure holes were used in Wales in the late 1800's to drain gas from virgin coal
beds. The first successful large-scale use was in a German colliery in the 1940's  (Diamond,
1993).    By  this  time, numerous coal  mines worldwide  were using various methods of
underground methane drainage methods to remove gas associated with mining.

Only recently has coalbed  methane gained attention as a source of  competitive, saleable
natural gas.   Coalbed  methane has been produced in commercial quantities in the United
States since 1981. The industry has evolved to include not only degasification in conjunction
with  underground coal mines, but  also stand-alone  projects for the commercial production of
natural gas.   Conventional oil and gas  production practices have been modified for coalbed
methane's unique reservoir characteristics and  production techniques. These include  low
wellhead pressure;  separation of  gas  and water;  compression of gas; and procedures to
produce  and,  in  many cases, dispose of large volumes  of  water. At active coal mines,
strategies for commercial  production of  methane can be incorporated into existing in-mine  and
gob  gas  drainage systems.  At mines  worldwide, recovery technologies can be adapted to
employ methane as an energy source, rather than  venting it into the atmosphere.

In the  United States, coalbed methane production  has grown  rapidly over the past decade,
particularly in the past several years. Figure 11 illustrates the tremendous increase  in coalbed
methane production from  1982 to 1994.  Production in 1991 exceeded 9.0 billion cubic meters,
and  by 1994 had  exceeded 20 billion cubic meters. Over 90 percent of the 1994  production
came from two major coal basins, the San Juan and Black Warrior. Within the past four years,
several other basins have also begun  producing  commercial quantities of coalbed methane.
Expanded production is projected over the next decade, from currently producing areas as well
as from new basins.
      FIGURE 11. U.S. COALBED METHANE PRODUCTION (IN MILLION CUBIC METERS)


        25000 - •


        20000 - •


        15000 - •


        10000
         5000 - •
n
              1982 1983 1984  1985  1986  1987  1988  1989  1990 1991  1992 1993  1994
         Source: GRI, 1993; Petroleum Information, 1994 and 1995; ERNGC,
                                                                                 1-23

-------
Figure 12  shows  the  major US coal basins  and associated in-place  coalbed methane
resources. Table 4 summarizes  1994 US coalbed methane production by state.  Most of the
production is from vertical wells,  in areas without existing underground coal mining.  However,
coal mine methane recovery and use has proven profitable at mines in Alabama, Virginia, Utah
and West Virginia.  Collectively,  gas production at  these mines exceeded 800 million cubic
meters in 1994. Chapter 3 describes current projects  for  recovering and  using coalbed
methane in conjunction with coal mining, in the United States as well as other countries.

TABLE 4 - SUMMARY OF  1994 US COALBED METHANE PRODUCTION FOR USE
STATE
Alabama
New Mexico
Colorado
Virginia
Wyoming
Utah
West Virginia3
TOTAL
NUMBER
OF WELLS
2,956
1,663
1,006
492
136
104
<50
> 6,357
PRODUCTION
(Million m3)
3,155
11,734
5,558
800
71
136
-69-143
>21,523
RECOVERY METHOD
(Type of Well)
Vertical, Gob, Horizontal
Vertical
Vertical
Vertical, Gob, Horizontal
Vertical
Vertical, Horizontal
Gob, Horizontal

SOURCES: GRI Quarterly, 1993 (for data through 1992); Petroleum Information, 1994 and 1995 (for
1993 and 1994 data on western states); Lewis, 1995; USEPA, 1995a; Byrer, 1995; Biggs, 1995 (for data
on West Virginia).
Worldwide, preliminary estimates of coalbed methane resources range from 113 to 255 trillion
m3 (4000-9000 TCP) (USEPA, 1993).  Encouraged by the success of the US coalbed methane
industry, activities have increased in several other coal-producing countries, which now have
coalbed methane projects in various stages of development.  Countries with strong potential
include Australia, Canada,  China, Czech Republic, Germany, India, Poland, Russia,  South
Africa and Ukraine.   Table 5 lists  coal  production and  estimates  of associated methane
resources  and methane emissions from mining for the top ten coal-producing countries of the
world; collectively, they account for 90 percent of total  global methane emissions from coal
mines. China, the United States, the United Kingdom, and the Former Soviet Union (primarily
Russia and Ukraine)  account for approximately 70 percent of  global emissions from coal
mining. These countries also contain the greatest potential methane resources.

Historically, relatively few countries have collected detailed coalbed methane emissions data.
The  U.S.  Bureau  of  Mines estimates methane  emissions  using Mine  Safety  and Health
Administration (MSHA)  reports on mine ventilation  emissions. However,  these estimates
contain assumptions and carry a level of uncertainty, particularly relative to total methane flux.
Emissions data from coal mines in other countries contain these same uncertainties; for many
countries,  less data  exists.  Therefore, the emissions estimates presented  in Table  5 are
considered                                                                 preliminary.
3 West Virginia state agencies do not collect or release coalbed methane production data; numbers
presented here reflect estimates based on personal communication with the sources listed above.
                                                                                 1-24

-------
  GREATER
GREEN RIVER
COAL REGION
850 X
                                                                                                                                                             1-25

-------
The nature of coalbed methane within seams is complex and accurate resource estimation is
difficult.  The  estimated  coalbed  methane  resources  in  Table 5  are  based  on  gross
assumptions concerning the gas contents of different coals and a large amount of geological
data already  gathered on  coal resources in each country. As more  information  becomes
available, estimates can be  refined.

      TABLE 5 - WORLDWIDE COAL PRODUCTION,  ESTIMATED METHANE
     RESOURCES, AND ESTIMATED EMISSIONS FROM COAL MINING (1990)
COUNTRY

CIS
China
United States
Australia
South Africa
India
Germany
United Kingdom
Poland
Czech Republic
TOTAL TOP 10
WORLD TOTAL
COAL PRODUCTION
(In Million Tons)
UNDERGROUND
393
1,023
385
52
112
109
77
75
154
22
2,401
SURFACE
309
43
548
154
63
129
359
14
58
85
1,762
4,740
EST. METHANE
RESOURCE
(Trillion m3)
LOW
42.5
30.0
HIGH
79.0
35.0
11.3
8.5
14.5
3.9
1.4
2.8
1.7
0.4
.05
102.5
113.2
1.3
0.37
151.3
254.7
EST. METHANE
EMISSIONS
(Billion m3)
LOW
7.1
14.0
5.3
0.7
1.2
0.6
1.5
0.9
0.9
0.4
32.6
36.0
HIGH
8.9
24.5
8.4
1.2
3.4
0.6
1.8
1.3
2.2
0.7
53.0
58.4
Sources: USEPA, 1993; Schraufnagel, 1993; DRCCU, 1994
1.3.2 COALBED METHANE RESOURCES AND THEIR POTENTIAL FOR DEVELOPMENT

China is the largest coal-producing country  in the world, producing about 1.2  billion tons in
1994. Coal resources in China are characterized  by large reserves, wide distribution, varied
coal ranks and numerous coal seams. Currently, proven reserves of coal amount to 986 billion
tons. CM estimates that coalbed  methane reserves to depth of less than 2000 m are 30-35
trillion cubic meters. Section 2.4  in Chapter 2 discusses the coal basins, their geology, and
methane potential in detail.

Estimated  in-place coalbed methane resources in China are 30 to 35 trillion cubic meters. This
compares  to 11 trillion cubic  meters of in-place resources in the United States, or about 1/3 of
China's estimated resources.  Without more detailed data, it is not possible to give an accurate
estimate of the time and costs that would be involved in developing China's resources. Once
site-specific coalbed methane projects  and markets  are identified,  estimates of methane
recovery costs could be compared with prices of competing fuels, in  order to  determine the
break-even costs for each specific project.

A review of the 15 year history of the  US coalbed methane industry, including exploration and
development,  production trends, and costs, provides useful guidelines for the percentage of in-
place resources that may potentially be recovered in China. In the US, a total of 5,865 wells
were drilled by 1994, producing 21.5  billion cubic meters of methane annually.  From 1984 to
1994, coalbed methane production was 77.7 billion cubic meters, less than 1 percent of the
                                                                               1-26

-------
total US in-place resources (Petroleum Information, 1994 and 1995; ERNGC, 1995). This 10-
year period  coincides with aggressive coalbed  methane development in  the San Juan and
Warrior Basins of the US, which was driven by an energy tax credit. Also during this time,
several US  agencies were providing incentives for companies to develop coalbed methane
projects4.

From 1975 to  1992, the Gas Research Institute, Department of Energy, US Bureau of Mines,
and gas producers and service companies provided over $4.6 billion for investment in coalbed
methane research,  drilling  and production technology, and pipelines (Schraufnagel,  1994).
Significant funds were allocated to  improving technologies  of vertical well gas recovery, such
as improved hydraulic fracturing technology, optimizing well spacing, and recovering gas from
multiple, rather than single seams.  Most  of the coalbed gas produced in the US is of pipeline
quality, and  a  pipeline infrastructure is in place, allowing the sale  of methane from major coal
mines directly to nearby pipelines.

The above-described conditions in the US thus provide a ready supply of pipeline  quality gas.
The  major considerations in determining  pipeline project profitability are the quantity and
quality of gas produced, proximity to a pipeline that can purchase gas, and the price at which
the gas can be sold.  In  China, due to the  lack of  existing pipeline  infrastructure,  power
generation projects are an attractive use  option for coalbed  methane. Methane can be used to
meet on-site electricity needs, as well as  sale of any surplus energy to a nearby utility. Primary
factors for  profitable  power generation  projects are  the level  of  electricity that can be
generated, on-site electricity needs  of the mine, the price the mine  currently pays for electricity,
and the buy-back rate offered by the local utility.  Some mines may have the additional use
option  of selling methane to nearby industries  or institutions  with  large natural  gas  needs.
Profitability of  a local  user option is  determined by natural gas needs of the  potential user,
distance between the user and the  mine, the price at which the gas can be sold, and the cost
of converting an existing fuel system to operate on  coalbed methane (USEPA, 1995b).

The area in the United States most  analogous to China's coal-producing regions is the Warrior
Basin of Alabama. In the late 1970's to early 1980's, all coalbed methane production from this
basin was from coal mining regions; since then,  significant  production has come from vertical
wells in unmined regions of the basin. The Warrior is  a large  coal basin,  covering nearly 91
thousand km2, with  most of the coal mines occurring at depths ranging from 300 to 500 m.
Over the past  15 years,  a total of 3,000 coalbed methane wells have been drilled,  and  annual
methane production for 1994 was almost  3.2 billion cubic meters.

1.3.3  CHINA  UNITED  COALBED  METHANE  COMPANY,  LTD.  AND  ORGANIZATION
       OF THE COALBED METHANE SECTOR

Until recently,  three separate organizations administrated  coalbed  methane development in
China:  MOCI, the Ministry  of Geology and  Mineral  Resources (MGMR), and the China
National  Petroleum and Gas Corporation (CNPGC). The responsibilities of  these three
organizations overlapped to some degree, resulting in confusion and disputes on the extent of
administrative  power.  In May 1996, therefore,  China's highest  governing body, the State
4 It is now becoming clear that the coalbed methane industry in the US can stand alone without special
tax breaks (Stevens et al, 1996). While the Section 29 tax credit undoubtedly accelerated investment in
coalbed methane, many coalbed methane "plays" remain profitable without tax incentives. Production,
new well completions, and reserve additions all continued to grow after the tax credit expired.


                                                                                  1-27

-------
Council, established the China  United Coalbed Methane Company,  Ltd. (China CBM). As a
single, trans-sectoral agency, China CBM is responsible for restructuring the coalbed methane
sector  by commercializing  the exploration,  development,  marketing,  transportation,  and
utilization of coalbed methane.

The State Council has also granted China CBM exclusive rights to undertake the exploration,
development, and production of coalbed methane in cooperation with foreign partners. China
CBM will jointly map out target areas for international cooperation and will conduct  invitations
for overseas bidding, negotiation, and signing and execution of contracts for proposed projects
upon approval of the State Planning Commission.  In addition to  these  duties, the  new
company will also act as  a  government watchdog and address some the country's energy-
related environmental problems (China Energy Report,  1996).

Since China  CBM will coordinate coalbed  methane  development work  between  the coal,
petroleum, and  geology  and minerals sectors,  it is  jointly  owned  by MOCI,  MGMR,  and
CNPGC.  Following is an overview  of these three organizations,  as well  as other groups
involved in coalbed methane development in China.

The Ministry Of Coal Industry

MOCI departments involved with coalbed methane development include:

•  Planning  and Development  Department. Manages coalbed methane activities within
   MOCI.

•  Science Technology and Education Department.  Responsible for identifying key issues
   regarding technological aspects of coalbed methane development and use.

•  Safety Department. Responsible for general management of underground drainage.

•  General  Bureau of Coalfield Geology:  Responsible for implementing coalbed methane
   assessments.

•  China Coal   Utilization and Energy   Conservation  Corporation:   Responsible  for
   construction and management of surface facilities for use of coalbed methane.

•  China Coal Information Institute:  Responsible for management of the China Coalbed
   Methane Clearinghouse, collection and  exchange  of information from China  and other
   countries, and publication of the journal China Coalbed Methane;

•  Star Mining Corp:  Helps the planning and development department conduct management
   and coordination work  relating to  coalbed methane; organizes and participates in coalbed
   methane development and  use projects with other enterprises; responsible for publication
   of the Bulletin on Coalbed Methane.

Ministry of Geology and Mineral Resources

The  Ministry of  Geology and  Mineral Resources is responsible for the  exploration  and
management of national mineral resources.  For more than ten years,  MGMR's North China
                                                                                1-28

-------
Bureau of Petroleum  Geology (NCBPG) has been involved in coalbed methane exploration
and  development projects.  In  the  1980's, the  NCBPG  evaluated  the  coalbed  methane
resources of north China and neighboring areas, and carried out preliminary experiments on
coalbed methane exploration and development  in Kailuan.  In  1991,  the  NCBPG began
implementing  a study on geological evaluation, target area selection,  and techniques  of
coalbed methane exploration and development.  Since 1993, the NCBPG has also been
carrying out the  Deep Coalbed Methane Exploration Project  funded  by the United Nations
Development Programme (UNDP). The immediate objective of the latter project is to acquire
the technologies, methodologies, training and practical experience that will enable MGMR and
others to produce methane from coal seams that are too deep for mining (Sun and Huang,
1995).

China National  Petroleum & Gas Corporation

CNPGC established the New Area Exploration Corporation which comprehensively  manages
coalbed methane projects of the CNPGC. Its research institutes include the Well Completion
Division of Langfang Branch, the Research Institute of Petroleum Exploration & Development,
and the Well Completion Technology  Research Center of Southwest Petroleum Institute. The
CNPGC has participated  in  the  Fengcheng coalbed  methane  project, the Lengshuijiang
coalbed methane project in Hunan Province, and the Dacheng coalbed  methane project.

Other Research Institutes

The research institutes in the coalbed methane sector are the Fushun Branch of the Central
Coal Mining Research Institute  (CCMRI), which is engaged in research and development of
coalbed methane drainage techniques; the Xi'an Branch of the CCMRI, which is engaged in
exploration  and evaluation of coalbed methane resources, and have personnel  trained in the
methodologies  and equipment required for coalbed methane  testing; and the  Gas Geology
Research Institute of the Jiaozuo Mining Institute, which has been working at research on gas
geology.

Other Organizations

In  addition, several  CMAs, including  Songzao, Kailuan,  Tiefa,  Huaibei,  Huainan  and
Pingdingshan, have established leading groups for coalbed methane development which have
become decision-making  organizations for  each coal mining  administration.  Enterprises
engaged in coalbed   methane development include  the Jindan  Energy Research  and
Development Company of the Jincheng CMA, and the Yuneng New Technology Development
Co. of the General Bureau of Coalfield Geology.

1.3.4  MULTIPLE BENEFITS: ENVIRONMENT, ENERGY, SAFETY

Given China's  reliance on  coal, current plans to construct new mines, and with the trend
towards mining  deeper, gassier coal seams, it is likely  that emissions of methane from coal
mining will continue to increase. Now more than ever, recovered coalbed methane can greatly
contribute to China's energy sector, economy, and environment. China's attention to this will
lead to the following benefits:
                                                                               1-29

-------
•  An additional natural gas resource
   One of the  goals of China's  energy development strategy is to  expand natural gas
   production and use.  New conventional gas supplies may develop  slowly due to the
   lack of infrastructure and the  remote location of these fields  relative to industrial and
   population centers. Coalbed methane resources, by contrast, are concentrated in major
   coal producing regions, which  are also large industrial and population centers.  China's
   government recognizes the potential contribution of coalbed methane as an energy
   resource,  and has  included  plans  to increase development as part of its energy
   strategy.

•  Improved economy
   Costly government  subsidies are being withdrawn  as China's coal  mining industry
   becomes more market driven, while  demand increases for an inexpensive,  domestic
   energy source.  Increased use of coalbed methane could reduce reliance on coal and
   costly imported fuels.

•  Improved mine safety and profitability
   Previously,  coal mines have viewed liberation of coalbed  methane into the mine
   workings as a mine  safety  hazard,  and have vented coal mine  methane  to  the
   atmosphere.  Mining  coal at increasing  depths  generally  means  higher  methane
   concentrations, which increase safety hazards resulting in higher mining costs and the
   need for larger ventilation systems.  Coalbed methane drainage reduces the potential
   for methane explosions and sudden outbursts of coal  and gas, thus improving safety
   conditions.  Methane recovery also increases coal production, increasing mine profits,
   because mines can safely produce more  coal without  delays taken  to reduce excess
   levels of methane.

•  Improved local environmental quality
   Coalbed methane is a clean-burning fuel.  When burned, methane emits essentially no
   sulfur or ash, and only a small  percent of the nitrogen oxides,  carbon  dioxide and
   volatiles that are emitted by the burning of coal. Coalbed methane could offset the use
   of coal  by industrial and  residential consumers; improving  local air quality. A  high
   degree  of coal  combustion  is  common  in  China's cities,  leading  to public  health
   problems.  Adverse environmental  impacts  associated with atmospheric  methane
   emissions include depletion  of  stratospheric  ozone and increases  in tropospheric
   ozone,  which contributes to smog  formation. Reducing methane  emissions near
   population centers, lowers tropospheric ozone creation and associated smog.

•  Improved global environmental quality
   Methane currently accounts  for  over 15  percent of expected warming from climate
   change (USEPA, 1993). It has a  sizable contribution  to potential  future  warming
   because it is a potent greenhouse gas and because methane's concentration has been
   increasing dramatically. Due to methane's  high potency and short lifespan, stabilization
   of methane  emissions will  have a rapid impact on mitigating potential  climate change.
   Higher methane concentrations may also contribute to stratospheric ozone depletion.

   China  is the world's  largest  emitter of methane from  coal mining, with  estimated
   emissions of 12.5 to 19.4 billion cubic meters annually, or about one-third of the world's
   total emissions from this source.  Increased recovery of methane from China's  coal
                                                                              1-30

-------
       mines has great potential for reducing global methane emissions. Currently,  less than
       5 percent of total mine methane emissions are being recovered, with the balance being
       emitted to the atmosphere by ventilation systems.  Increasing the recovery rate to 40
       percent at the state-owned mines alone (some of which liberate as  much as 50 cubic
       meters of methane per ton of coal mined) would reduce emissions by an estimated 4 to
       5 billion cubic meters annually.

1.3.5   FOREIGN INVESTMENT IN CHINA: IMPLICATIONS FOR COALBED METHANE
       PROJECTS

For the benefit of US companies considering investment  in coalbed methane in China, this
section contains an overview of China's  investment potential. More detailed information on
policies to encourage development of coalbed methane is presented in Chapter 6. In addition,
Chapter 5  includes a discussion of issues related to joint venture development. China's
economy is attracting numerous global investors, and because deployment of foreign capital is
a critical  component of China's long-term strategic policy for economic  development, the
government is making  efforts to further encourage foreign investment. In encouraging the
establishment of joint ventures  with foreign  capital, China gives energy development the
highest priority; and, at present,  most foreign capital in  this sector is used in oil prospecting
and coal exploitation (Dorian, 1995).

In  1993 China renewed efforts to revise its taxation system as a means of better  attracting
foreign investment. Toward  this  end, six new laws and  regulations were adopted during the
year and  put into effect January  1, 1994. These laws and  regulations included the enterprise
income tax law and the individual income  tax law, as well as regulations on the following: a
value-added tax; a consumption tax;  a business tax; and a resource tax.

Recognizing  the potential  benefits of increased coalbed  methane  development, China's
government is taking an active role in encouraging development of coalbed methane. In order
to provide a regulatory and legal framework for coalbed methane exploration in China,  MOCI
issued the  "Provisional Regulation and  Rules for the  Management of Exploration and
Development of Coalbed Methane" in  April 1994 (China Coalbed  Methane Clearinghouse,
1995). The government's desire to  develop this resource, together with a strong  desire to
establish  joint energy ventures  with foreign capital, create a favorable climate for  foreign
investment in coalbed methane projects.

1.3.6  SOURCES OF ADDITIONAL INFORMATION

As discussed in Chapter 3, numerous coalbed methane  projects are currently underway in
China. Several of  these  involve joint ventures between  large  US energy companies and
Chinese  mining  enterprises.  The  China  Coalbed  Methane  Clearinghouse  has   been
instrumental in  providing foreign companies with the assistance  and  information needed to
assess methane development opportunities in key coal mining areas. It has also helped these
companies by explaining the procedures  for management of coalbed methane projects in
China, and proposing target areas  for coalbed methane  development. The China Coalbed
Methane  Clearinghouse remains an excellent source of information and assistance for firms
interested in developing coalbed methane in China. Readers may contact the Clearinghouse at
the address listed in Appendix A.
                                                                                1-31

-------
Potential investors may also wish to read the publication "Investment in China", compiled jointly
by China's Foreign Investment Administration, the China  Economic and Trade Consultants
Corp., and the Ministry of Foreign Trade and Economic Cooperation (whose address is listed
in  Appendix A). It includes  the  text of laws  on Chinese-foreign  contractual  joint  ventures,
procedures for approving joint ventures, and many other regulations and topics of interest.
                                                                                   1-32

-------
                                  CHAPTER 2


              COALBED METHANE RESOURCES OF CHINA

2.1 INTRODUCTION

Throughout China, there  are abundant coal  resources,  and associated  coalbed  methane
resources. The CM estimates that total coalbed methane resources contained in coal  less than
2000 m deep are 30 -  35 trillion cubic meters (Sun and Huang,  1995). The bulk of  these
resources are contained in the Ordos, Qinshui, North China, Tu-Ha, and Junggar Basins, and
the Yunnan  and Guizhou  coal-bearing regions.  Each of these  basins or regions contain
coalbed methane resources in excess of 1 trillion cubic meters. The following sections of this
chapter present an overview of China's major coal basins, and describe the geologic factors
affecting coalbed methane recovery.

Throughout this chapter, tables containing coal  and methane resource data are organized
according to coal field or province rather than by basin, as this is how the data are typically
reported  in China.  Generalized discussions of coal and methane  resources in this chapter,
however, will  refer to  coal  basins where  appropriate. Chapter 4  profiles coal mining
administrations considered by the Ministry  of Coal  Industry (MOCI) to have the greatest
coalbed methane development potential.

2.2 TECTONIC FRAMEWORK OF CHINA'S COAL BASINS

China  has  undergone a  long and  complex  tectonic  history dominated  by  compressional
deformation, but  influenced by episodes of  rifting  as well. The geologic history of the coal
bearing regions of China is the result of complex overprinting of various tectonic events, one
upon the other. Figure 13 depicts the location and geologic age of the major tectonic  elements
that formed the structural framework for the development of the China's sedimentary basins
The unique geologic evolution of basins within a given region affected the deposition of the
coal bearing strata and the associated generation of gas, as well as the subsequent trapping
or dispersal of this gas.
                                                                               2-1

-------
                                                                                                                NORTHEAST
                                                                                                                  \ CHINA BLOCKS
EXPLANATION

  Cenozoic

  Mesozoic

  Late  Paleozoic

  Middle Paleozoic

  Oceanic Crust

  Continental Basement

  Major  Pault, Suture

  Latitudinal  and  Longitudinal Belts
                                                                                                            2-2

-------
The tectonic evolution of northern China differs dramatically from that of southern China. North
and south China were at one time separate microcontinents, or plates, which collided during
Permian time (Liu, 1990). The northern plate acted as a relatively stable platform throughout
the depositional history of the coal-bearing sequences.  It is known as the North China Block.
Basins lying in northeastern China produce large, economically important amounts  of coal.
These basins were formed during  a major rifting event that resulted in a thick and relatively
undeformed marine  Paleozoic stratigraphic  sequence  which accumulated as the rift basin
opened. This thick sequence  underlies the coal strata that was deposited  in a sequence
dominated by terrigenous rocks.

Back  arc basins develop in the  region behind interactive tectonic plate margins. This is  the
locus  of downwarping of the crust that occurred during a compressional period which resulted
from the collision  and subduction of oceanic crust  under accreting  continental  crust.  The
geologic record suggests that the Tarim, Junggar and Qaidam Basins are back arc basins
situated to the west of the North China block, north of the accretionary terrain that comprises
southern China.

In contrast to northern China,  episodic tectonic events and  marine  transgressions largely
controlled southern China, resulting in frequent disruptions in coal deposition. South China was
not a  stable platform,  but a composite terrain comprising  numerous severely deformed and
folded belts similar in  structure to the  Alps  of Europe  or the Appalachians of the US (Hsu,
1989).

Dramatically different tectonic history resulted in unique coal basin  geology within the  north
and south regions.  In  the north, clastic sequences dominate sediments of the coal-bearing
sections, and coal seams generally are fewer, thicker,  and more laterally  continuous. In  the
south, where marine influence and tectonic activity  prevailed, the  coal  sequences  contain
carbonates and volcanic rocks,  and the coals  tend  to be  more numerous, but thinner and
laterally discontinuous.

These differing  tectonic histories have  several broad  implications  for  coalbed methane
development in China. The North  China Block and  the sedimentary basins of northeastern
China are the least deformed areas. Southern China, in contrast, has undergone widespread,
complex faulting and folding, which will  greatly affect the reservoir characteristics of the gassy
seams found in this region. In some cases,  structural  complexity may reduce the permeability
of the reservoir; where in others areas it  may enhance  permeability. It is likely  that  the
permeability enhancement  will  be localized, and identification  of these higher permeability
zones will be key in achieving high recovery efficiencies. Mining also enhances permeability; in
fact, in some places, the only areas that are likely to produce methane are those where mining
has caused relaxation of the strata, thus acting as massive reservoir stimulation.

The deposition of coal resources is controlled  by major  tectonic structures recognized by
Chinese geologists  as directly affecting the  occurrence, development, and  distribution of coal
seams.  These  structures  comprise latitudinal and longitudinal tectonic belts.  Three major
latitudinal tectonic systems  are present in China.  From north to south, they are the Yinshan-
Tianshan Tectonic  Belt;  the  Qinling-Kunlun Tectonic  Belt; and the  Nanling  Tectonic  Belt
(Figure 13). These  belts divide China into major structural  elements, which acted at various
times  as controls on deposition  of the coal-bearing  sequences.  Coal-bearing sediments
occurring in the Yinshan-Tianshan Tectonic Belt range in age from  late Jurassic to  early
Cretaceous; those  of  the  Qinling-Kunlun  and  Yinshan-Tianshan Tectonic Belts are older,


                                                                                    2-3

-------
predominantly Permo-Carboniferous and Jurassic in age. South of the Qinling-Kunlun Belt, the
coal-bearing formations are mainly late Permian in age.

The coal resources in the area north of the Qinling-Kunlun Belt account for 93.6 percent of the
total coal resources in China. The area south of this tectonic belt accounts for only 6.3 percent
of  the  total  coal resources in  China.  Of these resources,  91 percent are concentrated  in
Yunnan, Guizhou and Sichuan Provinces.

The longitudinal tectonic belts are generally  compressional  systems. The four major north-
south tectonic belts are  the West  Yunnan  Tectonic Belt;  the  Sichuan-Yunnan  Belt; the
Sichuan-Guizhou Belt; and the Helan-Liupan Belt. The Sichuan-Yunnan Belt and Helan-Liupan
Belts  are located in central China; these two belts divide China into eastern  and western
structural zones, as well  as coal producing regions. Tectonic events, primarily Mesozoic and
Cenozoic in age, resulted in a relatively stable platform to the east  and a technically active
area to  the west. The coal basins contained in the eastern area thus differ dramatically from
those in the west.

In summary,  the  tectonic history  of  China creates  a framework for understanding the
distribution of coal and associated coalbed methane resources. Figure 14 illustrates the major
sedimentary basins of China. As expected, the major coal mining areas are situated on the
margins of the sedimentary basins. Estimated methane resources are also indicated for select
basins.  The  sedimentary  basins  are  contained  within four  large  geographic  regions -
Northeast,  North, South,  and Northwest. Each  region  has unique  characteristics that are
directly  related to their tectonic history. Figure 14 shows these four regions; their key features
relative to the coal deposits are as follows:

•  Northeast:   The coals occurring in  this region were deposited within a rift basin; coal
   seams are thick and laterally continuous. Major coal basins are the Sanjiang-Mulinghe,
   Songliao,  Donhua-Fushun, and  Hongyang-Hunjiang (detailed in Section 2.3.2).

•  North:  The north is dominated by a stable platform (the North China block) underlain by
   continental basement rock, formed as rift  and foreland basins. Major coal basins are the
   Taixing-Shandou, Qinshui, Daning, Ordos, Hedong, Yuxi, Xuhuai,  and Huainan (detailed in
   Section 2.3.3).

•  South: The south consists of accretionary terrain that comprises a series of fold belts. Coal
   seams in this region are  thinner; and coal  deposits  are frequently  disrupted relative  to
   those  in  the  north  and  northeast.  Major coal  basins  are  the Chuannon-Qianbei,
   Huayingshan-Yongrong, and Liapanshui (detailed in Section 2.3.4).

•  Northwest: This region contains  back-arc basins underlain largely by oceanic crust. Major
   basins are the Tarim, Qaidam, and Junggar Basins  (detailed in Section 2.3.5).
The regions designated in the text above are the basis of organization used to discuss coal
and    coalbed   methane   resources   in    Sections    2.3    and   2.4,    respectively.
                                                                                   2-4

-------
          YiU

Wuq^iaYou>er

      TalimuB
                 Songliao Nanyuan
                 \      ^
                         Sanjiang-Mulini

                    / /
                    ^-Yilan-Yitong
                      Jiaohe-Liaoyuan
                      Yanbian

               r _  Dunhua-Fushun

               'ulfengy.ang"HunJlang
                                                                          ,ixmg Shandou
                               ,Zhundong       Pingzhuang
                               ,E. Juneear)         Beida\\
                                    ,,  Qins
                                    Guangw
                        Huayingshan-Y
          -Xunan— Luxinan
         rXuhuai
           Huainan
            —Suzhe-Wanbian
            - Changjiang Zhongxia You
             (Lower Yangtze River)

           Wuganbian

         Zheganbian
        Pingdong
      xYongmei
     Chuanwu Xiangbian
\Yuebei
 (Old Canton)              SCALE
                                                                                    250     500nile
                                                                      2-5

-------
2.3 COAL RESOURCES

2.3.1  INTRODUCTION

In 1992, China's demonstrated coal resources totaled 986.3 billion tons, with proven in-place
reserves accounting for 30 percent, or 296 billion tons. Recoverable reserves totaled 114.5
billion tons. Appendix B describes the coal reserve and  rank classification systems used in
China. The  coal deposits are distributed throughout  China and  vary  in age,  structural
complexity, and rank. Of the total coal resources, 75 percent are bituminous, 12 percent are
anthracite, and 13 percent are lignite.

The economically important coal seams in China occur in Permian,  Carboniferous, Jurassic,
and Tertiary-age sediments. The stratigraphy of China's major coal-bearing groups for the
Northwest, South, North, and Northeast regions is shown on  Figure 15; composite stratigraphic
sections are shown for key coal basins within each of the four regions. Northern, northwestern,
and northeastern China contain 84 percent of the total in-place coal reserves; of these, the
provinces of Shanxi, Shaanxi, and  Inner  Mongolia  account for 75  percent.  Coal reserves
suitable for open cast mining are comparatively small (7 percent of total); 70 percent of these
surface-mineable reserves are lignite (DRCCU, 1994).  Abundant  coal  reserves occur in
northwestern China; however, a large portion of the reserves are unexplored, infrastructure is
absent, and the region is distant from population centers.

China's  coal and coalbed  methane resources will be discussed below according to the four
geographic regions designated in Section 2.2. Although there are coal basins in Tibet, these
resources were not evaluated under the scope of this report.

As  described  in  Chapter  1,  China's state-run coal mines  are  divided  into Coal Mining
Administrations (CMAs). Currently there are 108 CMAs in China, which manage approximately
650 mines. MOCI has  identified  major  coal-producing areas, which contain large CMAs,
throughout China.  Figure  16 shows  the  four geographic  regions,  the location of  selected
CMAs. Table  6 summarizes 1994 coal production for all  CMAs that produced over 500,000
tons per annum.

Included within the following sections is a brief description of the major  coal basins found
within each region. Following each section of text describing  a particular region is a map of that
region indicating the location, coal production and coal type for major CMAs contained within
the region. Most of the information in the text that follows came from MOCI and articles by Sun
and Huang (1995) and  Bai (1995). This overview of coal basins serves as a guide to the size
of basins, age, number of seams, thickness, rank, and depth of seams. Chapter 4 provides
detailed profiles of ten key CMAs within these basins.
                                                                                  2-6

-------

Figure 15. GENERALIZED STRATIGRAPHIC COLUMN
OF MAJOR COAL-BEARING GROUPS
Composite Sections From Key Basins in Northwest, South, North and Northeast China

SYSTEM
>H
K
<
pi
K
H
E-i
CRETACEOUS
u>
ro
m
<1
K
£>
^3
O
ra
ro
2i
K
E-i
^
^
5?
K
H
DH
CARBONIFEROUS
SERIES
Pliocene
Miocene
Oligocene
Eocene
Paleocene

Upper
Middle
Lower

Upper
Lower
Upper
Middle
Lower
NORTHWEST
Junggar
Basin



Xishanyao
Badaowan



SOUTH
Sichuan—
Guizhou Area




Changxing
Longtan
Tongziyan


Ceshui
(Seshui)
NORTH
Ordos and
North China
Basin
Zhaotong
Shuange



Datong/
Yan'an



Shihezi
Shanxi
Tiayuan
Benxi

NORTHEAST
Shulan, Fushun
Fuxin, Jilin

Shulan/
Fushun


Fuxin/
Wulin
Naizishan





Sources: CII; Xi'an Coal Branch; Liu, 1990; Lee, 1989; Hendrix et al, 1995
05139002
2-7

-------
2-8

-------
  TABLE 6.  SUMMARY OF 1993 COAL PRODUCTION FOR MAJOR CMAs
CMAs producing over 500,000 tons per annum, in descending order of production
              (Locations of CMAs shown on Figures 17-20)
REGION
North
North
North
North
North
Northeast
North
Northeast
North
North
Northeast
North
North
North
North
Northeast
North
Northeast
Northeast
North
North
Northeast
North
North
North
North
North
North
South
North
North
North
North
North
Northeast
North
South
North
Northeast
North
Northeast
Northeast
North
North
North
South
North
Northwest
North
North
South
Northwest
South
North
North
CM A
Datong
Kailuan
Pingdingshan
Huaibei
Xishan
Hegang
Xuzhou
Fuxin
Longkou
Yanzhuo
Jixi
Huainan
Yangquan
Fengfeng
Jincheng
Tiefa
Xinwen
Qitaihe
Shuangyashan
Lu'an
Yima
Fushun
Pingzhuang
Zaozhuang
Shitanjing
Beijing
Zibo
Zhengzhou
Panjiang
Feicheng
Fenxi
Xingtai
Tongchuan
Hebi
Shenyang
Zhalainuoer
Shuicheng
Huozhou
Liaoyuan
Datun Coal
Tonghua
Shulan
Jiaozuo
Wanbei
Huolinhe
Panzhihua
Hancheng
Jingyuan
Dayan
Wuda
Pingxiang
Yaojie
Songzao
Handian
Shizuishan
PROVINCE
Shanxi
Hebei
Henan
Anhui
Shanxi
Heilongjiang
Jiangsu
Liaoning
Shandong
Shandong
Heilongjiang
Anhui
Shanxi
Hebei
Shanxi
Liaoning
Shandong
Heilongjiang
Heilongjiang
Shanxi
Henan
Liaoning
Inner Mongolia
Shandong
Ningxia
Beijing
Shandong
Henan
Guizhou
Shandong
Shanxi
Hebei
Shaanxi
Henan
Liaoning
Inner Mongolia
Guizhou
Shanxi
Jilin
Jiangsu
Jilin
Jilin
Henan
Anhui
Inner Mongolia
Sichuan
Shaanxi
Gansu
Inner Mongolia
Inner Mongolia
Jiangxi
Gansu
Sichuan
Hebei
Ningxia
COAL BASIN
Daning
Jingtang
Yuxi
Xuhuai
Qinshui
Sanjiang-Mulinghe
Xuhuai
Fuxin
Huangye
Luxinan
Sanjiang-Mulinghe
Huainan
Qinshui
Taixing-Shandou
Qinshui
Songliao
Luzhong
Sanjiang-Mulinghe
Sanjiang-Mulinghe
Qinshui
Yuxi
Donhua-Fushun
Pingzhuang
Luxinan
Zhuohe
Jingtang
Guangfang
Qinshui
Liupanshui
Luzhong
Qinshui
Taixing Shandou
Ordos
Taixing-Shandou
Donhua-Fushun
Haila'er
Liupanshui
Qinshui
Jiaohe-Liaoyuan
Luxinan
Hongyang-Hunjiang
Yilin-Yitong
Qinshui
Xuhuai
Shengli-Huolinhe
Dukou-Chuxiong
Hedong
Jingyuan-Jingtai
Haila'er
Ordos
Jiyou
Zhongqilian
Chuannon-Qianbei
Taixing-Shandou
Zhouhe
SPECIFIC
EMISSIONS
21.42
15.82
NA
11.45
12.35
16.17
13.16
29.08


29.84
18.41
25.95
21.28
19.00
12.73

19.18
15.77

10.84
31.58


12.48

14.86

20.42



17.08
15.73
26.18

33.74

16.36

18.25
22.63
19.97



16.48
11.25


30.62
14.49
47.99

14.27
COAL
PRODUCTION (103T)
31,754.6
17,604.8
17,147.8
14,232.1
14,127.7
13,130.7
13,103.1
12,698.7
12,003.1
12,003.1
11,644.2
11,498.5
10,476.9
10,370.0
10,320.6
10,241.0
10,089.0
10,060.1
10,015.5
9,106.4
8,609.6
8,579.4
6,993.3
6,129.2
6,005.8
5,517.0
5,061.7
5,052.3
5,014.0
4,993.3
4,819.0
4,780.0
4,721.6
4,671.5
4,410.5
4,305.1
4,122.2
4,016.8
3,979.0
3,875.8
3,809.3
3,803.8
3,799.6
3,766.0
3,694.2
3,527.2
3,462.8
3,350,8
3,311.9
3,253.3
2,741.4
2,718.1
2,696.4
2,620.0
2,560.8
                                                                   2-9

-------
          TABLE 6. SUMMARY OF 1993 COAL PRODUCTION FOR MAJOR CMAs
                             (Continued from previous page)
REGION
South
South
South
South
Northeast
Northwest
South
North
South
Northeast
North
North
Northwest
South
South
Northeast
South
South
North
South
North
North
North
North
North
South
South
North
North
South
South
South
South
South
North
South
South
North
South
South
Northwest
South
South
North
South
North
North
South
South
North
South
South
South
North
South
CM A
Furong
Lianshao
Heshan
Nantong
Beipiao
Urumqi
Zixing
Xuangang
Fengcheng
Nanpiao
Baotou
Haibowan
Hami
Baisha
Guangwang
Huichun
Yongrong
Liuzhi
Pubai
Tianfu
Yiminhe
Yinying Mine
Chenghe
Xiaoyu Mine
Jingxing
Quren
Leping
Dongshan Mine
Xinglong
Lindong
Changguang
Yong'an
Dazhu
Meitian
Cuijiagou Mine
Donglou
Hongmao
Linyi
Youjiang
Yongding
Datong
Longyan
Huayingshan
Guzhuang Mine
Siwangzhang
Nanzhuang Mine
Xiahuayuan Mine
Songyi
Zhongliangshan
Yancheng City
Shangjing
Luoshi
Huangshi
Lingwu
Yinggangling
PROVINCE
Sichuan
Hunan
Guangxi
Sichuan
Liaoning
Xinjiang
Hunan
Shanxi
Jiangxi
Liaoning
Inner Mongolia
Inner Mongolia
Xinjiang
Hunan
Sichuan
Jilin
Sichuan
Guizhou
Shaanxi
Sichuan
Inner Mongolia
Shanxi
Shaanxi
Shanxi
Hebei
Guangdong
Jiangxi
Shanxi
Hebei
Guizhou
Zhejiang
Fujian
Sichuan
Guangdong
Shaanxi
Guangxi
Guangxi
Shandong
Guangxi
Fujian
Qinghai
Fujian
Sichuan
Shanxi
Guangdong
Shanxi
Hebei
Hubei
Sichuan
Jiangsu
Fujian
Jiangxi
Hubei
Ningxia
Jiangxi
COAL BASIN
Chuannon-Qianbei
Lianshao
Guizhong
Chuannon-Qianbei
Nanpiao
Junggar
Chenzi
Daning
Pingdong
Nanpiao
Daqingshan
Ordos
Tu'Ha
Chenzi
Guangwang
Yanbian
Huayingshan-Yongrong
Liapanshui
Hedong
Huayingshan-Yongrong
Haila'er
Qinshui
Hedong
Daning
Taixing-Shandou
Yuebei
Pingdong
Qinshui
Chengde
Liapanshui
Suzhe-Wanbian
Yongmei
Huayingshan-Yongrong
Yuebei
Ordos
Nanning
Guizhong
Lunan
Baise
Yongmei

Yongmei
Huayingshan-Yongrong
Qinshui
Yongmei
Taixing-Shandou
Xuanwei
Chuanwu Xiangbian
Chuannon-Qianbei
Lunan
Yongmei
Jiyou
Wuganbian
Ordos
Pingdong
SPECIFIC
EMISSIONS
26.72
37.88

36.83
24.57
16.00
22.04
11.81
28.55
12.29
45.50


23.20
17.04
15.52
37.65
51.31

50.40

NA



16.33
18.86

14.65

27.64


41.83
10.32

24.48





26.07



28.00

58.38
13.97





COAL
PRODUCTION (103T)
2,394.7
2,360.1
2,353.8
2,208.6
2,177.6
2,166.6
2,142.4
2,062.1
2,000.3
1,954.2
1,904.5
1,743.3
1,695.5
1,676.8
1,667.2
1,610.1
1,501.8
1,454.1
1,401.1
1,345.9
1,343.2
1,203.1
1,180.1
1,101.2
1,100.0
1,084.2
1,082.9
1,060.9
1,050.0
1,041.6
1,027.6
1,018.0
1,012.9
920.4
863.1
818.2
810.1
781.3
741.2
722.8
707.0
670.1
669.8
667.2
665.4
651.1
630.0
625.4
613.8
609.4
608.9
604.6
586.5
532.8
505.3
* Average specific emissions listed for high gas mines only (emissions greater that 10 mj/ton)
Source: China Coal Industry Yearbook, 1994; and the CM
                                                                              2-10

-------
2.3.2  NORTHEAST REGION

The Northeast region contains coal-bearing sediments deposited predominantly during Late Jurassic time, with some
deposited during Permo-Carboniferous  and early  Tertiary time.  The  region comprises  Jilin  and Heilongjiang
Provinces, northern Liaoning  Province and  the eastern part of Inner Mongolia (Figure 17). The tectonics of the
Mesozoic coalfields are relatively complex,  due to  the impact of the folding  and faulting that occurred  after the
formation of  the Mesozoic coal  basins.  A major subsidence zone,  the  Cathaysian  rift system, developed  in
Northeast China after the late Mesozoic (Liu, 1986). Many extensional structures, such as  horsts and  grabens,
formed in the rift system, and the coal-bearing formations are best developed in these fault-defined basins.

Coal seams are generally thick, although  the lateral extent within individual coal basins may be relatively small. Coal
rank ranges from lignite to high volatile bituminous coal with some occurrence  of medium volatile bituminous coals.
Late Jurassic coal-bearing sediments are well-developed in the eastern part of this region; the Sanjiang-Mulinghe
Basin is  located in this region. Grabens also formed during rifting events in the southern part of the region; the
Songliao Basin contains late Jurassic coal-bearing sediments.

Most of the coal in this  region is bituminous (much of it gassy), although there are some anthracite and lignite coals
as well. Late Jurassic and early Cretaceous  lignite deposits occur in Inner Mongolia, mainly in the area north of the
Yinshan Mountains. The economic hard coal  deposits comprise the Tertiary Fushun and Shulan Groups (Figure 15).

Deposits are grouped into four main basins, located in the provinces of Heilongjiang, Liaoning, and Jilin.

•  The Sanjiang-Mulinghe Basin is the most economically important coal basin  in Heilongjiang Province, with seams
   ranging in thickness from 2 to 20 meters.  Major CMAs within this basin include Hegang and Shuangyashan. Coal
   measures in the Hegang CMA are shallow and gently dipping, and are structurally  uncomplicated.  These are
   high volatile bituminous coals, some of which are suitable for  metallurgical coking.  The Shuangyashan CMA,
   also located in Sanjiang-Mulinghe Basin, possesses high quality coals but is located far from major  industrial
   centers.

•  The Songliao Basin has an area of 513  km2.  The basin contains the large Tiefa CMA, which has eight active
   underground mines, all of which are gassy. Seam depth ranges from 600 to 800 m. There are 20 coal seams,  of
   which 12 seams are mineable. The basin's major mineable coal seam, No. 8, has an average thickness  of 2-4 m.
   Coal rank is high volatile bituminous.

•  The Donhua-Fushun Basin is  a major coal-producing  basin in Liaoning Province.  The coal basin has three
   workable Eocene seams whose total thickness ranges from 20 to 134 meters. Structurally, this basin is  relatively
   simple, with laterally continuous high  volatile bituminous coal seams that are low in ash and sulfur. The Fushun
   CMA, located in the Donhuan-Fushun Basin, recovers and uses coalbed methane. In 1993, Fushun CMA had an
   annual gas drainage of 113.36 million cubic meters (Huang L., 1995).
                                                                                 2-11

-------
2-12

-------
•  The Hongyang-Hunjiang Basin is located in Jilin Province. Within this basin, the Tonghua CMA has numerous
   mineable bituminous coal seams. Some of these Jurassic coal seams  are mined for coking coal.

2.3.3  NORTH REGION

The North Region contains the largest quantity of proven coal  reserves in the country.  It is an important  coal-
producing region of China, possessing high quality coal and nearby markets.   Flat-lying Paleozoic and Mesozoic
strata occur in  a series of basins comprising  800 km2 and extending through Shanxi Province north  to Hebei
Province and southwest Inner Mongolia. All twelve of the provinces in this region produce coal, making an important
contribution to national coal production. Rank of these  coals is  principally bituminous, with occurrences  of small
amounts of semi-anthracite and anthracite. Coal  basins in the northern  region are generally linked by rail to the
domestic markets and  ports from which  coal is exported. The rail system  to  coastal markets has recently  been
upgraded. The  area has been extensively explored,  and numerous large  underground mines are  in operation.
Abundant hard coal reserves occur in Inner Mongolia, which lie in remote areas with access to markets via railway.

The North Region consists of predominately Upper Carboniferous-Permian coal basins, with lesser amounts of coal
reserves contained in Lower and Middle Jurassic sediments (Figure 15).  Major CMAs and coal basins  in this region
include  Kailuan, Fengfeng, Tonghua, Datong, Jiaozuo, Zibo, Yangquan, Huainan, Huaibei,  Yuxi, and  Hebi (Figure
18). Quality of the Paleozoic coal  produced in this region is relatively consistent. With the exception of the anthracite
deposits of the West Beijing coalfield, all other coalfields contain high volatile bituminous coal. In the central part of
this region near Taihang Mountain, coal deposits range in rank from low volatile bituminous coal to anthracite  coal.
Key coal basins in the North Region are:

•  The economically important coal basin in Hebei Province is Taixing-Shandou, with bituminous coals of Permo-
   Carboniferous age.  In this basin, there are  up to 21 mineable coal seams, some of which are coking quality,
   whose maximum thickness is 30 m. In general,  coal measures are gently dipping with some local faulting. Major
   CMAs in the Taixing-Shandou  Basin include Hebi, Jingxing, and Xingtai.

•  The Qinshui Basin, located in Shanxi Province,  is a major coal-producing basin  containing  Carboniferous,
   Permian, and Jurassic coals  (Walker, 1993). Major CMAs in the  Qinshui  Basin include Yangquan, Xishan,
   Jincheng, and Jiaozuo; these  CMAs produce bituminous and  semianthracitic coals. Methane recovery  systems
   are used at the Yangquan CMA, and gas drainage in 1992 averaged 90 million cubic meters per annum.

•  The Daning Basin, located in  northern Shanxi Province, comprises Carboniferous, Permian, and Jurassic coals
   (Walker, 1993). It contains the largest CMA in China, the Datong CMA. In 1994, the coal mines of  Datong  CMA
   produced over 31 million tons of coal, primarily subbituminous in rank.
                                                                                2-13

-------
                           INNER  MONGOLIA

                                    Datong
        "Wuda
        Shizuishan
         Shitanii
                                                  Guznuang Mine
                                                   / Lingsnan LMA
                                                         HEBEI
                                                   Jingxing
                                                   Nanzhuang IWine
                uangang in
         Dongshan Mine-HT
               Xisharr
                  Yinying
SHAANXI    VFeroag^8^"8
       l_U'a»L-^\^rr^Huozhou
COAL  TYPE
 GANSU

ijiagou Mine,
                                                                               -Zibo
                                                                         SHANDONG
                    /Tongcpuan
                              Hancheng
                                      Yima

                             Pingdingshan
                                            Jiaozuo
                                                Datun Elec. Co.
EXPLANATION
                                                                                           10   >1D million tons per annum

                                                                                           5    >5<10 million tons per annum

                                                                                           1    >1<5 million tons per annum

                                                                                           0.5   >5QO,ODD<1 million tons per annum

                                                                                           0.05  >50,000<50Q,000 tons per annum
                                                                                                                       na   coal type not available

                                                                                                                       lig   mainly lignite production

                                                                                                                       sub  mainly sub-bituminous coal

                                                                                                                       b   moinly bituminous coal

                                                                                                                       sa   mainly semi-anthracite

                                                                                                                       m.t.  mixed types
                                                                                                      2-14

-------
•  The Ordos Basin is an extensive coal basin, spanning the provinces of Shaanxi, Gansu,  Ningxia, and Inner
   Mongolia. It contains Carboniferous, Permian, and Jurassic coals (Walker, 1993). Major CMAs contained within
   the Ordos Basin include Tongchuan, Wuda, and Cuijiagou, which produce subbituminous and bituminous coals.

•  Most of the coal seams in Henan Province are relatively deep, and were  deposited in  Permo-Carboniferous
   time. The Yuxi Basin contains the Pingdingshan and Yima CMAs.

•  The Xuhuai Basin, located in northern Anhui Province, contains substantial anthracite and bituminous deposits
   of coking coal. It is a large basin, covering 4,000 km2 and containing 12 coal mines, 10 of which are considered
   highly gassy  mines. Seam depth ranges from  400 to 1,000 m, with 13 to 46 seams, 4 to 13 of which  are
   mineable  in various parts of the basin. The basin contains the large  Huaibei CMA. At these mines, seam
   thickness ranges from 1 to 19 m. The coal-bearing strata are predominately steeply dipping, but free of intense
   structural deformation.

•  The Huainan  Basin is an important coal basin in southern Anhui and Jiangsu  Provinces, covering an area of
   2,500 to 3,000 km2 (Yang et al,  1995). Depth to the coal seams is generally less than 1,000 m, with a maximum
   depth of  1,700 m. There are 10 to 18 seams considered mineable; four to five major seams are 2 to 6 m thick.
   Permo-Carboniferous coal seams range in  rank from low to high volatile bituminous, much of which becomes
   coking quality with depth. The Huainan Basin is linked by railroad to the ports of Suzhou and Shanghai.

2.3.4  SOUTH REGION

The South  Region  comprises of Paleozoic and  Mesozoic bituminous and anthracite  coals,  of  Paleozoic and
Mesozoic age, with less important coal seams deposited during the late Tertiary. Most of the coal deposits in the
region were deposited in the Permian and late Triassic-early Jurassic (Figure 15). Important deposits of extractable
coal deposits in the eastern part of this  region are limited to complex tectonics and thinner seams. These deposits
are scattered throughout the provinces of Hubei, Hunan, Guangxi, Guangdong, Fujian, Zhejiang, Jiangxi, and South
Anhui (Figure 19). Numerous medium and small coal mines are currently operating in this area.

Permian coal deposits in Guizhou,  Sichuan, and Yunnan Provinces are more substantial, accounting for about 75
percent of the total  coal resources in the South Region. Although the southwestern part of this region lacks the
infrastructure of the  North Region, the government is committed to aggressively developing these coal resources.
Some of the  key coal basins in the South Region are:

•  The Chuannon-Qianbei Basin is located in Sichuan and Guizhou Provinces.  It contains thick, bituminous coals
   good for  coking. There are both semi-anthracite and lignite deposits in Sichuan Province. Major CMAs in  this
   basin include Songzao,  Furong, Nantong,  and Zhongliangshan. The Songzao CMA, between Sichuan and
   Guizhou  Province,  recovers and uses coalbed methane from underground methane drainage systems. In 1992,
   Songzao drained 67 million cubic meters, or 33 percent of the mine gas liberated.
                                                                                2-15

-------
   COAL TYPE

na   coal  type not  available

lig   mainly lignite  production

sub   mainly sub-bituminous coal

b    mainly bituminous coal

sa   mainly semi-anthracite

m.t.   mixed types
            PRODUCTION

         1Q    >10 million tons per annum

         5    >5<1D million tons per annum

          1    >1<5 million tons per annum

         0.5   >500,000<1 million tons per annum

         0.05  >5D,ODQ<500,000 tons per annum
                                                                               COAL  TYPE
     Longmenshan
                                                                                                                    Charigzhou City
Yarong LMA\
                                                                                                                        Yili LMA
                                                                                                                      ANHUI
                                                                                                                Wutong LMA\
                                             —Dazhu
                                          Zhongliangshan
                                                                                                                  Xuanjing LM

                                                                                                              ZHEJIAKJG
                                                                                                          / Shangrao LMA
                                    \   Songzao
                                    * Tongzi LMA
                                    / Lindong
                                                                                                                           Fengcheng

                                                                                                             xiang      t^Luoshi
                                                                                                                      Snangjing
                                                                                                                    Tianhushan
                                                  / Luocnang
                                                  	1—
                                     Youjiang  X Hongmao
                                                                   ?Pingsh(
                                                      Heshan    J^Xiwan
                                           GUANGXI             ^          GUANGDONG      \
                                                                                              \  7 vMeixian
                                                                                                 Siwangzhang
                                                                       v Manning
                                                                   \  ^ Nalong Mine f    /Maoming
                                                                    Donglou
                                                                                                                          —Changguang
                                                                                            2-16

-------
•  Huayingshan-Yongrong Basin is located in northern Sichuan Province. The basin contains two large CMAs with
   high gas mines, the Yongrong and Huayingshan CMAs.

•  Guizhou Province contains large coal reserves which have only been recently explored. They consist mainly of
   Permian bituminous and anthracite deposits. The Liapanshui coal basin is the most extensively developed coal
   basin in the province. The Panjiang, Shuicheng, and Luizhi CMAs are located in this basin.

•  There are six gassy mines in Yunnan Province, however, none of these are part of large, state-run CMAs. They
   are the Yipinglang,  Yangchang, Laibin, Tianba, Houshou, and Enhong mines.   Neither coal gas content nor
   specific emissions data are available  for these mines.

2.3.5  NORTHWEST REGION

The Northwest Region is geologically similar to the North region,  containing large resources of mainly Jurassic and
some Permo-Carboniferous deposits of bituminous coal. The deposits  are located in the  provinces of Xinjiang,
Gansu, and Qinghai (Figure 20). Despite large reserves, coal production is low due to the lack of infrastructure and
the region's distance from heavy industry and population centers.

Xinjiang Province,  located  in extreme  northwest China, contains  the largest  estimated  coal resources of any
province. Jurassic coal deposits range from lignite to bituminous  in rank, and are mostly is high volatile bituminous.
Three large basins, the Junggar, Tu-Ha,  and Yili  Basins, contain numerous thick coal seams,  ranging to a maximum
thickness of 200 m. Although current production  in this region is limited, it is an area with a great potential for future
coal development.

2.4 COALBED METHANE RESOURCES AND EMISSIONS ESTIMATES

The Xi'an  Branch Institute of the Central Coal  Mining Research  Institute  (CCMRI) estimates that China's coalbed
methane resources, at depths less than 2000 meters, total 30 to 35 trillion cubic meters (Sun and Huang, 1995). This
estimate is  the product of a special study entitled "Evaluation of Coalbed Methane Resources in China".

High gas or  outburst-prone  coal mines account for  almost half of the  key  state run mines  in China.  Table 7
summarizes 1994 methane  emission data for high methane  mines, low methane mines and open pits. Based on
data from 334 major coal  mining areas in China, there are  149 areas with high gas content, and 185  mining areas
with low methane content.

Appendix C lists the 1992 and 1994 emissions data by province for these mines (Tables C-1 and C-2,  respectively).
Table C-3 lists 12 local mine areas (LMAs) that are considered by MOCI to be high gas.
                                                                                2-17

-------
                                                                                                                         EXPLANATION
   PRODUCTION
                                         COAL  TYPE
-|Q    >10 million tons  per annum






 5    >5<10 million tons per annum





 1    >1<5 million tons per annum
                                      na    coal type not available




                                      lig    mainly lignite production




                                      sub   mainly sub-bituminous  coa




                                      b     mainly bituminous coal



0.5  >500,000<1 million  tons per annum      sa    majn|y semi-anthracite
0.05  >50,000<500,000 tons per annum
                                                                                                                                                      SHAANXI
                                                                                                                 2-18

-------
According to the CM, the CMAs whose average specific emissions exceed 20 cubic meters per
ton are as follows:
•  Northeast China: Fuxin, Yingcheng, Liaoyuan, Qitaihe;
•  North China: Xiahuayuan, Beipiao, Baotou, Yangquan; and
•  South China:  Tianfu, Huayingshan, Nantong, Yongrong, Furong,  Liuzhi, Shuicheng, and
   Songzao.

              TABLE 7 - SUMMARY OF 1994 METHANE EMISSION DATA
                          CHINA'S KEY STATE-RUN  MINES

NUMBER OF MINES:
Total
With Drainage
METHANE VENTED (10b mj)
METHANE DRAINED (10b mj)
TOTAL LIBERATED (10b mj)
DRAINED & USED (10b mj)
DRAINED & VENTED (10b mj)
TOTAL EM ITTED (1 Ob mj)
COAL PRODUCTION (10btons)
ABSOLUTE EMISSIONS (rrrVmin)
SPECIFIC EMISSIONS (mj/t)
LOW METHANE
MINES
351
0
798.6
0.0
798.6
0.0
0.0
798.6
248.1
1519.4
3.22
HIGH METHANE
MINES
318
131
3,863.5
561.3
4,424.8
395.2
166.1
4,029.6
190.5
8418.6
23.23
OPEN PITS
14
0
106.1
0.0
106.1
0.0
0.0
106.1
30.1
201.9
3.52
TOTAL
683
131
4,768.3
561.3
5,329.5
395.2
166.1
4,934.3
468.7
10139.9
11.37
Source: Fushun CCMRI, 1995

In 1994, 318  of the 683 state-run mines
listed,  or 46.5 percent,  were classified as
high gas or outburst mines. High gas mines
are defined  as those mines with  specific
emission greater than 10 cubic meters per
ton,  and low  gas  mines are those  with
specific emissions less than 10 cubic meters
per  ton. As  shown  in  Figure  21,  total
emissions of  coalbed  methane  increased
steadily, from  3.12  billion cubic  meters  in
1985 to 4.48 billion cubic meters in 1993.
Over this 8-year period (from  1985 to 1993),
total emissions increased by  an average  of
170 million cubic meters per annum.

Underground gas drainage  is practiced  in
many  mines to  improve mine safety.   In
1994,  131   mines  had  methane drainage
systems. A total of 4.425 billion cubic meters
of methane  was  emitted  from all mines  in
1994. Of this, 561 million cubic  meters  of
methane were recovered. A total  of  395
million  cubic meters, or  70 percent, of the
FIGURE 21. INCREASE IN METHANE
EMISSIONS AT STATE RUN COAL MINES
4.
3C .
{/) 1 .
w J
0)
"S
£ 05.
o *A
15
" 2 -
c *
_0
m™ 1 *\ .
•1 .
n e .
0.

S
/







^^







^
+^~







^-^









1985 1987 1989 1991 1993
                                                                               2-19

-------
recovered methane  was used. This represents less than 10 percent  of the total methane
liberated from Chinese mines.

Table 8 is a summary of emissions data by province, and indicates the amount of methane
recovered and used  by the key state-run mines whose specific emissions are greater than 10
cubic meters per ton  of coal  mined.  Appendix C  (Table C-4) lists detailed  information on
individual high gas CMAs.

Current methane recovery and methods are discussed in greater detail in Chapter 3. Figure 22
shows the location  of these  high  gas mines.  Many of  these  mines, which are currently
recovering methane, are discussed in detail in Chapters 3 and 4.

Figure 23 shows China's  coal basins, along with the  coalbed methane generation potential and
storage capacity. The Xi'an branch of CCMRI classifies these prospects as follows:

•  Low generation potential and medium storage capacity
•  High generation potential and low storage capacity
•  High generation potential and high storage capacity
•  Variable generation and low storage capacity

These four categories give an indication of the coalbed methane potential for selected Chinese
coal  basins; the optimal category  for coalbed methane production is high generation potential
and  high storage capacity. As Figure 23 shows,  the North,  Northeast and  South regions
contain several coal basins with these characteristics, and many key state-run mines are
located in these basins. One basin  in  the Northwest Region (the Tarim Basin) is  also in this
category.

2.5    OVERVIEW OF FACTORS AFFECTING RESOURCE RECOVERABILITY IN
       CHINA

China has abundant coalbed methane, but the development of this resource is limited by many
factors.  Regional  variations in tectonics  can  result in over-  or underpressured  zones, low
permeability, or erratic  methane content, adversely affecting development of coalbed methane.
The  permeability of  many coal seams in China,  particularly those that have  not undergone
relaxation due to mining,  is generally low, often less than 0.1 md; Sun and  Huang (1995) cite
low permeability as  the single most unfavorable factor affecting the development of coalbed
methane in China. Experience in the  US indicates  that the optimal permeability for coalbed
methane development  is about 3 to 4 md, and that it should be no lower than 1 md.

Underpressured reservoirs are  another relatively common problem in China.  Based on analysis
of available data and ongoing  testing for coalbed methane development, most coal seams in
China have low reservoir pressures, ranging from 0.5 to 3.0 MPa.  A small number of mines
operating at depths of  800 to 1000 m have reservoir pressures as high  as 5 to 8 MPa. In the
US, by comparison,  the Blue Creek  Seam of the Warrior Basin has reservoir pressures of 5.6
MPa at a depth of only  600 to 800 m. Coal seams with  low  permeability or those that are
underpressured may not be effectively stimulated by  hydraulic fracturing, and may ultimately
yield low production.
                                                                                2-20

-------
Table 8: KEY DATA PERTAINING TO METHANE LIBERATION FROM HIGH GAS MINES BY PROVINCE
NO. AVERAGE
MINES
PROVINCE REGIO (1994) SPECIFIC
N
EMISSIONS
(m3/T)
Heilongjiang NE 32 29.5
Jilin NE 18 19.1
Liaoning NE 30 22.5
TOTAL 80 24.6
Hebei N 15 15.9
Shandong N 3 17.9
Jiangsu N 2 11.0
Anhui N 17 13.6
Henan N 29 16.2
Shanxi N 24 21.2
Shaanxi N 10 25.8
Inner N 4 19.4
Mongolia
Ningxia N 6 14.7
TOTAL 110 17.7
Zheijiang S 11 30.9
Jiangxi S 15 29.3
Hunan S 31 30.9
Sichuan S 43 48.3
Guizhou S 19 37.1
Yunnan S 5 19.7
Guangxi S N/A
Guangdong S N/A
TOTAL 124 37.2
Gansu NW 4 37.2
Xinjiang NW 0 N/A
TOTAL 4 37.2
GRAND TOTAL 318
SOURC
TOTAL METHANE
LIBERATED %
(Mm3) CHANGE
1992 1994
390.1 450.1 15%
101.2 112.9 12%
549.7 536.0 -2%
1040.9 1099.0 6%
231.1 196.2 -15%
28.1 32.6 16%
13.8 12.1 -12%
248.7 303.5 22%
302.1 314.6 4%
806.8 795.5 -1%
122.0 161.3 32%
26.4 71.0 169%
73.7 92.6 26%
1852.8 1979.4 7%
31.1 28.0 -10%
123.5 111.6 -10%
104.9 103.2 -2%
644.4 618.7 -4%
389.1 416.6 7%
20.2 35.3 75%
1313.2 1313.3 0%
23.5 33.2 41%
N/A N/A
23.5 33.2 41%
4230.4 4424.9 5%
E: FUSHUN CCMRI (1995); CM (199£
TOTAL METHANE
DRAINED %
(Mm3) CHANG
E
1992 1994
16.3 13.5 -18%
0.3 1 .6 420%
132.9 142.2 7%
149.5 157.2 5%
20.7 19.3 -7%
0.0 0.0
0.0 0.0
9.5 9.8 3%
19.5 23.5 21%
114.5 115.2 1%
3.5 4.7 35%
1.4 0.0 -100%
8.0 13.1 63%
177.1 185.6 5%
0.0 0.0
9.3 1 1 .5 24%
1 .8 2.4 33%
154.1 153.0 -1%
40.6 48.5 19%
0.0 0.0
205.9 215.4 5%
0.0 3.1
0.0 0.0
0.0 3.1
532.5 561.3 5%
0; JP International (1990)
TOTAL METHANE
USED %
(Mm3) CHANG
E
1992 1994
0.0 0.0
0.0 0.0
114.9 126.7 10%
114.9 126.7 10%
10.4 14.2 37%
0.0 0.0
0.0 0.0
6.1 7.4 21%
10.6 13.8 30%
95.6 101.9 7%
0.0 0.0
0.0 0.0
3.4 5.6 65%
126.1 142.9 13%
0.0 0.0
5.1 8.0 57%
1.1 1.9 73%
90.9 101.8 12%
8.1 13.9 72%
0.0 0.0
105.2 125.6 19%
0.0 0.0
0.0 0.0
0.0 0.0
346.2 395.2
                                                      2-21

-------
                         v\ Qitaihe
        Shangrao  LMA    EXPLANATION
2-22

-------
                                    Pingzhuang
                                        eida .
                                        angqmg
                 Santang Hu
                        Chaean ..„.
                             aosha
                           Zhongjiakou
                           Daqingshan
Talimu Beiyua
anm; Yanzhu
                Tu-Ha
   Tadortg"Beiqi Lianzquleng
                        J
                 Zhongqiiian
                 ~
                     _  Qins.
                     Guangwa
    Tumen Ba
Changdu Mangkan
         Huayingshan-Y
   Chuannan-Qi

     Dukou-Ch
                                                             Songliao Nanyuan
                                                                     Sanjiang-Mulinkhe
                                                                       Yilan-Yitong
                                                                      Jiaohe-Liaoyuan
                                                                       Yanbian
                                                                   Dunhua-Fushun
                                                                   mgyang-Hun jiang
                                                                   r^npiao
                                                              g Shandou
                      GuizhonJ
                       Nannirig /
                          QuanXuy  ,,
                          Liansr/aL/Chehzl
                            Guangznou
                                                            5guangtangLuzhong
                                                                Yubei
                                                                	   Luxinan
                                                              Xuhuai
                                                                 Huainan
                                                                 —Suzhe-Wanbian
                                                                 ~~ Changjiang Zhongxia You
                                                                  (Lower Yangtze River)
                                                                Wuganbian
                                                             xZheganbian
                                                             Pingdong
                                                           \Yongmei
                                                          Chuanwu Xiangbian
                                                     v Yuebei
                                                      (Old Canton)             SCALE
                                             Source: Cll, 1995
                                                   2-23

-------
One key to successful coalbed methane exploitation in China will be identification of localized
areas with enhanced permeability. These enhanced zones are caused by either faulting and
folding of the coal bearing strata, or simply by the  mining out of adjacent seams, causing
relaxation of the beds. In addition, coalbed methane  research work in China should focus on
the development of technologies for producing methane from coalbeds with low permeability
and/or low reservoir pressures (Sun and Huang, 1995).

Underground gas drainage will continue to play an important role in China's coalbed methane
development program. Many  Chinese mines  are also interested  in  recovering methane via
surface  wells, but currently lack experience in this technology (Sun  et al,  1995). Chapter 3
discusses  the gas drainage techniques currently  used in China, including  several ongoing
projects demonstrating state-of-the-art technologies.
                                                                                 2-24

-------
                                  CHAPTER 3

        THE POTENTIAL FOR INCREASING COALBED METHANE
                       RECOVERY AND USE IN CHINA
3.1 INTRODUCTION

While methane  drainage  has been practiced  in China for several decades, tremendous
opportunities exist for increased recovery and use of methane from coal mines.  Currently, the
drainage efficiency of existing degasification systems is relatively low, averaging 20 percent
(Sun and Huang, 1995). Significantly more gas  could be available for use with an integrated
approach to methane recovery in conjunction with mining operations.

Chinese mines vent to the atmosphere most of the  gas they produce.  Based on methane
emissions  data from 1994, mines in  China  drained  about 564  million  cubic meters,  which
represents about 10 percent of the total methane liberated. A total of 110 government-run
mines currently have methane drainage systems. Less than one-half of these mines, however,
are set up to distribute and use recovered methane. China's mines use about 73 percent of the
methane they drain, and only about 14 percent of the total methane they liberate. With  an
integrated approach to methane recovery in conjunction with mining operations, these  mines
could make available significantly more gas that could  be used, rather than vented.

Gassy coal mines throughout the world  are concerned, for safety reasons, with reducing the
methane concentration in mine ventilation air. As discussed in Section 3.2 below, safety is of
prime concern at Chinese coal mines due to a high number of methane related accidents.
Mines can  reduce methane concentrations by  increasing ventilation, or  by decreasing the
amount of methane  liberated into the mine workings from  the coal and surrounding strata.
They can increase ventilation by increasing the size of the fans,  or adding additional ventilation
shafts.   Alternatively,  they  can reduce  the methane concentration in ventilation air  by
expanding methane drainage, ultimately  reducing ventilation requirements.  Methane drainage
can increase profits by improving mining  productivity and reducing ventilation requirements.  In
addition, mines can often sell the gas they recover.
                                                                               3-1

-------
3.2 METHANE ACCIDENTS IN CHINA'S COAL MINES

Gas  explosions and outbursts are a severe threat to  Chinese mines,  causing numerous
fatalities and economic loss. MOCI thus gives high priority to efforts related to controlling gas
hazards. Gas and coal dust explosions account for the largest percentage of accidents in
China's mines. Table 9 shows fatalities caused by gas and coal dust explosions in key state-
run mines from 1981 to 1993.

            TABLE 9. GAS  EXPLOSIONS AND OUTBURST FATALITIES
                        IN KEY STATE-RUN COAL MINES

1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
TOTAL
EXPLOSIONS
Accidents
11
6
11
11
8
6
9
7
4
10
5
3
7
98
Fatalities
270
35
219
65
161
58
81
121
30
149
40
24
108
1361
OUTBURSTS
Accidents
4
6
4
8
7
7
5
10
10
7
6
2
12
88
Fatalities
7
17
15
18
41
16
20
42
42
41
16
12
47
334
TOTAL
Accidents
15
12
15
19
15
13
14
17
14
17
11
5
19
186
Fatalities
227
52
234
83
202
74
101
163
72
190
56
36
155
1695
Local mines face more severe conditions. Between 1983 and 1993, there were 50 accidents at
local mines with more than ten fatalities  each, of which  40 accidents were caused by gas
explosions,  killing 835 people.  The remaining 10 accidents were caused by gas outbursts,
killing 184 people.

Methane drainage is a  highly  effective means  of reducing emissions and preventing gas
explosions and outbursts. The following  section describes historical  and current trends in
methane drainage in China, as well as the potential for increasing methane recovery.

3.3 COALBED METHANE RECOVERY

3.3.1 TRENDS IN METHANE DRAINAGE IN CHINA

Nationwide, coalbed methane drainage nearly doubled in 14 years, increasing from 294 million
cubic meters in 1980 to 564 million cubic meters in 1994 (Table 10). In 1980, there were five
coal mining administrations (CMAs) whose coalbed methane output exceeded 10 million  cubic
meters; in  1993, 13 CMAs met this criteria. Much  of the  progress during this period can be
attributed to improved technology and the acquisition of additional equipment.
                                                                              3-2

-------
TABLE 10. METHANE DRAINAGE AT COAL MINING ADMINISTRATIONS
(Million Cubic Meters, in descending order of 1993 volume recovered)
CMA
Fushun
Yangquan
Songzao
Tianfu
Zhonglangshan
Nantong
Liuzhi
Tiefa
Panjiang
Furong
Shuicheng
Jiaozuo
Shitanjing
Fengfeng
Hegang
Fengcheng
Kailuan
Nanzhuang
Beipiao
Hebi
Tongchuan
Huaibei
Huainan
Guzhuang
Guangwang
Yinying Mine*
Jixi
Jingyuan
Lianshao
Xishan
Yongrong
Pingxiang
Hangcheng
Pingdingshan
Shenyang
Yaojie
Yinggangling
Baisha
Benxi
Jingjing
Leping
Xuangang
Baotou
Fuxin
Liaoyuan
Shizuishan
TOTAL
PROVINCE
Liaoning
Shanxi
Sichuan
Sichuan
Sichuan
Sichuan
Guizhou
Liaoning
Guizhou
Sichuan
Guizhou
Henan
Ningxia
Hebei
Heilongjiang
Jiangxi
Hebei
Shanxi
Liaoning
Henan
Shaanxi
Anhui
Anhui
Shanxi
Sichuan
Shanxi
Heilongjiang
Gansu
Hunan
Shanxi
Sichuan
Jiangxi
Shaanxi
Henan
Liaoning
Gansu
Jiangxi
Hunan
Liaoning
Hebei
Jiangxi
Shanxi
Inner Mongolia
Liaoning
Jilin
Ningxia

1980
99.88
85.78
10.70
5.44
18.56
1.70
1.94
2.52
0.08
0.58
1.93
2.27
0.00
4.49
3.22
9.77
3.08
0.00
3.59
5.21
0.00
1.69
2.47
0.00
0.00
3.48
2.47
0.00
0.31
0.86
0.00
0.18
0.00
0.00
0.00
0.00
0.00
0.25
0.39
0.57
0.35
0.01
16.44
1.17
2.39
0.00
293.77
1985
102.12
89.52
34.09
12.91
18.83
7.18
4.66
1.80
0.01
1.24
1.64
3.86
0.00
6.25
1.10
4.67
4.44
0.00
2.09
6.91
0.00
4.25
4.74
1.28
0.00
1.16
7.34
0.00
1.60
NA
0.00
0.89
0.00
0.00
0.04
0.00
0.20
NA
NA
NA
NA
0.00
4.20
NA
1.25
0.00
330.27
1990
108.63
76.91
59.23
22.59
21.50
22.00
11.00
10.17
5.64
12.43
5.35
10.26
0.15
7.62
3.95
8.01
8.35
0.00
5.93
7.12
0.00
3.16
4.06
3.68
0.00
3.54
5.42
0.00
1.40
1.50
0.00
0.44
0.00
0.00
0.17
0.00
0.06
0.04
NA
NA
NA
0.00
4.66
NA
0.37
0.00
435.34
1992
109.73
106.11
60.70
26.59
24.31
26.03
18.35
16.80
8.16
13.87
14.11
11.66
7.99
11.97
9.04
7.90
8.69
3.24
6.21
8.02
3.50
4.72
4.78
3.77
1.17
3.60
7.30
1.41
1.70
1.05
0.79
1.20
1.00
0.13
0.11
NA
0.16
0.13
0.00
0.00
0.00
0.00
NA
NA
0.33
0.02
536.35
1993
113.36
90.53
76.31
25.10
22.07
20.27
18.41
16.26
15.00
14.10
12.75
12.27
11.04
9.89
9.88
8.27
8.07
7.83
6.57
6.48
5.05
4.66
4.20
3.75
3.70
3.70
3.37
2.00
1.67
1.47
1.44
1.28
1.09
0.65
0.22
0.20
0.13
0.00
0.00
0.00
0.00
0.00
NA
NA
NA
NA
543.04
Note: 1994 drainage totaled 564 million m3; a breakdown by CMA was not available
* Yinying Mine is not associated with a CMA; it is under the jurisdiction of the Shanxi
Province Coal Administration
Shaded CMA's are profiled in Chapter 4 SOURCE: CM, 1995 and Huang, 1995
                                                               3-3

-------
                                                  FIGURE 24. ANNUAL METHANE
                                                     DRAINAGE FROM CMAs
                                              600
                                           o
                                           =  100
                                                1980
                                                       1985
                                                              1990
                                                                     1993
Figure  24  shows  the  annual   methane
drainage  from CMAs.   During  the  period
1980-1993,  the   Fushun  and  Yangquan
CMAs      consistently   recovered   more
methane  than all of the remaining  CMAs
combined. In 1993, the Fushun,  Yangquan,
and  Songzao  mines  accounted  for  52
percent of the total methane drainage from
Chinese  mines.  Figure  25  shows   the
locations   of the  46  CMAs1  that  drain
methane. The greatest increase in methane
drainage   since   1980  occurred  at   the
following    CMAs:   Songzao,    Nantong,
Zhongliangshan  and  Furong  in  Sichuan
Province; Tiefa in  Liaoning Province; Liuzhi in Guizhou Province; Jiaozuo in Henan Province;
and Hegang in Helongjiang Province. The CM considers these CMA's as key areas for future
coalbed methane development.

3.3.2 METHANE DRAINAGE METHODS

Underground coal mines can employ several different techniques to  recover methane.  The
most attractive option for a specific mine depends on site specific conditions, including:

•  development and topography of the surface;
•  the thickness and depth of the targeted seam;
•  the amount of methane contained in the coals;
•  the mining method used;
•  the number of mined seams;
•  the efficiency of the ventilation system;
•  equipment availability; and,
•  local experience.

The principal drainage methods  used worldwide  are  pre-mining and in-mine degasification,
enhanced gob well drainage, and,  in some instances, an integrated approach that combines
these techniques.  Table  11  lists methane recovery and use options along  with  support
technologies needed to apply these methods.

Drainage efficiencies and the amount of methane drained per ton of  coal  mined indicate the
effectiveness of a drainage system. Table 12 summarizes these data for 98 Chinese mines.
 One of these, the Yingying Mine, is not associated with any CMA; it is under the jurisdiction of the
Shanxi Province Coal Administration
                                                                                3-4

-------
3-5

-------
    TABLE 11. SUMMARY OF OPTIONS FOR REDUCING METHANE EMISSIONS FROM COAL MINING
Technology or
Parameter
Recovery Techniques
Support Technologies
Gas Quality
Use Options
Availability
Capital Requirements
Technical Complexity
Applicability
Methane Reduction*
Gas Recovered from
Gob Wells
• In-Mine Boreholes
• Vertical Gob Wells
• In-Mine Drills and/or
Basic Surface Rigs
• Compressors,
Pumps, and other
support facilities
• Medium Quality
(11-29MJ/m3)
(300-800 Btu/cf)
(approx. 30-80%
CH4)
• On-Site Power
Generation
• Gas Distribution
Systems
• Industrial Use
• Currently Available
• Low
• Low
• Widely Applicable
• Site Dependent
• Up to 50%
Gas Recovered in
Advance of Mining
• Vertical Wells
• In-Mine Boreholes
• In-Mine Drills and/or
Advanced Surface Rigs
• Compressors, Pumps,
and other support
facilities
• High Quality
(32-37 MJ/m3)
(900-1 000 Btu/cf)
(above 90% CH4)
• Chemical Feedstocks
in addition to those
uses listed for
medium quality gas
• Currently Available
• Medium/High
• Medium/High
• Technology, Finance,
and Site Dependent
• Up to 70%
Gas Recovered from
Ventilation Air
• Fans
• Surface Fans and Ducting
• Low Quality
(<1% CH4; usually below
0.5%)
• Combustion Air for On-
Site / Nearby Turbines
and Boilers
• Requires Demonstration
• Low/Medium
• Medium/High
• Nearby Utilization
• Site Dependent
• 1 0-90% recovery
Gas Recovered from All Sources
• All Techniques
• All Technologies
• Ability to Optimize Degasification
using Combined Strategies
• All Qualities
• All Uses
• Currently Available
• Medium/High
•High
• Technology, Finance, and Site
Dependent
• 80-90% recovery
* These reductions are achievable at specific sites or systems



After USEPA, 1993
                                                                                                  3-6

-------
               TABLE 12. DRAINAGE EFFICIENCIES AT CHINESE MINES
Number of Mines
59
15
24
TOTAL 98
Drainage Efficiency
<10%
>15%
>20

Amount Drained (m3/ton)

>20
>10

The following portions of this section describes methane drainage methods typically used in
China.

Drainage from Working Seams
In the case of a single seam, boreholes are
drilled  from  the  haulage roadway  into the
seam,  in a  parallel or fan-shaped pattern
(Figure 26).  Quality of gas will vary greatly
depending on local geology, coal rank, and
the   efficiency  of the  drainage  system.
Typically, medium quality gas (11-30 MJ/m3)
will  be  recovered. The  advantage of this
method is that it is inexpensive and can be
implemented  out  relatively   quickly.  The
drainage efficiency is low, however, usually
about 20 percent.  In general, the drainage
efficiency can be increased by using longer
parallel holes with larger diameter (up to 300
mm),  and lengths ranging  from 70 to 80
percent of face length.
   FIGURE 26. PLACEMENT OF BOREHOLES
WITHIN COAL SEAM, XIE NO. 2 MINE(Plan View)
                        Haulage roadway
    FIGURE 27. PLACEMENT OF CROSS-
    MEASURE BOREHOLE FOR METHANE
           DRAINAGE (Side View)
                         Coal Seam
                     Borehole     Rock
                                roadway
 In the case of very thick,  dipping seams or
 multiple seams, cross-measure boreholes are
 drilled for pre-drainage (Figure 27). The drilling
 station is set up in a rock heading beneath the
 seam.  Boreholes  cross   the  seams  and
 adjacent  strata,  intercepting  the  bedding
 planes  and  cross-cutting  features  through
 which liberated methane flows into boreholes.
 Therefore,  with cross-measure boreholes the
 drainage efficiency  is much higher than with
 parallel boreholes drilled within seams.
                                                                                 3-7

-------
Drainage From Adjacent Seams
         FIGURE 28. IMPACT OF MINING ON
             OVERLYING STRATA
        After a  seam is  mined, the overlying  or
        underlying strata will be relaxed, deformed
        and fractured, liberating methane into the
        working  face  through  these  fractures
        (Figure  28).  In  order to  reduce   these
        methane emissions, it is necessary to drain
        gas from these strata during mining. The
        degree   of  relaxation, and  consequent
        volume  of methane liberated, depends on
        the competence  of the  adjacent  strata.
        Figure   29  shows  the gas  release and
        relaxation zone boundaries. It also  shows
        where   to  place  boreholes  within   these
        relaxation zones so as to optimize methane
        drainage.
           FIGURE 29. CROSS-SECTION OF LONGWALL ROOF AND FLOOR STRATA
                                                                       Gas release and
                                                                       relaxation zone
                                                                       boundaries
                                                                       ^  Coal seams
                                                                        \ in the floor
                     Cross-measure
                     holes in the floor
After Lunarzewski et al, 1995
                                                                                    3-8

-------
       FIGURE 30. BOREHOLE PLACEMENT FOR
         DRAINAGE FROM ADJACENT SEAMS
                             Borehole
                                          Seam
In most cases, drilling sites are set up in a
development  entry  (Figure 30).  Boreholes
are drilled into adjacent seams, and should
be  located within  the  fracture zones that
open  during   mining,  and  accompanying
strata relaxation.  Boreholes may be 20-50
m apart, with a diameter  of  70-150 mm.
Methane drainage  begins after the working
face advances about  10-30  m  past  the
drainage borehole,  and stops  when  the
working  face  is   100-200  m  past  the
borehole. The gas  is generally of medium
quality,  similar  to  that  recovered  from
working seams, as described previously.

Drainage From Gob Areas
According to  information from about 60  mines,  methane liberated from gob areas typically
accounts for 25-30 percent of total emissions from a given mine,  and can be as high as 50
percent in some mines. In order to reduce methane emissions from gob areas into ventilation
roadways, gob gas drainage has been implemented in some mines. Since the 1950's, mines of
the Fushun CMA have recovered 600 million cubic meters of methane from gob areas.
                                „ ,., ,. Development
                                Ventilation  entry
               entry
 FIGURE 31. BOREHOLE PLACEMENT
  FOR DRAINAGE FROM GOB AREAS

      Borehole
                     n x  j     Ventlation
                     Cavad     roadway
                     material
In general, gob gas is accumulated at the upper area
of the roof cavity. Therefore, an effective approach
is to drill boreholes from the ventilation roadway into
the upper area  of the cavity (Figure 31). The most
efficient  number  and  spacing   of  vertical  gob
boreholes  per   panel  depends   on   underground
conditions.  The  concentration  of  methane drained
gob areas can be as high as 60-80 percent, and  flow
rates can reach  3-4 cubic meters per minute.
Drainage Using Surface Wells

Methane drainage  using  surface  wells  is new to  China's  coal  mines.  Compared  with
conventional  natural gas  production  in  China, coalbed  methane reservoirs have poor
permeability and furthermore tend to be underpressured. Therefore, it may  be necessary to
fracture or otherwise stimulate  coal seams. Surface wells are used in order to  increase
methane production.
The State Science and Technology Commission approved China's first surface well methane
drainage demonstration project in  1989. The project, located at the Kailuan mine,  set out to
                                                                                 3-9

-------
develop key technologies for well-drilling, fracturing and production of coalbed methane from
surface wells. Participation of US coalbed methane consulting firms provided the introduction
of modern equipment. In 1992, the Kailuan project was included in a Global Environmental
Facility (GEF) project, executed by the United Nations Development Programme (UNDP), titled
"Development of Coalbed Methane Resources in China". Now, more than 20 projects involving
surface drainage from vertical surface wells are underway in China. Of these, several CMAs
have surface wells that are now producing methane, including: Fengcheng in Jiangxi Province;
Dacheng in  Hebei  Province;  Jincheng  in Shanxi  Province;  and Tiefa in  Liaoning Province.
Production rates from the No. 1 test well of  the Dacheng project reached 6,000  cubic meters
per day.  MOCI plans to select several coal basins for intensive  development based on a
nationwide  evaluation of coalbed methane resources.  As noted in  Section 3.5, the Xi'An
branch of the  CCMRI is conducting this resource  evaluation, which is funded  by the GEF
project. MOCI expects to build two to four coalbed methane production centers by year 2000.

3.3.3  OPTIONS FOR INCREASED RECOVERY

Significant opportunities  exist to increase the quality and quantity of gas recovered in China.
Chinese mines currently rely on in-mine degasification from the working and adjacent  seams,
and in-mine gob drainage. Drainage efficiencies  could increase significantly with updated
technologies, including:  vertical  pre-mine  drainage from surface wells;  in-mine pre-mine
drainage employing hydraulic fracturing and possibly horizontal longhole drilling, techniques;
and drainage of methane from gob areas using surface boreholes.

The effectiveness of degasification systems at all mines must be assessed on a site-specific
basis, and will depend on factors such as:

•  methane content of the coal;
•  volume and rate of methane liberated;
•  type and age of the mine;
•  time available for degasification before the coal is mined; and,
•  geologic conditions such as faulting, fracturing, and characteristics of adjacent strata.

Commonly, recovered methane is vented during periods of low gas demand, such as during
the night (when few people are cooking)  and during the summer months. Due to recent reform
of China's energy policy, however, there is  newly  found interest in expanding methane use,
both regionally  and locally.  Many regions  face serious coal shortages, and need additional
local sources of energy.  Coal used for cooking  and heating  is a major source of local  air
pollution and has contributed to a greater  interest in developing clean-burning natural gas
resources.   For this  reason,  municipalities often  pursue coalbed methane projects  most
aggressively.

In the near term, basic  improvements to existing technology could increase the quality and
quantity  of  gas recovered.  Typically, Chinese  mines  now  drain gas  with  methane
concentrations  from 40 to 60 percent. Mines could improve  their recovery  systems  by
monitoring gas quality; regulating quality by stopping leaks  in the in-mine and surface gas
gathering systems;  and  modifying drilling  and completion  techniques (such  as hydraulic
fracturing and  more optimal  placement  of drainage wells). In the longer term, an integrated
approach to mine  drainage could maximize the  recovery  of  methane and improve  mine
                                                                                 3-10

-------
profitability and safety.  This could include  recovery of methane before, during,  and after
mining, both from the surface and within the mine.

Methane drainage efficiency at China's coal mines averages less than 20 percent. A primary
cause of this low efficiency is the low permeability of coal seams in  many mines.  Outdated
drilling and drainage equipment is also a problem at least  30 percent of the  coal mines with
existing   drainage  systems.  As  discussed  below,  drainage  efficiencies  could   increase
significantly with modern equipment and updated technologies, including fracturing  seams to
enhance permeability, and  using integrated drainage methods.

Enhancing Fracture Conductivity

Enhancing fracture conductivity would lead to significant increases in methane recovery during
single-seam pre-drainage efforts. Several mines have tested methods for enhancing fracture
conductivity. The No. 2 mine at the Hebi CMA (see Chapter 4 for details)  and the Liwangmiao
Mine in   Hunan Province tested the use of high-pressure  water jets to cut slots in  their coal
seams.  The No. 1 Mine at the Yangquan CMA, Longfeng Mine at the Fushun CMA, and
Zhongmacun Mine at the Jiaozuo CMA  tested hydraulic fracturing using clear water and sand.
The tests showed that the fracture lengths reached 100 m with water pressures of 10 to 20
MPa and flow rates of 0.5 to 2 m3/min. As a result, methane flow from a borehole increased to
0.5 to 2  m3/min., about 100 times the rate prior to fracturing.

Integrated Recovery Methods

At some sites, drainage efficiencies can increase to over  75 percent using a combination of
pre-mining, during mining,  and post-mining techniques. Experience from many  mines shows
that the drainage rate could increase significantly by taking advantage of strata relaxation,
enhancing  permeability;  this holds true for both single-seam  and multiple-seam mining. In
addition, more and more mines in China are recognizing the importance of methane recovery
from gob areas, now  that  the significance of coalbed methane as an economic resource is
being recognized.

Use of Updated Technology

In order to achieve high drainage efficiencies, it can be effective to drill horizontal  longholes
from an adjacent haulage  way into  the fractured zone above  the gob.  In  this case, in-mine
directional  drilling may be  the best option. Recently, the  Tiefa Coal Mining Administration
imported directional drills for a methane drainage project that is part of the GEF-funded project
mentioned  in Section 3.3.2.   Other improvements  that would increase methane  recovery
include:

      •   improvement  of  gas  collection  systems,  including  more efficient   moisture
          separation;
      •   equipment for grouting standpipes under pressure to ensure a bond to the rock;
      •   effective use of modern drilling and monitoring equipment; and,
      •   enforcement of safety standards and practices.
                                                                                 3-11

-------
 Methane Drainage Using Surface Wells

Experiences with methane production in the US show that surface wells can recover up to 70
percent of the methane in place. Surface well demonstration projects are currently underway in
the Kailuan, Huainan, Jincheng and Tiefa CMAs, and in unmined areas of the Dacheng Basin
in  the Tianjin region southeast of Beijing. The  preliminary results of these  projects  are
promising. Recent testing of three vertical gob wells  at Tiefa has been encouraging, as noted
in Section 3.5.

3.4  COALBED METHANE USE

Increased methane recovery  will only be economically and environmentally feasible if it is
accompanied by increased  use.  Because most of  China's coal mining areas are distant from
integrated pipeline  networks, opportunities for large-scale, off-site use of methane are limited.
In contrast, many opportunities exist for on-site uses for the gas, because of the large volume
and close proximity of potential industrial and residential users.

Based on 1993 data, China already uses about 395 million  cubic meters (approximately  73
percent) of the 543 million  cubic meters of methane recovered from its coal mines annually,
mainly in  the residential and industrial  energy sectors. Forty of  China's  110  coal mines
recovered their methane. While this is a commendable use rate compared to many countries,
the remaining 148  million cubic meters that they
vented  to  the  atmosphere  presents  a large
volume  of   wasted  methane  that   can  be
recovered and used.  Less that one-half of the
mines with  drainage systems use any  of the
drained methane. China's recent reforms  in the
coal  industry   have increased the  focus on
coalbed methane use, as exemplified in Box 2.
The  best options for the use  of mine  methane
will vary regionally, depending on the quality and
quantity of gas,  and local energy markets. Any
additional    use   of   coalbed  methane   for
commercial  and residential  heating  that would
displace the current dependence on coal could
significantly  improve   local   and  regional  air
   BOX 2. CHINA'S INCREASED
 FOCUS ON COALBED METHANE
      RECOVERY AND USE

Since  1982,  MOCI's Department of
Coal  Processing   and   Utilization
(DCPU)  has  included gas  use in its
energy strategy. Using state allocated
funds, such as the coal-substitute-oil
fund, and various preferential  loans,
DCPU has completed  over 50 gas use
projects. These include  installation of
gas storage  facilities with  a volume
capacity of 650,000 cubic meters, and
construction  of 620  km  of  gas
pipelines    to   provide    220,000
households  with  coalbed  methane
(Sun and Huang, 1995).
quality.  In  addition,  mines  can  be potentially
increase profitability by expanding their use of methane on site, and/or by selling it to nearby
industries.
The following sections discuss various options for using methane recovered from coal mines.
The most viable options include on-site heating of water and air; cofiring methane with coal in
mine  boilers; use in gas turbines; and  domestic (residential) uses,  such as heating and
cooking.
                                                                                  3-12

-------
3.4.1  DIRECT INDUSTRIAL AND RESIDENTIAL USE OPTIONS

As  discussed in  Chapter 1,  industry consumes  two-thirds  of  the total energy produced  in
China. One of the key opportunities for expanded  coalbed methane use is substitution for coal
at mines and in nearby industries. Specific uses  depend on conditions at specific mines, but
include:

•   on-site heating of water and air;
•   thermal coal drying;
•   heating of ventilation air; and,
•   substitution for coke gas, coal or gas in local industries.

Combined heat and power generation facilities located at mine sites often use low-quality coal
as the main fuel  source.  Often this coal has low heating values,  and a high ash and sulfur
content, resulting in low energy efficiency and decreased air quality.  During winter months,
when heat and electrical requirements are high and atmospheric inversions occur, air pollution
generated by these facilities severely impacts the local communities. Coalbed methane could
readily displace the  use of coal  at mine sites, providing increased energy efficiency while
improving the local environment.   Availability of coalbed methane may permit conversion  of
existing coal-fired boilers to co-fire with gas.

As an alternative  fuel, coalbed methane can replace lignite, hard coal and coke oven gas, and
conventional  natural gas.  Coalbed  methane is an environmentally sound fuel and has high
thermal efficiency. The heating value of methane  is 8000-9000 calories per cubic meter;  1000
cubic meters of methane is  equal  to about 1 ton of coal equivalent. Currently, the use  of
coalbed methane in China includes on-site  heating of water and air, heating of ventilation air,
and on-site coal drying. In addition, relatively small amounts  of coalbed methane are used for
production of chemical products.  For example, the Songzao Coal Mining Administration has
built a chemical plant with  a capacity of 600 tons of carbon black annually.

Box 3 describes several uses of coalbed methane in  China by industries that would otherwise
employ coal.
              BOX 3. INDUSTRIAL USE OF COALBED METHANE IN CHINA

 In China, coalbed  methane has numerous applications in industry.  Potential users of CBM are the
 many on-site or nearby industries operated by the coal mines. China already uses coalbed methane
 locally, and the potential to expand use is significant. Examples of local use opportunities include the
 carbon black plants near the large state-run mines.2 The first factory producing carbon black was built
 in 1952 at  the Longfeng Coal Mine in the Fushun CMA (see the Fushun  profile in  Chapter 4 for
 additional details). Now there are carbon black  plants at several of the larger CMAs. In  1970, a
 formaldehyde factory with an annual production of  500t was  built at West Opencast Mine at the
 Fushun CMA, although due to decreased  demand for formaldehyde it is not longer in operation.  Other
 users include powder, plastic, and glass factories at the Fushun CMA (Huang L, 1995). In  Hebei
 Province, there is a ceramics operation at the Kailuan CMA, which could readily use CBM for its daily
 operations.
2 Carbon black is an amorphous form of carbon produced commercially by thermal or oxidative
decomposition of hydrocarbons. It is used primarily in rubber goods, pigments, and printer's ink.


                                                                                   3-13

-------
There are also many opportunities for increasing use of coalbed methane in the residential
sector. These residential uses include  cooking  and heating  at mine  residences as well as
dining, child care, and school facilities. Town gas (gas manufactured from coal) is sometimes
employed for these purposes,  but coalbed methane requires less investment and provides
higher benefits, because it does not require construction of a gas supply plant. Coal mine gas
supplied  for residential use normally  contains 35-40  percent  methane,  but  no harmful
impurities arise from the  distillation  process, therefore  a  complex cleaning system  is not
required. As a result, residential use of coalbed methane is becoming widespread throughout
the mining regions.

3.4.2  NATURAL GAS PIPELINE SYSTEMS

Recovered coal mine  gas  can  be  compressed and  transported  by natural gas pipeline
systems. According to  the CM, the gas must meet the  following  requirements: (1) Methane
content of the gas transported  in the pipelines must be  greater than 95%; and  (2) pressure
must be between 23.8 and 37.4 atm.

In 1993,  China produced nearly 17 billion  cubic meters of gas from 79 fields. Currently, there
are only 5,902 km of pipelines in China,  mainly in Sichuan, Guangdong, and Hebei Provinces
(the main gas pipeline system is shown  in Figure  8 of  Chapter  2).   In addition, a 900 km
pipeline  channeling natural  gas  from  Yan'an  (in  Shaanxi  Province) to  Beijing  is  under
construction. For  the purpose  of coalbed  methane development, the pipeline diameter has
been redesigned from 500 mm to 600 mm. There currently exists no large,  integrated pipeline
infrastructure in China,  and  additional  capital costs are required in  order  to upgrade and
increase  China's pipeline system.

In general, most of the  high-gas mining areas lack complete natural gas pipeline systems. At
present,  a  short-distance gas pipeline can be used to  supply coalbed  methane to nearby
users; currently, the Tangshan  Mine of the Kailuan CMA injects coalbed methane into  its city
gas system. Because of the  proximity of many of China's CMAs  to residential and industrial
areas, they are ideally suited  for construction of a local pipeline network to these users.  Before
initiating  pipeline  projects  however, several  issues must be carefully considered, including
transmission costs, distances from  production sites to gas markets, and the productive life of
the resource.

3.4.3  POWER GENERATION OPTIONS

Electricity used by China's coal mines  is provided  mostly by coal-fired power stations, with
waste-fired stations providing only small amounts of power.  Coal is also  the dominant fuel
used for heat at mine facilities. Replacing coal with coalbed methane for power generation and
heating  would not only reduce environmental  pollution, but would  likely  increase thermal
efficiency. Numerous opportunities exist for the  generation of electricity and steam at mine
power plants, since all coal mines consume electric power. Mines currently generate most of
their electricity and steam from coal. Coalbed methane could displace the use of coal in power
generation, which causes severe air pollution  and is  in short supply. Following is a discussion
of several power generation options that may apply well to China.
                                                                                 3-14

-------
                               Cofiring With Natural Gas

Cofiring is the combustion of natural gas with coal in the primary combustion zone of a coal-
fired boiler. The gas input may vary from less than 10 percent to up to 100 percent of total fuel
input depending on boiler design and the needs of the boiler operator.  Intermittent gas use
may be attractive to larger power plants in the event that there is insufficient coalbed methane
to meet year-round needs.  This would allow the power plant to take advantage of low summer
prices  for  methane,  while  maintaining the flexibility of burning  coal  when  gas  is either
unavailable or more expensive. Box 4 describes seasonal use of methane at mines in Ukraine.
    BOX 4. GENERATION OF ELECTRICAL AND THERMAL ENERGY FOR MINE USE: UKRAINE

 The Donetskugol Production Association in the Donetsk Coal Basin of southern Ukraine contains several
 mines that use coalbed methane as fuel in their boiler plants.  The boilers use methane when it is
 available and switch to low quality coal when the quantity or quality of the gas is insufficient. There are,
 however, other mines  in the Coal Production Association that do not use the methane they recover, due
 primarily to  lack of capital for investment in the  required surface  facilities to  collect, process, and
 transport the gas to the boiler (USEPA, 1994a).

 Similar situations exist at Chinese coal mines. There is a need for on-site water heating for space heating
 and bathhouses.  In addition, it is necessary to  heat mine ventilation air  during the winter months in
 many northern and northeastern mines.  Installation of improved methane drainage systems to recover
 gas of reliable quantity and quality, and availability of capital necessary to  invest in surface equipment,
 would allow increased  methane use.
Cofiring  can yield  a broad  range of operational,  economic,  and environmental  benefits,
including reduced  sulfur, particulate, carbon, and  NOx emissions,  lower maintenance costs,
greater fuel flexibility, improved plant capacity factor, and production of salable fly ash. While
many of these benefits  are  site-specific, most plants will  achieve at least some  of them.
Cofiring can be accomplished at very low capital costs and with no technological risk;  if for any
reason natural gas is no longer available, the boiler could continue to operate entirely on coal.
At some power plants in the  U.S., cofiring has reduced operating  costs by millions of dollars
per year (Vejtasa et al, 1991; CNG, 1987).

The only modifications required to the boiler are the addition  of gas supply piping, gas igniters,
and warmup guns. In the US, the costs for minor modifications such as replacing igniters is on
the order of $US 3-7 per kW. The cost to modify burners to add dual firing capacity  is on the
order of $US 10-20 per kW (GRI, 1995).

Equipping a unit to fire 100 percent gas or cofire high percentages of gas commonly includes
installation of a side-wall mounted gas burner equipped  with a combustion air fan. Based on
the large diameter of such a burner, tube wall modifications are required. A conventional side-
wall mounted ring-type gas burner capable of firing the average available methane should be
rated  at about 4.8 Gcal/hr.

An  alternative to the side-wall  mounted gas  burner  is to insert gas injectors between boiler
tubes along the side walls. This approach could be used to fire at least 25-35 percent of the
boiler heat input without the need for an additional combustion air supply. Greater heat input
using this approach may be possible, but would require further evaluation.
                                                                                   3-15

-------
Box 5 describes a power plant in
Poland that cofires methane along
with  pulverized  coal;   the   plant
operates more efficiently and cost
effectively.

Internal Combustion Engines

Internal  combustion  (1C)  engines
include   spark-ignited   four-stroke
and diesel  dual-fuel engines.  They
can generate  electrical  power with
medium  to  high-quality  coalbed
methane.  Typical capacities  of 1C
engines    range   from   several
kilowatts (kW)  to several megawatts
(MW).   These  sizes   are  much
smaller  than   gas  turbines  and
would be more compatible with the
production   of  coalbed  methane
from a single well. As an example,
a  1  MW 1C engine would  require
approximately  10,000  cubic meters
gas (30 - 80 percent methane)  such
        BOX 5. COFIRING OF METHANE AT THE
           ZOFIOWKA CHP PLANT, POLAND
  The Zofiowka mine in
  Upper  Silesian  Basin
the  Rybnik-Jastrzebie  area  of the
of  Poland  cofires  methane  and
  pulverized coal at its CHP plant, whose capacity is 64 MWei +
  320 Mwth. The plant supplies heat and power to the mine and
  the town of Jastrzebie.  About 10 percent of the  fuel energy
  consumed by the power plant is delivered in gas.  During the
  first half of 1994, 20.8  million  cubic meters  of gas, with a
  methane concentration of 46.5 percent, were consumed by
  the plant.

  Methane is combusted in the startup burners and the backup
  combustion supporting burners.  Each 1000 cubic meters of
  methane yields 12.9  MWh  of steam, which  produces 3.1
  MWh of electricity, 4.7 MWh  of heat energy, and 5.1 MWh of
  regeneration feedwater.  Use of coalbed methane in the CHP
  plant is cost effective, due largely to the low price of coalbed
  methane (each cubic  meter of methane produces $0.08 US
  worth  of electricity and $0.03  US  worth of heat).  Using
  conventional  natural gas to  cofire with the coal  would cost
  four to five times as much (USEPA, 1995c).
of methane per day. 1C engines can use medium quality
as that produced by surface gob drainage.
1C engines are modular in design and require little specialized expertise to install and maintain.
Due to their small sizes, they can be relocated easily if the gas supply is depleted. They tend,
however, to require high capital investment and maintenance costs.  Previously, variations in
gas quality caused some problems with the  use of mine gas in 1C engines, but with modern
integrated control systems it now appears possible to accommodate these fluctuations.

                                     Gas Turbines

Gas turbines are more efficient than coal-fired generators, cost less to install, and are available
in  a wide range of sizes. This allows  utilities to add smaller increments  of capacity to handle
peak consumption, rather than investing in larger, capital intensive coal-fired units that would
be underutilized. In addition, gas turbine exhaust is a source of waste  heat, which can be used
to  generate steam  in a heat recovery boiler.   Three  systems which  improve  the thermal
efficiency  of the  system are:  1) Use of steam for process or district heating,  known as
cogeneration;  2)  Use of  steam in a  turbine generator  for additional  electrical power
production, known as a combined cycle, and 3)  Use  of steam injected into the  hot gases
flowing to the thermal turbine, known as a steam  injected turbine (STIG).
                                                                                   3-16

-------
 BOX 6. GAS TURBINE AT THE FUSHUN CMA

In 1990, the Laohutai Mine of the Fushun CMA built a
coalbed methane-fired   power  plant  that  utilizes
surplus methane saved during low periods of methane
use in the summer months. The rated capacity of the
generating  unit  is  1,500  kW. Research indicates that
when the methane concentration reaches 40 percent,
the  gas flow rate  needed for generating 1,200 kWh
electricity is 35  m3/minute, and the efficiency of the
unit can exceed  80 percent.

The success achieved in using methane to generate
electricity has created additional use and conversion
opportunities. The coalbed methane-fired power plant
has an annual  generating capacity of 2.8 MWh, and
can supply  1.8  MWh  electricity into  the  electric
network (Huang L,  1995). It runs only during the
summer, however (May to September).
Gas turbines can  use coalbed methane
directly from a high pressure pipeline, or
from  an  external   coalbed  methane
compressor.  Box  6  describes  a  gas
turbine at the  Fushun CMA.   In most of
these cases,  waste  heat is recovered
from  the turbine  stack  for  use  in  an
auxiliary thermal process. These turbines,
which range in size from 3 to 20 MW, can
frequently supply a significant portion of a
mine's electrical needs.

The working efficiency of a gas turbine is
about 30 percent. The Raston  TB5000
gas  turbine,  manufactured  in the  UK,
provides  nearly  complete combustion of
coalbed  methane.  The large  amount of
waste heat in gas turbine exhaust can be
recovered by waste heat boilers and used
for heating. Gas turbines requires high-pressure fuel input (above 18 atm), and the methane
concentration of the gas must be greater than 40 percent.

Compared with other power generating technology options, steam turbines have low thermal
efficiency, but they operate reliably and have a long  service life.  Under normal conditions,
where a standard boiler is used to combust coalbed methane for steam generation, boilers can
use medium- to high-quality gas.

The combined cycle method is one of the most efficient methods to convert gas energy into
thermal power.  Gas turbine exhaust has a high temperature and rich oxygen content, and can
be transported to waste heat boilers to generate steam  for driving a turbine. Thermal efficiency
of the system can reach 45 percent.

In 1990,  the Laohutai Mine of the Fushun  CMA built  the first coalbed methane-fired  power
station in China. The power station has an installed capacity of 1200 kW, and the methane
concentration of the gas exceeds 40 percent.

3.4.4  VENTILATION  AIR USE OPTIONS

Because nearly five  billion cubic meters of methane are emitted annually from  ventilation
systems  at China's key state-owned mines  alone,  use  of this ventilation air,  if feasible,  would
be highly desirable. Numerous studies have examined options for purifying this gas, but the
expense   is prohibitive   using existing  available technology.    However, as  technology
progresses,  it  may become  economically feasible to  enrich  the  gas contained  in  mine
ventilation air using some of the methods discussed in Section 3.4.5 below.

At present, the best option for use of ventilation  air is as part of the fuel  mixture in  steam
boilers, gas turbine generators, or gas engines. This has been successfully achieved  at the
Appin and Tower Collieries in Australia, where ventilation air is used to help fuel a set  of gas
engines,  increasing overall output of the plant by 7-10 percent (IEA, 1996). Where feasible, the
                                          3-17

-------
use of ventilation air should be part of an integrated methane drainage program.  In general,
the targeted  generation facility should  be within  approximately 2 km of the ventilation air
source for this option to be economic.

3.4.5  IMPROVING GAS QUALITY

Much of the 1.7 billion cubic meters of gas that mine drainage systems recover but vent to the
atmosphere  each year  have  methane  concentrations  ranging  from 30  to 50  percent.
Developing uses for this methane  would be  aided  by producing the highest quality gas
possible and by ensuring that quality (concentration) variations are minimized.

In the short  term, there are several  relatively  inexpensive,  low technology methods  of
improving the quality of recovered mine gas in China.  These include shutting in old wells (in-
mine); reducing  leaks in  the  in-mine and surface gas gathering systems (pipelines);   and
improving grouting of standpipes.  In the longer term, there are several methods for improving
gas quality which require  some investment and higher technology.  The three primary means
of improving the quality of gas recovered from coal  mines are improved monitoring and control,
increased pre-mining drainage, and gas  enrichment.

Improved Monitoring and Control
One of the most economical methods to improve the quality of gas is to reduce air entrapment
in the gas stream during the production process. This can only be accomplished by finding the
equilibrium production rate of the well, i.e., the rate at which the  ratio of methane liberation in
the coal equals the rate of production at  the well head.

Since the rate  of  methane liberation generally  declines with time it  is necessary to  adjust
critical production parameters frequently in order to control  the  bottom hole pressure  (BMP)
and maintain  a  high methane concentration  in the product gas.  Continuous monitoring of the
oxygen content at the well head in conjunction with adjusting the  production rate to maintain a
desired gas quality is a production control technique that automatically maintains the BMP at
the required  level  without needing to determine its actual value. Since the mine ventilation
system and the wellbore are  in communication,  it is  customary  (and advisable for  safety
reasons) to also monitor the mine ventilation system at appropriate check points.

Increased Pre-Mining Drainage
Gas drained in advance of mining usually has a higher methane content than that drained from
working faces or gob areas. Advanced pre-mining drainage techniques include:

       •   Use of vertical wells drilled from the  surface. Chinese mines do not widely employ
          this technique  at present, but it has been highly successful in the  US (Diamond et
          al,  1989).

       •   Use  of more numerous, and more strategically placed, cross-measure boreholes
          drilled  in  advance of mining.  Predictive  techniques can  be used  to  maximize
          recovery (Lunarzewski, 1994).
                                                                                 3-18

-------
Gas Enrichment

Gas quality can be improved by enriching gas through removal of one or more of the following
contaminants:  nitrogen,  oxygen,  carbon dioxide, and moisture.  Cryogenic  processes for
separating nitrogen and  air for methane have been successful  for large-scale conventional
natural gas operations, but require high capital investment and are economic only for very
large  gas flows (millions of cubic meters  per day). At present, this method would not be
economical for coal mines, which produce smaller volumes of gas.

There are a number of  enrichment processes  that are at various stages of research and
development, and that may in the near future be economic for small-scale plants processing
gas volumes under 300  thousand cubic meters  per day, such as would be produced by the
typical coal mine.

Nitrotec Engineering,  UOP, and BOC Group have each developed pressure swing adsorption
(PSA) processes  that use carbon molecular  sieves to adsorb methane from nitrogen and
oxygen. This type of PSA process has been proven in the laboratory and appears to be  ready
for full-scale commercial operation. Costs of this process are reportedly in the range of $US 26
to $US 48 per thousand  cubic meters for gas volumes between 57 and 283 thousand cubic
meters per day, and mixtures ranging from  75 to 92 percent methane (D'Amico and Reinhold,
1993).

Gas Separation Technology uses natural zeolites in a PSA process to adsorb nitrogen and
oxygen from methane mixtures. They report costs, based on laboratory tests, in the range of
$US 4 to $US 16 per thousand  cubic  meters  for mixtures ranging from 40 to  90 percent
methane and volumes between 28 and 142 thousand cubic meters per day. This process has
not been tested in the field (Gas Separation Technology, 1995).

The Mehra process uses hydrocarbon solvents for nitrogen rejection. It has been successfully
demonstrated in the field  with respect to nitrogen and moisture removal. If the process can be
proven to handle oxygen, it may be economic for volumes of 4,200  to 8,500 cubic meters per
day of mildly diluted methane (Mehra and Wood,  1993).

Bend  Research  uses a  transition  metal-based  liquid adsorbent to  remove nitrogen  from
methane.  Based on  laboratory research they report costs  of  $US  19  per thousand  cubic
meters for an  unspecified mixture  and volume,  and expect to lower the cost to $US 11 per
thousand cubic meters (Shoemaker, 1994).  This  process is still in the laboratory research
phase.

Membrane  Technology  and Research, along  with  several  other  firms,  has  extensively
researched membrane separation  of nitrogen and methane, which  would be  very  attractive
because  of the simplicity of membrane separations and their applicability in small plants. To
date, however, this is process is only conceptual, and there have been no reports of success
in developing  a membrane of sufficient selectivity between nitrogen  and methane that will
enable an efficient separation (Baker, Pinnau, and Wijmans, 1993).

None  of  the above methods can be said  to be both proven and  commercially available. It
seems likely,  however,  that in the  near  future one  or more processes will prove  to be
economically attractive for enriching medium-quality coal mine gas to pipeline quality.
                                                                               3-19

-------
3.4.6  GAS STORAGE

Coal mines should consider gas storage an integral part of any coalbed methane use strategy.
With storage facilities, gas  can be used as demand dictates.  For example, gas that mines
produce when demand is low  (such as during the summer) can be stored and used during
periods of higher demand.

The primary means of coalbed methane storage in China is surface storage tanks using the
Higgins floating lid design. Coalbed methane drained from underground mines is transported
to the storage tanks, and then  supplied to nearby households, schools, and other consumers
via pressure adjustment stations  and pipelines. So far, there are two  sizes of storage tanks
available,  one with a capacity of  5,000 cubic meters and the other with a capacity of 10,000
cubic meters. At  present,  China's total  gas storage capacity is about 680 thousand cubic
meters, and the total length of the main pipelines exceeds  655.6  km. This  is  insufficient to
meet China's storage needs. To expand coalbed methane development, gas  storage must be
available  at or near the mines themselves, as they are a primary user.   Gas  storage facilities
exist at several of the larger CMAs, such as Tiefa, Fushun, and Hebi; however, mines still vent
much of the gas because of a  lack of storage facilities.  Construction of additional facilities is
planned, and will play a major role in expanding methane recovery and use.

In areas where a CMA has several large coal mines within a relatively small area, construction
of local pipelines and storage tanks could link the individual mines, allowing optimal gas use by
local industry and residential districts.  A CMA such as Songzao, which currently has several
large  mines with  some pipeline infrastructure and gas storage facilities, would benefit from
such a combined  option.

In many gas producing areas of the world, underground storage is the most common means of
storing gas to  meet  peak seasonal  market demands. Although the initial cost  may  be
prohibitive, underground storage  systems  can handle much larger capacities than surface
storage.  Preferred sites are porous subsurface reservoirs, including  depleted oil and gas fields
as well as aqueous reservoirs. Other sites used for storage are natural and man-made salt
and rock caverns. Underground gas storage was first utilized in the United States in 1916, and
currently  there are over 400 storage fields with a total capacity of more than  228 billion cubic
meters of gas. This is equivalent  to almost half the annual U.S. gas consumption.  In addition,
the use of underground gas storage can allow capitalization of spot gas market purchases,
and  better supports management of  marketing  and production by producers (Thompson,
1991).

In addition to conventional storage  facilities, another available option  is  gas storage in
abandoned coal mines. Since the  early 1980's, two abandoned mines in Belgium have stored
imported  natural gas (Moerman, 1982). In China,  abandoned coal mines or inactive shafts of
operating  mines are potential locations for gas storage. A thorough  evaluation of the geologic
and hydrologic  conditions  at these mines  is, of course, necessary to determine economic
feasibility and mine safety.
                                                                                 3-20

-------
3.4.7 NATURAL GAS VEHICLES

Vehicles are a major contributor of air pollution worldwide, emitting carbon monoxide, reactive
hydrocarbons,  and nitrogen oxides.   Diesel  vehicles also emit particulate matter.  With an
increasing number of vehicles in China, the availability of oil as the main fuel source becomes
less desirable in the  future.  Natural gas is environmentally preferable because its use would
reduce  emission of all of the  major vehicle  pollutants.  The economic  and environmental
benefits of using methane  as  a fuel source  are significant,  especially considering the large
amount of methane vented from coal mines each year  in China, and the current shortage of
vehicle  fuel.

Compressed natural gas (CNG) provides a low cost, efficient, clean burning and abundant fuel
source  that any internal combustion  engine can use. Current natural gas vehicle technology
possesses energy efficiency ratings that are equal  to or  greater  than gasoline and  other
alternative fuels. According to the American Gas Association (1993), 2830 cubic meters (100
Mcf) of  CNG is equivalent to 3785 liters (1000 gallons) of gasoline.  Countries which currently
use CNG vehicles include  Ukraine,  Canada, New Zealand, Mexico,  Spain,  and  the United
States (see Box 7 for a discussion of incentives  in the US). One of the  most common  uses of
CNG vehicles is for urban fleets such as  taxis, trucks,  delivery vans, and buses.   CNG is a
well established technology;  it is proven reliable, safe,  and economical, and is clean burning.
   BOX 7. INCENTIVES IN THE US FOR INCREASED USE OF NATURAL GAS VEHICLES

 Natural gas vehicle technology has accelerated  in the US since  passage of  the Clean  Air Act
 Amendments (CAAA) in  1990. The CAAA is promoting alternate fuel vehicles by requiring areas that
 have not adopted a  Federal Ozone Program to convert a certain percentage of their fleet vehicles to
 clean-fuel vehicles by 1998. Also, the  CAAA requires  attainment  of national ambient air quality
 standards. If metropolitan areas do not attain ozone, CO, and particulate matter standards, they face
 rigid non-compliance penalties. Transit authorities can convert about 55 percent  of public transit buses
 to natural gas consumption.

 Fleet vehicles are excellent targets for conversion  to natural gas, because fleets consume a large
 portion of the motor fuel in the US, are centrally fueled, and release large quantities of pollutants. The
 Energy Policy Act of 1992 mandates that a percentage of fleet vehicles must be powered by clean fuels
 in the future. Conversion to natural gas fueled vehicles is happening nationwide, primarily in major
 private fleets,  public utility fleets, transit  bus  fleets, and school buses. Total range of a natural gas
 vehicle depends on the  amount of natural gas stored in the vehicle. Converted and bi-fuel vehicles
 actually have an extended range, since the driver has access to two fuels—the normal gasoline range
 and the added natural gas range. Dedicated  vehicles  have a range of about 330  km (Natural  Fuels
 Corporation, 1994).

 Because natural gas is cheaper than gasoline, fleet owners often see a payback  of the initial cost in
 three years or less, depending upon annual mileage and vehicle type. With tax and rebate incentives,
 the  payback period  can be  substantially shortened. According to the Energy Policy  Act  of 1992,
 businesses and  individuals are entitled to a  tax deduction of up to  $2,000 for cars, and  $5,000  to
 $50,000  for  trucks and vans  (depending on vehicle weight),  for conversion and/or use of alternative
 fueled vehicles (AFVs). A deduction of up to  $100,000 is also offered for the cost of establishing an
 AFV refueling station (Natural Fuels Corporation, 1995).  In addition, several states,  including California,
 Colorado, Oklahoma and Texas, also offer financial  incentives for AFVs, such as  investment tax credits
 or fuel tax exemptions.
                                                                                     3-21

-------
In order to use CNG as vehicle fuel, its methane concentration should reach 90-100 percent,
and the concentration of paraffin should not exceed ethane  by  more than 6.5  percent.  As
methane is  the primary  component  of coal mine  gas, after enrichment,  the methane
concentration could  be increased  to  95 percent, while the ratio of paraffin to ethane  is
minimally increased. Therefore, coalbed methane is  highly suited for production of CNG for
vehicle fuel.

Currently, there are over seven million vehicles in China, and the number of vehicles increases
13 percent annually.  Most of these have inefficient engines and high fuel consumption, which
create major problems with the domestic energy supply and  local air quality.  As the number of
vehicles increases dramatically in the next several years, a key  issue in China's energy and
environmental policy is to increase  efficiency and satisfy emission standards. One solution is
the technological development of alternative fuel for transportation, including increased use of
natural gas,  methanol, and ethanol.  During the 1960's, a shortage of conventional fuel  in
China spurred the use of natural gas  vehicles, which were most successful in areas with
natural  gas  resources and  infrastructure.  As discussed  in Section 1.2.3,  recent  energy
strategies emphasize increased development and use of  natural gas.  As the government
reduces price controls and the economy becomes more market-driven, the price of oil and
natural gas should rise to current market levels.  The CMAs, which have their own fleets and
municipal buses, could benefit greatly by using CNG vehicles.

A barrier in China, as with most countries, is that there is no high-pressure natural gas vehicle
refueling infrastructure, so vehicles must be refueled directly from  the pipeline.  The paradox is
that the lack of refueling stations limits the development of natural gas vehicles, and the small
number of natural gas vehicles limits the development of a refueling  infrastructure. Refueling
stations have been imported from Canada, U.S. and New Zealand; however, due to equipment
and vehicle problems, the stations have  not been efficiently maintained (EIC, 1994).

Another use for CNG with potential  applications in China has been developed in the U.S. This
technology, developed by a Texas-based company, was designed specifically to recover and
use gas produced from marginal wells, or wells  isolated from existing pipelines.   Gas  is
compressed at the  source, a specially-designed CNG trailer is connected, and the gas  is
loaded into steel tubes. Gas can then be transported to an end  user, where it is off-loaded.
Although designed for conventional  gas, this technology could be  applied to coalbed methane.
In China the most  likely  applications  would  be at  the  larger  CMAs, where the methane
produced from underground mines  is of sufficient quantity and quality to economically collect
and use locally.

Compressed natural gas may also  serve to supply households with a cleaner source of fuel
than coal for cooking and heating. This use could improve local air quality and create a market
for coalbed  methane where  construction  of a pipeline  may not be economic. This could
develop a market for coalbed methane incrementally, which means up-front capital costs
would be lower and the market could develop until a pipeline project became economic.
                                                                                 3-22

-------
    3.5  CHINESE   ACHIEVEMENTS   IN   COALBED  METHANE   RECOVERY  AND
         USE

    China's coal industry has accumulated enormous experience in recovering coalbed methane
    using in-mine methods. In the early 1990's, China began in-mine drainage projects to improve
    safety and production conditions in the mines.  Use of this methane, however, is in its initial
    developmental stages. Recent reforms in the energy sector have promoted increased use of
    natural gas, and MOCI is now committed to develop coalbed methane as a key strategy for the
    coal industry.

    Forty Chinese mines are currently set up to distribute the recovered methane. CMAs supply
    methane  to employees for residential cooking at very low costs, as a form of social welfare.
    Coalbed  methane is also sold as a commodity to urban residents outside the CMAs.  The
    current principal industrial uses for coalbed methane are for small carbon black plants run by
    the CMAs, and a small gas turbine generator at Fushun.  Industrial use and gas  turbines are
    described in  Section 3.4.1  (Box 3)  and 3.4.3 (Box 6),  respectively.   Increased  methane
    recovery, and a concomitant increase in use, could displace the use of coal for  cooking and
    heating in the growing residential sector.   Underground  gob gas drainage  systems, and
    surface gas  storage  facilities are  in place  and operating  in many CMAs. Since many of
    China's mining operations are relatively close to population centers,  a wide range of use
    options exist, including the deployment of waste heat from turbines for district heating.

    In addition to methane recovery from mines, coalbed methane exploration and development in
    China's unmined areas is increasing as well. According to preliminary statistics, MOCI, the
    China National Petroleum and  Gas  Corp.  (CNPGC),  the  Ministry of Geology  and Mineral
    Resources, and local governments drilled 39 boreholes for methane resource evaluation and
    production tests during the period 1990-1994. These boreholes were drilled in both mined and
    unmined  areas, and were financed using domestic as well as foreign capital.

    Following is a summary of coalbed methane projects planned or recently undertaken3 in China
    (China Coalbed Methane Clearinghouse, 1995; Wang and Li, 1995; Sun, 1995).  Figure 32
    shows the locations  of these projects. Table  13 summarizes the projects, their locations, and
    status as  of December 1995.

Anhui Province

    1. Huainan  CMA  - Enron Exploration Co. drilled four wells  in this CMA, two at the Xieli mine
       and two at the Panji mine. Testing indicated that permeability was low. Chapter 4 contains
       additional information about the Huainan CMA.

    2. Huaibei CMA - The Huaibei CMA completed a 540 m surface well at the Taoyuan Mine,
       which is  producing about 500-1000 cubic meters of methane per day from gob areas of
       Seams 7, 8, and 10 (Li D. et  al, 1995). Two coalbed methane assessment wells are being
       drilled as part of a GEF National Assessment sub-project. Chapter 4 contains additional
       information about the Huaibei CMA.
    3 Relatively long-established coalbed methane projects, such as the recovery and use of methane at the
    Fushun CMA, are not included here.


                                                                                   3-23

-------
                    18.Sanjiao Projects,






              20.  Hedong Project
                                                                                                .  Shenyang  CMA




                                                                                     ^~3. Kailuan CMA
         17.  Liulin  Projects,



                 \
15.  Binchang  Projects x
                                                                                 — 19.  Yangquan CMA


                                                                              —16.  Jincheng  CMA


                                                                                5.  Jiaozuo CMA


                                                                                   7. Yingyang Project
                                                                                  10.  Fengcheng CMA
                                                                                            EXPLANATION
            9.  Lengshuijiang  Project
                                                          .  Lianshao  CMA
                                                                                                                  3-24

-------
TABLE 13. STATUS OF COALBED METHANE PROJECTS IN CHINA
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
15
16
17
17
18
18
19
20
20
21
Coal Basin
Huainan
Xuhai
Jingtang
Lubei
Qinshui
Yuxi
Yuxi
Lianshao
Lianshao
Pingdong
Songliao
Fuxin
Dunhua-
Fushun
Various
Ordos
Ordos
Qinshui
Hedong
Hedong
Hedong
Hedong
Qinshui
Hedong
Hedong
Chuannan-
Qianbei
Participants
MOCI, Enron
Huaibei CMA
GEF, Kailuan CMA, GAI
CNPGC
Jiaozuo CMA, CCAO
Pingdingshan CMA, CNAGC, Enron
Zhengzhou City Gas Co.;Zhengzhou
City Coal Dept.;Sino-American Energy
Central China Admin. Petroleum Geol.
CNPGC, Hunan Prov. Planning Comm.
Jiangxi Province, CNPGC
GEF, Tiefa CMA, REI
Fuxin CMA, Juxin Planning Comm.,
Xi'an Branch CCMRI, USCBM Energy
Shenyang Planning Commission,
Advanced Resources International
GEF/UNDP, Xi'an Branch CCMRI
MOCI, CNPGC, Amoco
MGMR, Shanxi Planning Comm., Shell
Oil Co., Lowell Petroleum Pty. Ltd.
Jingcheng CMA, Sino-American Energy
NCBPG, UNDP
NCBPG, Lowell Petroleum Pty. Ltd.
Enron, Huajin Coking Coal Corp.
Shanxi Province Planning Commission,
US CBM Energy Corp.
Yangquan CMA
MGMR, Enron
MGMR, Amoco
GEF, Songzao CMA, REI
CMA / Mines Involved
HUAINAN /Xieli, Panji
HUAIBEI /Taoyuan
KAILUAN /Tangshan
None
JIAOZUO /not specified
PINGDINGSHAN /No. 8
None
LIANSHAO / Hongshandian
None
FENGCHENG/none
TIEFA /Xenon, Daxin
FUXIN / Wangjiaying
Guchengzi lignite coal field
Various
None
None
JINCHENG/Panzhuang
None
None
Sanjiao mining area
Sanjiao mining area
YANGQUAN / Hanzhuan
None
None
SONGZAO / Shihao, Datong
No. 1
STATUS (December, 1995)
Completed four wells
Completed a surface well
Drilling now underway
1 well completed and producing
Negotiating to drill a test well
Drilled 1 well
No. G1 well completed at 460 m
Drilled 2 wells to depth of 500 m
Drilled well to 600 m
Completing Quijian No. 1 well
Drilled 3 vertical gob wells; will
also drill 3 horizontal wells
Completed one test well
Completed and tested 2 wells
Collected data on mining areas
Feasibility study in progress
Lowell has drilled two wells, will
drill a third well
Completed 4 test wells; three
additional wells to be drilled
Producing/evaluating
Drilling/evaluating
Production testing 2 wells
Ready to sign agreement
Negotiating proposed project
Drilled two wells to date
Preparing to drill first well
Reservoir testing completed,
directional drilling to begin
Production
(m3/day)
N/A
500-1,000

6,000

N/A
N/A
N/A
600

21,600
N/A
1,800
(initially)


N/A
tested 3,000
to 5,000
500




N/A

N/A
Numbers in Column 1 correspond to locations in Figure 32. The acronyms list at the beginning of this report includes acronyms in this table.
                                                                   3-25

-------
                                    Hebei Province

   3. Kailuan CMA - This project, located at the Tangshan mine, includes drilling surface wells to
      drain methane in advance of mining; designing an optimal methane drainage system and
      strategy;  and  building compression, treatment and  transportation facilities. The Kailuan
      CMA is cooperating with GAI Co., a U.S.  contractor,  on this GEF-sponsored project. They
      have completed the project  design and drilling of five coalbed methane boreholes is now
      underway.  Chapter 4 contains additional information about the Huaibei CMA.

   4. Dacheng Project - The CNPGC is conducting this project in an unmined area.  The Dacan
      No. 1 well is 1,100 m deep; it has been completed and fractured and produces 6,000 cubic
      meters per day.  CNPGC is making a decision on investing in the drilling of 1  or 2 more
      wells.

Henan Province

   5. Jiaozuo CMA - The Central China Administration of Oilfields will cooperate with the Jiaozuo
      CMA on this  project. They plan  to drill and  complete a coalbed methane test well.
      Negotiations are underway.

   6. Pingdingshan CMA  - In 1993, Enron Oil and Gas  International  and the China National
      Administration  of  Coal Geology (CNACG) drilled  a  borehole at  the Pingdingshan CMA
      specifically designed to obtain coalbed methane reservoir parameters. Testing indicated
      low permeability. Chapter 4 contains additional information about the Pingdingshan CMA.

   7. Yingvang Project - The Zhengzhou City Gas  Department,  the city's Coal Department, and
      the Sino-American Energy Corporation have jointly  invested 2 million  RMB yuan in this
      methane recovery project. The No.  G1  well was  drilled to 460 m by the Central China
      Administration  of Oilfields.

   Hunan Province

   8. Lianshao CMA - The Central China Administration of Petroleum Geology has  drilled two
      wells to a depth of 500 m at the Hongshandian mine.

   9. Lengshuijiang  Project - The NPGC  and the Planning Commission of Hunan Province are
      cooperating on this project. A well has been drilled to 600 m, and production testing yielded
      600 cubic meters of methane per day.

   10. Fengcheng CMA - In 1994, Jiangxi  Province and the CNPGC cooperated in drilling a trial
      coalbed methane well, the Quijiang No. 1, at the Quijiang coal field. Unfortunately, the coal
      seam was damaged during the drilling process. Attempts to successfully complete the well
      are underway (Zheng, 1995).

Liaoning Province

   11. Tiefa CMA - This project, funded  by the GEF and administered  by  UNDP,  has been
      undertaken by the Tiefa Coal Mining Administration and Resource Enterprises Incorporated
      (REI), a US consulting firm. The primary objectives of the project are to demonstrate the
                                                                                   3-26

-------
      effectiveness of surface vertical gob wells, and to remove gas from the working seam via
      directionally-drilled in-mine horizontal gob boreholes (Schwoebel et al, 1995).

   Three vertical gob wells have been drilled, cased and completed  at the Daxing Mine, and
      results are encouraging. The three wells are producing a total of about 15 cubic meters of
      methane  per  minute. Late in 1995, the Tiefa  CMA began drilling the horizontal gob
      boreholes, also at the Daxing Mine.  This entails directionally drilling three long (-1000 m)
      in-mine boreholes above the working coal seam. Chapter 4 contains additional information
      about the Tiefa CMA.

   12. Fuxin CMA  - The Fuxin CMA, the Fuxin Municipal Planning Commission, Xi'An  Branch of
      the CCMRI, and  US  CBM Energy  Corporation are cooperating  in the development of
      coalbed methane  in this area. The  No. 9420 testing  well at the  Wangjiaying  Mine was
      completed in 1994. The permeability of the upper coalbeds was measured at 3 to 4 md.
      The concentration of methane in the gas is 90  percent. Due to unspecified difficulties,
      drilling had to be suspended before reaching the lower seams.

   13. Shenyang Project - The  Planning Commission of Shenyang City and Advanced Resources
      International, a US firm, are  cooperating on this project.  Two  wells were drilled at the
      Guchengzi lignite  coal field in  the northern part of the city. The wells  produced 1800 cubic
      meters per day after fracturing at the initial stage.

Shaanxi Province

   14. GEF/UNDP Project with  the Xi'an Branch of the CCMRI (in various provinces and basins) -
      This project will  include a detailed evaluation of China's  coalbed  methane resources,
      production potential, and use  methods.  The Xi'an branch will  also conduct detailed
      analyses on coalbed methane investment and market prospects. They have collected data
      pertaining to the coalbed methane resources of 17 mining areas. They will drill at least ten
      test boreholes in eight  different mining regions, including the Huainan, Huaibei, and
      Jiaozuo CMAs, to further evaluate their coalbed  methane resources.  To date, the Xi'an
      branch has drilled boreholes at the Huainan and Huaibei CMAs, and other test  boreholes
      will be completed  soon.

Shanxi Province

   15. Bingchang Projects - MOCI, the China National Petroleum and Gas  Corp. (CNPGC), and
      Amoco USA are  cooperating  on  a project that will take  place in the unmined Bingchang
      area. A feasibility  study is in progress.

   Elsewhere in  the  region,  under an agreement with the Ministry  of Geology  and  Mineral
      Resources (MGMR) Lowell Petroleum Pty. of Australia has drilled two wells,  financed by
      Shell Oil. They are preparing to drill a third well.

   16. Jincheng CMA - The Jincheng CMA and Sino-American Energy Co. are cooperating in this
      demonstration project at the Panzhuang mine.  To date they have completed four of seven
      proposed wells. One of the completed wells, Pan No. 2, has produced 3000-5000 cubic
      meters per day. Production tests of the  Pan  No. 3 and Pan  No. 4 wells yielded water and
      gas (Sun et al, 1996). Chapter 4 contains additional information about the Jincheng CMA.
                                                                                   3-27

-------
   17. Liulin Projects - Since 1991, the  North China  Bureau of Petroleum Geology (under the
       MGMR) has drilled six coalbed methane test wells, in the unmined Liulin Pilot Area of the
       Hedong Basin, with UNDP assistance. Well depths range from 350 to 400 m. In October,
       1994 these wells began producing an average of 500 cubic meters  per day. The Bureau
       has conducted reservoir evaluation and permeability studies (Quan et al, 1995; Chen et al,
       1995). The Bureau has  also conducted twelve  large-scale hydraulic fracturing treatments
       on the six wells (Li Z. et al, 1995).

   Another project is underway at the Liulin Contract Area. This area encompasses 218 km2 and
       is the first joint venture coalbed  methane exploration  area authorized by  the Chinese
       government (Zhao et al,  1995). The North China Bureau of Petroleum Geology and Lowell
       Petroleum Pty. Ltd. are participating in the venture. To date,  they have drilled two of three
       planned exploration wells; production testing, reservoir simulation, economic analysis, and
       a detailed assessment will follow.

   18. Sanjiao Projects - Since 1992, Enron Oil and Gas International has been cooperating with
       the Huajin Coking Coal  Corporation by conducting in-depth exploration  and evaluation  for
       coalbed methane resources in the  Sanjiao mining area of the Hedong Basin (Fisher, 1995).
       They are presently production testing two wells  in Sanjiao, and preliminary results suggest
       that the potential for coalbed methane production in the area is excellent.

   The Shanxi Province planning  commission  has organized another project  in  the northern
       Sanjiao mining area, involving  six partners, including  the  Lulian Subprovince Planning
       Commission, Huaxiang  Corp., the Geological  Exploration  Corp., Huatai  Corp., and US
       CBM Energy Corp. The Administration of Geology and  Mineral Resources has approved
       the license for exploration, and the partners are  ready to sign an agreement on the project.

   19. Yangquan CMA  -  The Yangquan  CMA  plans to  develop coalbed methane  at  the
       Hanzhuang  mining  area of the Qinshui Basin. This exploration project would include
       methane drainage in advance of mining, and would be synchronized with development of
       the Yangquan  mining  area  (Dong,  1995). CBM Associates  has  drilled  two wells  at
       Yangquan CMA. Chapter 4 contains additional information about the CMA.

   20. Hedong Projects - Enron Exploration Corp. negotiated a project with the  MGMR  to explore
       for methane in unmined areas of shallow coal deposits in southern Liulin County in the
       Hedong Basin. They have drilled two wells to date.

   Amoco has negotiated with  the MGMR for development of coalbed methane in deep deposits.
       They are preparing to drill a well.

Sichuan Province

   21. Songzao CMA - This project takes place at the  Shihao and Datong No.  1 mines. The  GEF
       is funding the project, UNDP is administering it, and  REI of the  US  is providing technical
       direction.  The  primary  objective  of the  project is  to  demonstrate the applicability  of
       directional drilling for improved  methane  drainage (Jianling  et al, 1995).  In  addition, the
       project includes: reservoir testing and computer simulation to optimize  borehole spacing;
                                                                                    3-28

-------
   in-mine hydraulic fracturing;  improving surface and underground gas collection  systems;
   and, improving current ongoing drilling and gas collection techniques.

   To date, all major equipment design, reservoir testing, and  sorption  testing  have been
   completed.  Permeability  is  low,  and the  coal  seam  appears  to be undersaturated.
   Directional drilling is expected to start  during the first quarter of 1996,  and  hydraulic
   fracturing will follow. Chapter 4 contains additional information on the Songzao CMA.

In summary, China has seen much progress  in coalbed methane development in recent years,
both in mined  and unmined  areas.  Coal  mines have been improving  their underground
drainage systems,  and are beginning to recover  methane from surface wells.  Major energy
companies are proposing several methane exploration and  development projects  in unmined
areas.

Certain technical barriers to widespread coalbed methane development in China still remain.
These  include the lack of a widespread pipeline  network, and relatively low permeability of the
coal seams. With increased capital investment and ongoing research efforts, China can likely
overcome these problems.
                                                                                3-29

-------
                                  CHAPTER 4


      PROFILES: SELECTED REGIONS WITH STRONG COALBED
                           METHANE POTENTIAL


4.1 INTRODUCTION

4.1.1 SELECTION CRITERIA FOR PROFILES

As Chapter 1 discussed, there are currently 108 Coal Mining Administrations (CMAs) in China,
which manage approximately 650 mines.  In addition to the CMAs, there are numerous gassy
local, township, and  private mines that cumulatively produce over one-half of China's coal.
Varying  physical and geologic criteria (including type of  basin, age, depth, rank,  reserves,
annual production, and life of mine) cause some coal mining regions to have  higher coalbed
methane development potential  than others.  Mines located near industrial and population
centers,  for example, are more conducive to near-term recovery and use options,  as recovery
is most economical for mines with ready gas markets nearby.

This chapter profiles  ten CMAs and one coal basin. Each of the profiled areas meets most or
all of the following criteria:

•  Depth of coal seam burial between 300 to 1000 m;
•  Minimum seam thickness of 2 m;
•  Coal rank ranging from low to medium volatile  bituminous; vitrinite reflectance 0.5 to 2.0
   percent;
•  Minimum gas content of 9 cubic meters/ton (based on desorption testing);
•  Coal seam permeability of 1 md or greater;
•  Well-developed local industrial infrastructure, nearby markets or population centers, and
   high  demand for natural gas.

Chapter 5 uses the information provided in the CMA profiles, with the recovery and use options
described in Chapter 3, to provide criteria for selecting the technologies appropriate to specific
conditions. Chapter  5 also contains  guidelines for the development  of coalbed methane
projects.
                                                                             4-1

-------
4.1.2  CMA PROFILES USER'S GUIDE

This chapter profiles the following ten CMAs with high project potential, the locations of which
are shown in Figure 22 (Chapter 2).

NORTHEAST REGION
      •   4.2  Fushun CMA - Liaoning Province
      •   4.3  Tiefa CMA - Liaoning Province

NORTH  REGION
      •   4.4  Hebi CMA - Henan Province
      •   4.5  Jincheng CMA - Shanxi Province
      •   4.6  Kailuan CMA - Hebei Province
      •   4.7  Pingdingshan CMA - Henan Province
      •   4.8  Yangquan CMA - Shanxi Province

SOUTH  REGION
      •   4.9   Huaibei CMA - Anhui Province
      •   4.10  Huainan CMA - Anhui  Province
      •   4.11  Songzao CMA - Sichuan Province

Section  4.12 profiles the Hedong  Coal  Basin, whose location is shown in  Figure 14 (Chapter
2).  It is in the  North Region in Shanxi and Shaanxi Provinces on  the eastern edge of the
Ordos Basin. As noted in Section 3.5,  the Hedong  Basin, like most of the CMAs listed above,
is an area where coalbed methane projects are planned or currently  underway. The source of
information for the Fushun CMA  profile is Huang  L. (1995)  and JP International  (1991); the
majority  of data for the remaining profiles were provided by the CM. Additional sources are
cited within the individual mine profiles.

There are  five appendices at the end of the report that may be useful to companies interested
in  pursuing methane  projects  in China.  Appendix A  lists contacts that  potential  foreign
investors may find useful. Appendix  B explains Chinese terminology regarding resources, coal
rank, and other frequently used  terminology pertaining to coal and coalbed  methane.  To avoid
repetition,  Appendix B contains information which is not included in  the individual mine profiles.
Appendix C consists of selected summary tables compiled on the individual CMAs. Appendix D
consists of provisional  rules and regulations for  coalbed  methane development in China.
Appendix  E contains more information about USEPA publications  and programs related to
coalbed  methane.

Individual  CMA profiles include the following types of data (to the extent  these data were
available):
•   Coal geology, reserves and  production; includes geologic setting, coal  reserves and rank,
    coal  production and quality;
•   Methane liberation, ventilation, recovery, and resources;
•   Present and planned use of  mine methane; and,
•   Mining economics.
                                                                                4-2

-------
Specific mining economics data for individual CMAs are not readily available.  CM data from
sixteen coal mining regions throughout China, however, indicate that coal sale prices during
September, 1995 ranged from 125 to 310 yuan for bituminous coal (average 215 yuan,  or
approximately $US 26.18),  and from  130 to 356 yuan  for anthracite (average 225 yuan,  or
approximately $US 27.40) per ton. No coalbed methane cost recovery data are available for
individual CMAs or mines. According to the CM, estimated average costs for methane drainage
in China are 30 yuan ($US 3.65) per thousand cubic meter for underground drainage and 400
yuan ($US 48.70) for vertical (surface) wells, respectively.

In selecting regions for coalbed methane development, it will be necessary to further evaluate
resource conditions,  market  demand,  and local  infrastructure.   Based  on  a preliminary
evaluation of methane resources (Table 14), however, it  appears that the mining areas profiled
in this chapter have great potential for future development.

              TABLE 14.  ESTIMATED COALBED METHANE RESOURCES
                   CONTAINED IN AREAS PROFILED IN CHAPTER 4
CMA or Coal Basin
Huainan
Yangquan**
Hedong Coal Basin
Huaibei **
Kailuan
Tiefa
Jincheng
Songzao **
Pingdingshan**
Hebi
Fushun **
METHANE RESOURCES
(Billion cubic meters)
500.0
290.0
220.0
158.4
30.0
28.3
24.0
22.7
17.2
10.6
*3.1
1994 COAL PRODUCTION
(Million Tons)
11.5
10.5
N/A
14.2
18.0
11.0
10.3
2.7
17.1
4.7
8.6
* The Fushun estimate is for recoverable methane resources only.
** 1993 Production listed for these CMAs
Resource estimates were provided by CM (1995) and Huang L. (1995); details on
resource estimation methodology were not available.
4.2 FUSHUN CMA

The Fushun CMA is located in eastern Liaoning Province (Figure 22) in the city of Fushun, an
industrial center. Coal mining operations began in the area in 1907. The CMA is situated in the
Dunhua-Fushun Basin and consists of three underground coal mines and one surface mine.

4.2.1 COAL GEOLOGY, RESERVES, AND PRODUCTION

Structurally, the  Fushun Basin is a large, asymmetrical syncline.  In addition to coal, there are
significant  quantities of oil-bearing  shale and  mudstone in the basin. Coal is mined  from a
group of Eocene age coal seams whose thickness totals 8 m in the western portion of the
basin  and  130 m in  the east; average recoverable  thickness is  50 m.  In  1993, the mine
produced 8.6  million tons of coal.  The coal is high volatile bituminous in  rank,  and is low in
                                                                              4-3

-------
sulfur, phosphorous, and ash. Large quantities of gas are associated with this coal, primarily in
the Laohutai Mine,  Shengli Mine, and Longfeng Mine.

4.2.2  METHANE LIBERATION, VENTILATION, RECOVERY AND RESERVES
The Fushun CMA began recovering methane in
the early 1950's. Total drainage volume from
1952  to 1994 is 3.7 billion cubic meters (Xu,
1995). Since  1980, the CMA has drained more
methane  annually   than   any  other  CMA,
recovering  113 million cubic meters in  1993.
The  CMA recovers methane underground, in
advance of,  during  and   after mining  (gob
recovery). Box 8 is an example of methane
recovery from working seams at the Laohutai
Mine.

Currently there  are eight  methane drainage
systems  in  the  Fushun  CMA, 0.48  million
meters  of gas supply pipeline, and  six  gas
storage tanks.  There are  also six ventilation
systems discharging low-methane gas into the
atmosphere.   The  CMA,  in  cooperation with
CCMRI,  has  conducted   several  hydraulic
fracturing tests using vertical (surface) wells at
the Longfeng  Mine (Xu, 1995).

Key   methane  characteristics  of   the  three
underground  mines  at the Fushun CMA are as
follows:
    BOX 8. METHANE RECOVERY FROM
WORKING SEAMS AT THE LAOHUTAI MINE

The Laohutai Mine is located in the center of the
Dunhua-Fushun basin, currently  mining at  a
depth  of about 600 m. Total seam thickness
averages 43.0 m  thick, and  dip is 21° to 25°.
Coal rank is  high volatile bituminous B (gas
coal),  and volatile  content  is 45.8  percent.
Methane content averages 13.2 cubic meters
per ton, and   permeability ranges from 2.9 to
3.1 md.

The natural flow of methane  from boreholes  is
only 3.5 to 4.0 m3/min (per 100 m of borehole).
In  contrast, when  vacuum pumps are  used to
drain methane from the seam, the flow rates
reach  120 cubic meters per minute. Boreholes
are 75 to 127 mm in diameter and are drilled
upward or downward into the seam. Recovery
efficiency is as high as 54.5 percent.

The No.  502  mining district,  in which they are
mining  from   5  active  faces,  is  a  typical
example. One drilling site is set up at each face.
At  each drilling site, five boreholes were drilled
downward at a dip of 5 to 15°.
Mine
Laohutai
Longfeng
Shengli
Coal Methane Content
26.5 m3/ton
34.8 m3/ton
34.8 m3/ton
CH4 Concentration in the Gas*
58 percent
33 percent
33 percent
* Presumably, this refers to gas recovered from the mines' drainage systems
According to  Huang L. (1995), methane reserves  of the three mines are about 14.4 billion
cubic meters; of this, an estimated 3.1 billion cubic meters of methane could be recovered.

4.2.3 PRESENT AND  PLANNED USE OF METHANE

About 75 percent of the methane recovered at Fushun mines is used for domestic purposes;
20 percent by the chemical  industry, and 5 percent is used for power generation. In 1990,
there were 160,000 households in  Fushun using coalbed methane as fuel,  for cooking and
heating; of these,  47,000, or 30 percent, were part of the mining complex. By 2000, there will
be an estimated 300,000 households in the city using coalbed methane.
                                                                                 4-4

-------
Methane consumption at the Fushun CMA fluctuates daily and seasonally. When meals are
not being prepared, and during the summer months, there is a surplus of methane, and large
quantities are vented to the atmosphere, while at mealtimes and during the winter months,
there are methane shortages. Thus,  it is necessary to increase gas storage capacity in the
region. There are presently 188,000 cubic meters of storage capacity at the CMA, and two new
surface tanks are  under  construction;  when  completed, the new facilities will provide  an
additional 20,000 cubic meters of storage.

The chemical industry at Fushun uses methane for making carbon black. Because of its low
sulfide content, methane is the ideal feedstock for carbon black production. One cubic meter of
methane can produce between  120 and  150 grams  of carbon  black.  The Fushun  Glass
Factory, a local plastic factory, and a local gun powder factory also use coalbed methane.

As discussed in Box 6 of Chapter 3,  the Laohutai Mine built a coalbed methane-fired turbine
power  plant that uses surplus methane recovered during the summer months. At a methane
concentration of 40 percent, the plant uses 35 cubic meters of methane per minute.

4.3 TIEFACMA

The Tiefa CMA is located in  northern  Liaoning  Province, 90 km north of the city of Shenyang,
in the southern Songliao coal-bearing area (Figure 22). The CMA was established in 1958, and
covers an area of 613 km2. There are currently  eight active underground mines, with  an
additional mine  to begin production in  1996. All mines in the CMA are connected  with the
national railroad network.

4.3.1 COAL GEOLOGY, RESERVES, AND PRODUCTION

Coal deposits of the Tiefa  CMA are contained in Upper  and Middle Jurassic sediments. There
are a total of 20 seams contained in the coal bearing section,  10 of which are considered
recoverable.  Major mineable coal seams are contained in an upper and lower coal bearing
section, with the lower section coals being slightly higher rank.  Depth of burial of these seams
range from 30 to 1000 m. The overlying strata consist primarily of sandy mudstone.

Coal rank is predominantly low, sulfur, high volatile bituminous with seam thicknesses ranging
from 1  to 3 m.  The CMA has 2.25 billion tons  of proven coal reserves.  The  CMA consists of
eight active  mines with a producing capacity of 15.15 million tons per annum.  Raw coal
production in 1994 totaled  11 million tons.

4.3.2 METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

Recovery of coalbed  methane at the Tiefa CMA began in 1974.   In 1994, ten gas drainage
systems were in place with an annual recovery of 16 million cubic meters, primarily from gob
areas.  Coalbed methane recovery volumes for the CMA have increased from approximately 2
million  cubic meters in 1985 to over 16 million cubic meters in 1993 (CM, 1995).

Drainage methods at the Tiefa CMA include overlying  adjacent seam borehole  drainage,  in-
seam drainage,  and gob drainage. Gob gas is drained using horizontal  long holes and  strike-
oriented roadways in the  roof strata. The CMA's Xiaonan  Mine drains gob gas using roof
                                                                               4-5

-------
boreholes, as described in Box 9 and Figure 32. The average drainage rate at this mine is 3.37
cubic meters per minute and the recovery efficiency is 73.1 percent.
            BOX 9. THE XIAONAN MINE: METHANE RECOVERY FROM GOB AREAS

The Xiaonan  Mine of the  Tiefa CMA produces 2.1 million tons of coal annually from Jurassic age
sediments. The depth of the first mining level is 385 m. The primary seam is the No. 7, with an average
thickness of 2.9 m. The methane content of this seam ranges from 7 to 8 cubic meters per ton.  The No.
4 seam is partly recoverable with an averaged thickness of 1.6 m. The methane content ranges from  13
to 14 cubic meters per ton.  Rank is high volatile bituminous C, with a volatile content of 36 percent.

Horizontal long boreholes are drilled in roof strata at the S1-722 face for methane recovery from gob
areas. Nine drilling sites are set up at intervals of 130 to 140 m in the ventilation roadway (Figure 33). At
each drilling site, 3 to 4 boreholes are drilled; they are 117 mm in diameter, and range in length from 150
to 255 m. A total of 34 boreholes are drilled.
            FIGURE 33. PLAN VIEW OF BOREHOLE PLACEMENT FOR METHANE
                             RECOVERY FROM GOB AREAS
            51 9
   Ventilation roadway
7654    321
                                                             Borehole.
                                                                           No. 4
                                                                            INo. 7
                                                               Ventilation roadway
Xiaonan Mine imported a modern drill from Acker, a US drill vendor, which uses a 95 mm and 117 mm
roller bit. In order to achieve high drainage efficiencies, boreholes should be drilled into the fracture zone
above the  gob cavity. The mine used directional drilling technology and improved the drill steel, in order
to maintain the desired drilling path.

During mining of the S1-722 coal face, methane flow from a single borehole averages 0.95 cubic meters
per minute, with a maximum rate of 3.48 cubic meters per minute. During a 426-day period  a total of
2.07 million cubic  meters (3.37 cubic meters per minute) were  recovered, with an  efficiency of 73.1
percent.

The Daxin Mine is the gassiest coal mine in the Tiefa CMA. Specific emissions range from 11
to 15 cubic meters per ton for the upper seams and  16 to 22 cubic meters per ton for the lower
seams. The  estimated methane reserves contained in the Daxin  Mine workable seams are
11.5 billion cubic meters (Schwoebel et al, 1995).

The CM estimates that the Tiefa CMA contains 28.3 billion cubic meters of coalbed  methane
reserves.  Of these, 23.5  billion cubic meters are contained in the Tiefa coal basin, and 15.3
billion cubic meters are recoverable. The gas content of mineable coal seams is high, ranging
from 11.05 to 24.23 m3/t for current mining depths. Coal seam permeability in the  region is
relatively low.

As  discussed in Section 3.5, there is a GEF-funded project for surface  (vertical well) gob gas
recovery at the Tiefa CMA. To date, three wells  have been drilled with  the cooperation of the
Tiefa CMA and the US company REI.
                                                                                     4-6

-------
4.3.3 PRESENT AND PLANNED USE OF MINE METHANE

The Tiefa CMA first used coalbed methane in  1975, initially for dining facility uses such as
boiling water. Residential use of coalbed methane began in 1985. Concentration of methane
in the gas mixture ranges from 30 to 90 percent.  Methane use by local residents and industry
is limited, averaging 25  percent,  with the  remaining 75 percent vented to  the atmosphere
(Schwoebel etal, 1995).

In 1992, the CMA built three gas storage tanks in the region. Total storage capacity is 25,000
cubic meters, supplying gas for 9,000 households.  In 1992, Tiefa CMA coal  sold for 78 yuan
per ton, and the price of coalbed methane was 0.15  to 0.50 yuan per cubic meter.  Gas
consumption per household averaged 1.36 cubic meters per day in 1992.

4.4 HEBICMA

Hebi CMA is located in northern Henan Province (Figure 22). It  covers an area of 15.5 km2,
and was founded in 1957. It mines coal from the Hebi Coal Basin.

4.4.1 COAL GEOLOGY,  RESERVES, AND PRODUCTION

The  Hebi CMA mines Permo-Carboniferous  age coals. Burial depth is less than 1,000 m.
There are up to  17 coal seams; 4 to 6 of  these seams are mineable,  with a  cumulative
thickness of 10 m. Coal rank in Hebi CMA is primarily low volatile bituminous and anthracite.

Coal reserves within the  Hebi CMA total 1.77 billion tons. The designed  annual  production
capacity is 4.20 million tons, and 1994 raw coal production was 4.67 million tons.
Since 1970, the Hebi CMA has had five
mines with gas drainage systems. As of
1992, a total of 132 million cubic meters
of  methane  have  been  recovered.
Drainage borehole lengths totaled  9.9
km, and  the drainage rate was  15.26
cubic  meters  per  minute.  Recovery
efficiency was 14.2 percent. In  1993,
the Hebi CMA  recovered 6.5  million
     BOX 10: ENHANCING PERMEABILITY AT
           THE HEBI CMA NO. 2 MINE

The No. 2 mine at the Hebi CMA has tested the use of
high-pressure water jets to cut slots in their coal seams.
Slots with a depth of 0.4 to 0.8 m and a width of 0.2 m
were cut at both sides of the borehole using a jet with a
pressure of  8 to 18  MPa. This resulted in  a release of
pressure from the coal seams, as well as fracturing. After
  ..      .       ,     ..       o    ^n  cutting the slots, methane flow from boreholes increased
cubic  meters  of  methane.  Box  10  dramatica||y
discusses successful efforts to increase  '          L
recovery at the CMA's No. 2 mine.

4.4.2 METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

Methane content in the Hebi CMA averages 13.76 cubic meters. Coalbed methane reserves in
1992 were about 10.6 billion cubic meters and  recoverable reserves were 2.2 billion cubic
meters.
                                                                               4-7

-------
4.4.3 PRESENT AND PLANNED USE OF MINE METHANE

Coalbed methane concentrations range from 30 to 40 percent, with a heating value of 11 to 18
MJ per cubic meter. Gas of this quality is  used  as  residential fuel without being processed.
Currently the region has five gas storage  tanks with  a  total capacity of 40 thousand cubic
meters, and 48 km of gas  pipeline. About 60 thousand cubic meters of gas are consumed
each day; of this, residential consumers use 87  percent, and mine facilities  use 13 percent.
The use ratio of coalbed methane in the region is 90.6 percent.

Residential areas with an existing transportation infrastructure are nearby,  making the  Hebi
CMA an attractive area for coalbed methane development.  Advanced surface  recovery
technology could recover significant quantities of coalbed methane,  providing  a  long-term,
stable gas supply for residential users, as well as developing additional industrial use  options.

4.5 JINCHENG  CMA

Jincheng CMA is located in southeastern Shanxi Province (Figure  22),  covering an area of
3,680 km2.  Currently Jincheng CMA  has three active mines; all three mine coal from within the
Qinshui Basin. The Tai-Jiao Railway crosses the eastern part of the region.

4.5.1 COAL GEOLOGY, RESERVES, AND PRODUCTION

Coal-bearing formations in the  Jincheng CMA are  of Permo-Carboniferous age,  within the
Taiyuan and  Shanxi  Formations. They  contain  up to 15 coal  seams, three of which are
mineable seams (Seams No. 3,  9, and 15). Individual seam thicknesses range from  1.7 to 6.0
m; cumulative coal thickness averages 13.8 m. Coal  rank is predominately anthracite, with ash
content ranging from 14 to 19 percent, and volatile matter from 6 to 9 percent.

The Panzhuang Mine  has three mineable anthracite seams with an average thickness of  10 m
and gentle dip. Overburden thickness ranges from 300 to 600 m, and seam thickness exceeds
1.5m.

Coal reserves in the region are  11.6 billion tons. Associated methane reserves to a depth of
1,000 meters are estimated at 6.3 billion  cubic meters.  In 1994, raw coal production was 10.32
million tons.

4.5.2 METHANE  LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

Currently, there is no underground methane recovery at the Jincheng CMA (and therefore, it is
not listed in Table 10).  However,  since 1991 the Jincheng CMA has been cooperating with
Sino-American Energy Corp. at  the Panzhuang Mine to develop coalbed methane resources
via surface wells. As discussed in  Section  3.5,  four of seven proposed wells have  been
completed and production tests  at one well yielded 3000 - 5000 cubic meters of  methane per
day.

Total methane reserves for the three mineable seams in the region are 24 billion cubic meters.
The majority of these resources occur  at the Panzhuang Mine. Average gas content is 19
cubic meters per ton, with a maximum gas content of 40  cubic meters per ton (Wang Y.  et al,
1995). The methane concentration of this gas  exceeds 85 percent.
                                                                               4-8

-------
4.5.3 PRESENT AND PLANNED USE OF MINE METHANE

There is a small residential area of 6,000 households and some public facilities five km from
the mine.  Use of coalbed methane as a fuel source would eliminate the need for construction
of a  coal gas plant, estimated to cost of 40 million yuan. Other potential uses for coalbed
methane at the Jincheng CMA are supplying methane to a thermal power station, as a source
of vehicle fuel, methanol factories, and as a chemical feedstock.

4.6 KAILUANCMA

The Kailuan CMA is located in the city of Tangshan in eastern Hebei Province (Figure 22). The
CMA was  built in 1978,  and currently consists of ten mines. The CMA covers an area of 890
km2. The Jingshan and Daqing railways cross the region.

4.6.1 COAL GEOLOGY, RESERVES, AND PRODUCTION

Kailuan CMA lies with the Kailuan Syncline,  Jinggezhuang Basin, Chezhoushan Basin, and the
Jiyu  Basin. The Kaiping Syncline, which covers an area of 670 km2, is the main structural
feature in the Kailuan Basin. Coal reserves to a depth of 2000 m are 13.2  billion tons.
Kailuan Coal Basin contains Permo-Carboniferous coals.  There are 30 coal seams, nine of
which are mineable; seam thickness ranges from 1 to 4 m.  Ash content is 12 to 20 percent,
and  volatile matter ranges from 34  to  40 percent.  Coal rank is  primarily  high volatile
bituminous.

The  designed production capacity of the region is 19 million  tons annually.   For the past
several years, raw coal production has averaged 18 million tons per annum. Kailuan  is the
largest coking coal producing region in China.

4.6.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

The axis of the Kaiping Syncline divides the area into two sub-basins with two distinct reservoir
characteristics. Gas contents south of the axis are low (less than 9 cubic meters  per ton), and
gas contents north of the axis are high (9 to 15  cubic meters per ton with a maximum of 20
cubic meters  per ton). Based on research  by the Xi'an Branch of the Central  Coal  Mining
Research Institute, coalbed methane  reserves to a  depth  of 2,000  m are  30  billion cubic
meters in the  Kaiping Coal  Basin. Cumulative thickness of the No. 8 and No. 9 seams in the
Kailuan CMA is 9.50 m. Injection  permeability and drop permeability are 18.0 md and 0.8 md,
respectively.  The  No.  8  and No. 9 seams are the primary  targets for coalbed methane
development.

Gas  drainage at the  Kailuan CMA began  in 1973. The primary methods used are surface
borehole  pre-mine and gob drainage.  For several years, gas drainage has averaged 8 to 9
million cubic meters per annum.  Box 11  and Figure 33 describe methane recovery from the
CMA's Zhaogezhuang mine. Currently, under a UNDP-funded project, the Tangshan Mine of
the Kailuan CMA has completed initial stages of construction for two vertical production wells.
This  is described in more detail in Section 3.5.
                                                                               4-9

-------
4.6.3 PRESENT AND PLANNED USE OF MINE METHANE

The Kailuan CMA is located  within the city of Tangshan, providing an  on-site gas market.
Coalbed methane recovered from Kailuan CMA is used for residential and mine facilities.  In
1992,  the  coalbed methane  supply  was  66 thousand  cubic meters  per  day,  meeting the
demand of 20 thousand  households. The CMA's Tangshan Mine injects  coalbed methane
directly into the  city gas system. Currently, the Kailuan CMA has six gas storage tanks with a
total capacity of 40 thousand cubic meters. The region uses  90 percent of the methane
recovered from the mines.
           BOX 11.  ZHAOGEZHUANG MINE: RECOVERY FROM ADJACENT SEAMS

The Zhaogezhuang Mine of the Kailuan Coal Mining Administration is located 30 km to the northeast of
the city of Tangshan.  The mine has been producing coal for approximately 100 years, and currently
produces 1.8 million tons annually. Present mining depth is 1002 m.

The Zhaogezhuang Mine  has been recovering methane from coal seams since the 1970's. The No. 9
and 12 seams, with a total thickness of 13 m, are the primary targets for methane recovery. The No. 9
seam has a methane content of 7.5 cubic meters per ton, and a permeability of 0.001 md. Gas and coal
outbursts have occurred during mining of this seam. Methane content of the No. 12 seam is 7.3 cubic
meters per ton, and the permeability is 0.0013 md. Three additional seams,  Nos. 5, 7, and 11, also have
potential for methane production.

Since 1987, the peak flow of methane reached 1.5 cubic meters per minute. At several locations along
the No. 11 seam  cross-cut, methane concentration  is 30-40  percent. The average amount of methane
recovered from adjacent seams totals about 450 thousand cubic meters, accounting for 37 percent of the
total methane recovered from the mine.

In  recent years, the Zhaogezhuang Mine has experimented with pre-drainage of methane from adjacent
seams. Figure 34  shows the placement of boreholes for methane recovery from adjacent seams. Drilling
sites are located in ventilation roadways at 30 m intervals, from which boreholes are drilled upward into
seams that underlie the target No. 11 seam. The seam is mined first to allow underlying strata to  relax.
                   FIGURE 34. BOREHOLE PLACEMENT FOR RECOVERY
                    FROM ADJACENT SEAMS AT ZHAOGEZHUANG MINE
                                                          •ehole
                                                          .ventilation
                                                          roadway
Methane flow from the No. 12 seam, or other seams underlying the No.  11 seam, increased rapidly as
the working face  of the No.  11  seam passes by the borehole.  A maximum flow rate  from a single
borehole reached  0.365 cubic meters per minute as the face passed 30  m past the borehole. The flow
stabilized at 0.113 cubic meters per minute after completion of mining operations. Recovery efficiency
was estimated at 36 percent.

The experience with methane recovery at the Zhaogezhuang Mine indicates that pressure from adjacent
seams was released and permeability increased as a seam of multi-seams  was mined out first.  This
                                                                                    4-10

-------
adjacent-seam  drainage technique is  considered  the  best option for methane recovery at the
Zhaogezhuang Mine.
4.7 PINGDINGSHAN CMA

The Pingdingshan CMA is located in the North Region of central Henan Province (Figure 22),
an important bituminous coal region. The  CMA contains 14 mines which mine coal from the
Pingdingshan and Hanliang Coal Basins, covering areas of 650 km2 and 61 km2, respectively.
The Pingdingshan CMA is an  important  coal center in China, with  a  long history of coal
production.

4.7.1 COAL GEOLOGY, RESERVES, AND PRODUCTION

The coals are found within seven Permo-Carboniferous coal groups. The Shanxi Formation is
the major  economic coal-bearing section.  One seam within the Shanxi  Formation is the
primary target for coal mining, accounting for over 60 percent of the total coal resources in the
CMA.  Total thickness of the coal-bearing package is 800  m. There are  10 mineable seams,
whose thickness totals 13 to 30 m. In  1994, coal reserves of  Pingdingshan Coal  Basin  were
estimated at 7.41 billion tons. In 1994,  fourteen coal mines produced 18.5 million tons of coal
(Wang H. etal, 1995).

The Pingdingshan Coal  Basin contains numerous coal seams, which are mainly high volatile
bituminous, with some medium and low volatile bituminous in rank. Volatile matter ranges from
20 to 23.4 percent. Most seams have well-developed cleating, and permeability  averages 1
md.

The thickness of the mineable seams generally exceeds 2 m, and they are laterally continuous
throughout  the basin.   Dip of the coal-bearing  sediments  ranges from 5°  to  15°. Strata
overlying the coal seams in the Pingdingshan Coal Basin are primarily mudstones and sandy
mudstones.

4.7.2 METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

Methane drainage increased from 0.13 million cubic meters in  1992 to 0.65 million cubic
meters in 1993.  Coalbed methane resources of the Pingdingshan CMA, to a depth of 1000 m,
are estimated at 17.2 billion cubic meters.  Gas contents tend  to be  fairly  high. Average
methane content in coal seams of the Permian Shanxi Formation exceeds 8 cubic meters per
ton, with a maximum of 16 cubic meters per ton (Wang H. et al, 1995).

Data from  gas contained in coals  at depths  less  than 600  m  indicate  that  methane
concentrations  exceed  80 percent  and carbon  dioxide  content  is less than 10 percent.
Coalbed methane content increases with increased  depth  of burial. Desorption studies show
that coals  from this region  tend  to desorb rapidly and completely, with little residual gas
remaining in the coal.

As described in Section 3.5,  Enron Oil and Gas drilled a  coalbed methane test well at the
Pingdingshan CMA. The coalbeds penetrated by this well had low permeability.
                                                                              4-11

-------
4.7.3 PRESENT AND PLANNED USE OF MINE METHANE

The Pingdingshan CMA currently has 11 mines, including two mines classified as gassy mines
and four outburst mines. If newer surface recovery technology is used to increase the drainage
efficiency to 50 percent, coalbed methane could become  an important energy source in the
region.

Within 200 km, there  are five large to medium sized cities, and transportation is convenient,
providing a significant market for coalbed methane.  There are over 80,000 households in the
city of  Pingdingshan.   Based  on  currently available demand, and a  methane drainage
efficiency of 25 percent, the Pingdingshan CMA could extract its coalbed methane resources
to a depth of 1,000 m for 100 years.

4.8 YANGQUAN CMA

The Yangquan CMA is located in central Shanxi Province in the Qinshui Coal Basin. It is near
the cities of Yangquan and Taiyuan (Figure 22) and is  connected  to markets via  several
railways.  It is  an  important production base for anthracite coal in China, and covers an area of
3,300 km2.  Currently, the Yangquan CMA  has  8  active  coal mines that are connected to
markets via several railways.

4.8.1 COAL GEOLOGY, RESERVES, AND PRODUCTION

Geologic structure in the Yangquan region is relatively simple, with coalbeds dipping up to 10°.
Depth  of cover  to the primary coal seams ranges from 300 to  1200  m.  The  Permo-
Carboniferous Taiyuan and Shanxi formations have an average cumulative thickness of 180
m. Within the  Shanxi  Formation, the No. 8 and No. 9 Seams are the primary mineable seams.
The entire region has up to 7 mineable seams. Total coal  seam thickness ranges from 2.3 to
37 m; individual seam thickness ranges from 0.6 to 6.5 m.

Coal reserves are mainly anthracite, with some low volatile  bituminous. Available coal reserves
of the Yangquan  CMA are 19.3 billion tons. In 1994, raw coal production totaled 13.5 million
tons. Design capacity for the CMA is 15.85 million tons  per annum (Qie and Lu, 1995).

4.8.2 METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

Coalbed methane resources  of the Yangquan CMA are estimated at 290 million cubic meters
to  a  depth of 800 m. Coal gas content is  relatively  high, ranging from  17.1 to  45.7 cubic
meters  per ton. Many of the mines are  considered to  be high  gas, and several are outburst
mines.  However, coalbed permeability is  relatively low, generally less and 1 Md.

Since 1954, the CMA  has drained gas from adjacent seams to increase mine safety. Methods
include cross-measure boreholes, drainage of  roof strata via  development roadways, and
vertical boreholes. The Yangquan CMA also drills boreholes within the  mined seam to drain
coalbed methane contained in adjacent limestone. In 1994, total emissions from the Yangquan
CMA were 398 million cubic meters. Estimated  cumulative methane emissions total 2 billion
                                                                              4-12

-------
cubic meters since 1954 (Qie and Lu, 1995). As discussed in Section 3.5, the Yangquan CMA
plans further coalbed methane development at the  Hanzhuang mining area of the Qinshui
basin. CBM Associates has drilled two coalbed methane wells at the CMA.
4.8.3  PRESENT AND PLANNED USE OF MINE METHANE

Significant volumes of coalbed methane are drained from the Yangquan CMA annually.  In
1993, annual drainage was 90.53 million cubic meters. The drained methane supplies gas to
about 60,000 households in the city of Yangquan (Qie and Lu, 1995).

4.9 HUAIBEI  CMA

The Huaibei CMA is located in northern Anhui Province in central-eastern China (Figure 22),
covering an area of 9,600 km2, with the coal-bearing region covering an area of 6,912 km2. It is
a  major  coal  and  industrial  center for  China,  with well  developed  transportation  and
infrastructure, but very high demand for energy relative to supply.

4.9.1  COAL GEOLOGY, RESERVES, AND PRODUCTION

The topography of the  region  is relatively flat,  but  the structure is complex, and the coal-
bearing section is contained in several synclinal basins. The Huaibei  Basin  is one of several
synclinal basins that contains  Permo-Carboniferous coal-bearing intervals. The  1200 m  thick
coal-bearing interval occurring in this basin comprises the Shanxi and Shihezi Formations. The
total  thickness  of the coal-bearing strata is about  1,200 m. Within these  strata are  up to 25
seams, with thicknesses ranging from 7.1  to 22.0 m.  Of these,  2 to 12 seams are mineable,
their total thickness ranging from 3.0 to 20.9 m.

The basin is divided  into four mining regions: Suixiao, Suxian, Linhuan and Woyang.  The
basin contains  35.46 billion tons of coal reserves, to a depth of 2,000 m. There are currently 21
active mines and three additional mines under construction.  In 1993, these mines produced
14.2 million tons of coal.

Coals in the region are relatively thick and the rank  is  predominately low  volatile bituminous,
semi-anthracite, and anthracite.  Coals in the northern part of the region underwent a  high
degree of metamorphism and are thus of higher rank, while the southern region is dominated
by high volatile bituminous coal. The overburden thickness is about 100 m in the north and 200
to 300 m in the south.

4.9.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

In general, the  coal gas content exceeds 8 cubic meters per ton throughout Huaibei CMA. The
CM considers  13 of the 21 active mines to be high gas.  Coalbed methane reserves of the
Huaibei Coal Basin are distributed over the Suxian and Linhuan mining regions. Gas content
of the coals in the Suxian  mining region  ranges from  6.9 to 25.5 cubic meters per ton; the
concentration of methane contained in this gas is 79 to 98.5 percent.  Gas content of the coals
in the Linhuan mining region ranges from 6.1  to 14.6 cubic  meters per ton;  the  methane
concentration in the gas is 75 to 91 percent.

Currently there are two underground gas drainage systems; the first was established at the
Luling Mine in  1973.  In-seam,  roof, and floor boreholes are  used for gas  drainage. Drainage
                                                                               4-13

-------
efficiency is about 15 percent, yet in 1993, the mine drained 4.7 million cubic meters (Li et al,
1995). Box 12  discusses a  recently-initiated surface well methane recovery  project at the
CMA's Taoyuan mine. As noted in Section 3.5, two coalbed methane wells are being drilled at
the Huaibei CMA as part of a GEF National Assessment sub-project.

An estimated 158.4 billion cubic meters of methane are  contained in the CMA,  with a  gas
distribution of 95 million cubic meters per km2 (Li et al, 1995). Of this total, 36.77 billion cubic
meters are in the Suxian mining region and 86.33 billion cubic meters  are in the Linhuan
mining region.
     BOX 12. SURFACE RECOVERY OF METHANE AT THE HUAIBEI CMA'S TAOYUAN MINE

The Taoyuan Mine is located 13 km south of Suzhou City, northwest of the Sunan Syncline. The syncline
covers an area of 32 km2, with a strike length of 15 km, and a width ranging from 1.5 to 3.5 km. Seams
are divided into three different groups: the upper,  middle, and lower groups. The main workable seam,
No. 3, is in the upper group; Seam Nos. 7, 8 and 9 are in the middle group; and the No. 10 Seam falls
into the lower group. Cumulative coal seam thickness is 12.9 m.  All seams are high volatile bituminous
A and B. Ash content is average,  sulfur content is low, and gas content is high. Vitrinite reflectance is
0.74% to 0.88%.

There are eight coal seams in the area of panel 1018 in which the surface well was drilled. The distance
between the No. 10 seam and the overlying No. 9 seam is more than 80 meters, as shown in the table
below. In the middle group, the gas pressure is 5 to 10 MPa, while the gas content ranges from 4 to 7
cubic meters per ton; the methane concentration in this gas is 95 percent. The depth of the gas depletion
zone (weathering zone of gas) ranges from 300 to 340 m.  Within the zone  where it is necessary to
relieve pressure (pressure  relief zone), the economic coal reserves of Seam Nos. 7, 8, and 9  reach 293
thousand tons, and methane reserves total 1.7 million cubic meters.

                    CHARACTERISTICS OF TAOYUAN MINE COAL SEAMS


COAL
SEAM
7,
72
73
8
9
10
TOTAL


LEVEL
(m)
-346
-352
-355
-368
-390


AVERAGE
THICKNESS
(m)
3.11
0.48
0.25
0.55
0.47
1.01
DISTANCE
FROM
OVERLYING
SEAM (m)

18
9
20
33
80
GAS
PRES-
SURE
(kPa)
71.8
77.9
79.7
87.9
2.7



COAL
RESERVES
(103TON)
121
42
63
49
17

292

GAS
RESERVES
(103 m3)
674
249
59
301
118

1,701
Methane Drainage Activities
A surface well, located in the middle and lower sections of panel 1018, was drilled to the No. 10 Seam, at
a depth of 506 m. Coal Seam Nos. 52  and 62 are found  within the weathering zone, and have been
sealed. Therefore, only Nos. 71  73, and 9 are considered suitable for methane drainage  within the
pressure  relief zone. Total  thickness of the three coal seams is 1.66 m. The well was completed in
November,  1994. Methane  began to blow out from the well with 12 m still to drill before reaching the
targeted depth. Gas flowed from the well at 0.2 to 0.3 cubic meters/minute, with methane concentrations
of 95.2 percent, and a wellhead pressure of 830 kPa.

A two-month recovery  test, completed at the end of February, 1995, yielded 55,000 cubic meters of
methane. As of July, 1995, the well continues to produce over 1,000 m3 per day of gas, with a methane
concentration of 94.5 percent. Preliminary calculations indicate the methane  reserves in coal Seam Nos.
                                                                                     4-14

-------
7, and 9, within the pressure relief zone at panel 1018, to be 1.7 million cubic meters. Assuming a 50
percent recovery factor, 850,000 cubic meters could be recovered.
4.9.3  PRESENT AND PLANNED USE OF MINE METHANE

Gas  recovered from  the  Luling Mine  is supplied  to about  4,000  households; there are,
however, many other opportunities for methane use at the Huaibei CMA. The CMA is situated
near dense population centers and associated gas markets. The nearby city of Huaibei has a
population of approximately 500,000, and the region is located only 70 km from the city of
Xuzhou and 80 km from the city of Bengbu. The local economy is well-developed and demand
for energy exceeds supply. Therefore, there is strong market potential for this resource.

4.10  HUAINANCMA

The Huainan CMA is  located  in the South Region of central Anhui Province (Figure 22). The
region covers 2,365 km2. It is an important energy base for eastern  China and has over 80
years of mining history. It has a well developed railway, highway, and waterway network.

4.10.1  COAL GEOLOGY, RESERVES, AND PRODUCTION

The Huainan Coal Basin contains Permo-Carboniferous coals covered by Cenozoic sediments.
The maximum  burial depth of the coal seams is 2,000 m. Geologic structure in the basin is
relatively complex, and continuity  of coals is controlled by numerous folds and faults.

Thickness of the  portion of the coal-bearing section  which contains mineable seams is about
350 m. This section consists of 9 to 18 mineable coal seams, with a cumulative thickness of 22
to 34  m.  Coal rank is bituminous, with volatile matter ranging from 33 to 42 percent. Vitrinite
reflectance ranges from 0.8 to 1.1 percent (Yang et al, 1995).

The coal bearing area of the  basin area covers 3000 km2, and estimated coal  reserves are
about 80 billion tons.  In 1994,  Huainan CMA produced 11.50 million tons of raw coal; annual
coal production by the year 2000 is projected to be 40 million tons.

4.10.2 METHANE LIBERATION,  VENTILATION, RECOVERY, AND RESOURCES

Typical gas content of the coal seams ranges from 4 to 12 cubic meters per ton, reaching a
maximum of 20 cubic meters  per ton (Yang et al, 1995). Gas contents of the coals increase
with increasing burial depth; for each 100 meters of depth, gas content increases by 1.4 to 2.8
cubic  meters per ton.   Based on this gradient, coalbed methane reserves exceed 900 billion
cubic  meters, of which an estimated 500 to 600 billion cubic meters are recoverable.

There  are  currently  20 coalbed methane wells in the Huainan CMA,  which  recovered
approximately 4.2 million cubic meters in 1994. Since 1985, the Huainan CMA has consistently
recovered over 4  million cubic meters of methane annually (Table 9). As noted in Section 3.5,
Enron Exploration Co. has drilled four coalbed methane test wells at this CMA.

4.10.3 PRESENT AND PLANNED USE OF MINE METHANE
                                                                              4-15

-------
Currently, coalbed methane recovered from Huainan CMA is used primarily as residential fuel.
The region uses 20,000 cubic meters of coalbed methane daily, meeting the demand of 7,235
households. Seven gas storage tanks have a total capacity of 150,000 cubic meters.

Electricity generation is a large potential gas market for the CMA; available electricity supply
does not currently meet  the demands of economic development. By the end of this century,
Huainan  CMA will  require  over  4,000  MW  of installed  capacity.  Meeting these  power
generation needs will require 10 billion cubic meters  of coalbed methane annually; based on a
market price of 0.8 yuan per cubic meter, the  potential economic value of coalbed methane
resources in the Huainan CMA may exceed 500 billion yuan.

4.11 SONGZAO COAL MINING ADMINISTRATION

The Songzao CMA is located in Sichuan Province, approximately 175 km south of Chongqing
and 300 km from Guizhou Province (Figure 22). All of its six large underground mines produce
coal from the Songzao Basin. Coal mining in the basin began in 1958, although  large-scale
production did not begin until the 1960's.

4.11.1  COAL GEOLOGY, RESERVES, AND PRODUCTION

Geologic Setting
The Songzao Basin is a northeast-southwest trending anticlinorium approximately 140 km2 in
size. Within this broad feature  lie  several smaller-scale anticlines and synclines resulting in
local steeply dipping coal measures. The overall structure is relatively simple, with localized
faulting and folding. More than 300 faults, both normal and reverse, have been identified within
the basin (JP  International, 1991 b), and they form the boundaries of many of the mines. Faults
are generally  less than 3000 m in length,  and  displacement ranges from 10 to 55 m. These
faults are well documented within the mine boundaries.

Anthracite coal occurs in the Permian  Longtan  Series,  where the coal-bearing interval  ranges
from 50 to 100 m thick. Within this interval, 14  seams are present, of which 5 are of mineable
thickness (0.7 to 3.0 m thick). The main mineable seam is the No. 8, with an average thickness
of 2-4 m.  The No. 8 seam represents 60 percent of the basin's coal reserves, and is 300 to
400 m deep at most of the basin's major mines. Although dips of beds  vary locally from 3° to
13°, the average regional dip is  12°. Present mining depth is 250 - 450 m.

Coal Reserves
Total coal resources are estimated at  900  million tons; reserves in the  balance category total
688 million tons (Appendix B  contains an explanation  of Chinese  resource  classification
terminology used in this report). Within the balance reserves are 592 million tons classified as
industrial reserves. These are defined as that portion of the Class A, B, and C reserves which
are slated for extraction. The  remaining  resources  are Class  D (predicted,  or possible
resources) which total 97 million tons.

Coal Production and Quality
Currently, there are six mines operating within  the CMA:  Songzao 1 and 2; Datong 1  and 2;
Shihao; and Fengchun. All of these active underground mines use the longwall method; three
of the mines have varying degrees of  mechanization, ranging from 50 percent (Datong 2 and
Shihao) to 100 percent (Datong 1).  Annual production capacity for the six  mines totals 3.2
                                                                                4-16

-------
FIGURE 35.  METHANE DRAINED AND VENTED 1981 -1990
million tons.  For the past several years, production has averaged 3 million tons per annum;
raw coal production in 1994 was 2.70 million tons. By the year 2000, the CMA estimates that
seven mines will be operating with an annual production of 5.4 million tons.

In 1991, there were 23 operating longwalls with a total development length of 57.5 km. By the
year 2000, four additional longwall systems will be in operation for a total of 27, and the length
of development headings will increase to 100 km, nearly double the present length.

In the mineable No.  8 seam, volatile matter ranges from 8 to 9 percent, ash averages 19
percent, and sulfur content is high, generally over 4 percent. Heating values range from 17,600
to 26,400 kJ/kg.   Overall,  ash and sulfur content  increase from north to south, with a
corresponding decrease in volatile content.

Most of the coal is shipped by rail and sold for power generation in coal-fired power plants in
Chongqing. The Chongqing Power Company operates two power generating stations, which
were designed specifically  to use coal that has the same characteristics as Songzao Basin
coal.

4.11.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

Methane Liberation
Figure  35 shows trends  in
methane  ventilation, drain-
age, and total liberation from
1981 through 1990.  In the
Songzao  CMA,  the  current
methane  recovery efficiency
is only 30 to 40 percent of
the total gas released to the
underground      workings.
While  this   rate  remains
relatively  constant, both the
volumes of methane drained
and vented  have  increased
over the past 10 years. Mine
management   plans   to
increase  methane recovery.
The CMA forecasts that their methane production will increase to over 100 million cubic meters
per annum by year 2000.

Gas content of the mined coal averages 17.3 cubic meters per ton, but locally varies from 17
to 29 cubic meters per ton. Specific emissions range from 56.7 to 88.4 cubic meters per ton,
and absolute emission rates range from 15 to 45 cubic meters per minute. Permeability of the
seams  ranges from 1.36 to 7.59 X 10"4darcies, which can be increased to 0.1 md by mining
the methane-liberating seam to release pressure for adjacent seams.

Methane Ventilation
Eleven large air shafts and  15 electrically driven fans provide ventilation for the mine complex.
Collectively,  these  fans  can  consume   5.3  MW  of  electrical power,  although current
   1981
1985
1986
1987
1988
1989
1990
                                                   4-17

-------
consumption is only 2.2  MW.   The  mines experience relatively frequent occurrences of
elevated  methane  concentrations, resulting  from  insufficient ventilation  air  movement
underground. This problem is exacerbated by an occasional power outage, due to the fact that
the mine lies at the end of the power transmission facility.

Methane Recovery
The Songzao CMA installed the first recovery  system  in 1967, and now all six mines have
systems in place.  Drainage personnel  remove  methane in advance  of or during mining
operations, via  tunnels in the  underlying rock. They  drill boreholes in a fan-shaped  array
upward into the roof to drain the working and overlying seams.  Drilling stations are located in
the rock tunnels at intervals of 15 to 150 m. Currently, there  are eight recovery stations
operating in  the six mines, with a total of 27 vacuum pumps.  The quality of the  recovered
methane ranges from 40 to 70 percent, and averages 50 percent.

In  1990, the Songzao CMA drained a total of 59.2 million cubic meters of methane  via its
degasification systems. By 1994, drainage had increased to more than 90 million cubic meters.
While historical data on the amount of methane used and vented from the Songzao CMA are
unavailable,  recovery efficiency averages 36 percent.  Table 15 shows past and projected
methane recovery at each  of the Songzao CMA mines.

               TABLE 15. METHANE DRAINAGE AT THE SONGZAO CMA
MINE
Songzao No. 1
Songzao No. 2
Datong No. 1
Datong No. 2
Shihao No. 1
Fengchun
TOTAL
1991
8.32
2.66
16.20
13.71
17.35
3.90
62.14
1992
9.33
3.09
18.82
15.01
21.41
4.05
71.71
1993
10.46
3.92
20.96
17.26
22.61
5.60
80.81
1994
11.87
4.61
24.02
18.17
24.61
7.25
90.53
1995*
13.17
5.61
27.77
20.69
25.87
9.0
102.11
2000*
13.17
5.61
37.87
28.65
30.18
9.00
124.48
* Projected
1993 total differs from data in Table 10; reason for discrepancy unknown
In  1992, Songzao's  coalbed methane development  project was  included  in the  GEF's
"Development of Coalbed Methane Resources in China",  in which directional long borehole
drilling and fracturing technology are to be introduced from  the US. Section 3.5 discusses the
status of this project at the Songzao CMA.

Methane Resources
Based on a report prepared by the Central Coal Mining Research Institute, the Songzao CMA
contains an estimated 22.7 billion  cubic meters of methane, of which 11.4 billion cubic meters
are recoverable.  No further details concerning the methodology used in these estimates are
available.

4.11.3 PRESENT AND PLANNED USE OF MINE METHANE

Of the 59. 2 million cubic meters of methane recovered in 1990, only 23.5 million cubic meters
(40 percent) were used, mainly by households for cooking and heating, and by the nearby
carbon black plant. Songzao mines vented  the  remaining  35.7 million cubic meters (60
                                                                               4-18

-------
percent) to the atmosphere. By 1992, methane use had increased; more than 30 million cubic
meters (about 49 percent) of the methane recovered from the Songzao mine were used that
year, mostly by mine facilities, residences, businesses, and farms, as shown  in Table 17. This
methane was used for cooking, heating, and industrial steam generation. A  600 ton-capacity
carbon black production plant, located at the CMA, is  one of  the primary industrial  users.
Coalbed methane supplies about 75 percent of the plant's fuel needs.

          TABLE 16. COALBED METHANE USE AT THE SONGZAO  CMA
1992 Consumption
Million cubic meters
Percent
Mine Facilities*
14.3
47
Residences
10.5
35
Other Industry
4.1
13
Other
1.5
5
Total
30.3
100
* Includes such facilities as cafeterias, bath houses, and worker housing.
Methane concentration = 100 percent.
In the future, a new on-site machinery factory and additional residential customers will increase
demand for  mine methane in the area, and the CM projects that by 2000, annual coalbed
methane recovery from the Songzao CMA will be 100 million cubic meters. Future use options
include power generation, transportation (vehicle fuel) and production of chemical products.

The largest growth market for this gas appears to be for power generation.  The mines need
increased power generation capacity; currently, there are electricity shortages that often lead
to power outages and resulting losses in coal  production. This mine area is located on the
outskirts of the transmission grid and experiences frequent low voltage  conditions, straining the
ventilation fans. According to a report detailing results of a GEF/UNDP  mission to Songzao
(Lunarzewski et al, 1992), by  year 2000 the  amount of methane required  by the domestic and
commercial sectors of the CMA will be about 30 percent of the total amount recovered, leaving
an adequate and dedicated supply of methane to fuel a 25.2 MW power plant.

As of 1993,  four of the six mining  districts had gas storage tanks, with a total capacity  of
30,000 cubic meters.  The CMA  is  building additional gas storage facilities and expects  to
double this capacity. The addition  of these facilities will create an integrated network between
the mines, and allow the six-mine complex to coordinate their methane  supplies.

Another potential  future  use  for the recovered methane is chemical feedstock production.
Currently, there is not a feedstock plant in the area.

4.12  HEDONG COAL BASIN

The Hedong Coal Basin is located at the eastern edge of the Ordos Basin (Figures 14 and 23)
covering an area of 12,000 km2. It is contained in portions of Shaanxi and Shanxi Provinces,
and the Inner Mongolian Autonomous Region. Coalbed methane activity in this basin occurs
outside the boundaries of coal mining administrations or other mining areas.

4.12.1  COAL GEOLOGY, RESERVES, AND PRODUCTION

Coal-bearing  strata in  the  Hedong  Basin  belong  to the  Permo-Carboniferous  Shanxi
Formation. The basin contains 17 coal  seams with  a total thickness of 19 m. Of these, nine
                                                                               4-19

-------
seams are mineable and four seams are primary targets for mining.  Seam thickness ranges
from 0.1 to 9.3 m, but mined seams are generally  1.6 to 3.9 m thick. Coal rank is primarily
medium volatile bituminous, with  a small percentage of low volatile bituminous and semi-
anthracite coal.

4.12.2  METHANE LIBERATION, VENTILATION, RECOVERY, AND RESOURCES

Based on desorption tests, gas contents in the Hedong Basin  range from 3 to 20 cubic meters
per ton. Coalbed methane resources within a depth of 1,000 meters are estimated at 220
billion cubic meters.

In  1991, the  Huaibei  Petroleum Geology  Bureau  of the  Ministry of Geology  and Mineral
Resources drilled six test wells in the Liulin area. Gas production for the wells ranged from 500
to 3,000 cubic meters.  Currently, the Chinese company Huajin Coking Coal Corp. and the US
company Enron Corp. are cooperating to conduct a  preliminary evaluation of coalbed methane
in Sanjiao mining region. Data obtained from these boreholes indicate that the permeability is
high. Section 3.5 briefly discusses the status of this project.

4.12.3  PRESENT AND PLANNED USE OF METHANE

The geology of the Hedong Basin is comparable to  that of the Black Warrior Basin of the US.
MOCI considers it an optimal region for surface recovery  of coalbed methane.  However, in
terms of economic factors,  the region  has less industrial development, infrastructure,  and
demand for coalbed methane, so near-term use options may be somewhat limited.
                                                                              4-20

-------
                                CHAPTER 5


     SUGGESTED APPLICATIONS OF  TECHNOLOGY AND ISSUES
                 RELATED TO PROJECT DEVELOPMENT


5.1 CRITERIA FOR SELECTION OF APPROPRIATE TECHNOLOGY

5.1.1 APPLICATIONS OF TECHNOLOGY SUITABLE FOR GEOLOGIC AND MINING
      CONDITIONS IN CHINA

Mines seeking appropriate technology for methane recovery should  consider the following:
•  geologic conditions;
•  mining conditions; and,
•  source and quantity of methane emissions.

The various recovery methods that may be employed in China, and the circumstances under
which they are used, are as follows:

•  If methane is emitted primarily from the working seam, then drainage  efforts should be
   directed toward the working seam; similarly, if it is emitted primarily from adjacent seams,
   then recovery efforts should focus on the adjacent seams.
•  If significant quantities of methane accumulates in gob areas, then it should be drained and
   recovered from gob areas via surface gob wells or in-mine horizontal longholes.
•  If methane is difficult to  drain  because of low coal seam permeability, then measures to
   relieve seam pressure should be taken; most commonly this is done by mining an overlying
   seam, causing relaxation of the seam in need of drainage.
•  Recovery  of methane via surface wells is feasible when topography will allow access for
   drilling  and gathering,  and   coal seams  have  a  high methane content,  sufficient
   permeability, and are between 300 and 1000 m deep.

5.1.2 SUGGESTED APPLICATIONS OF NEW TECHNOLOGY FOR IN-MINE RECOVERY

China has  been using in-mine recovery systems for several  decades.  In-mine recovery will
maintain an important place in the ongoing development of coalbed methane  recovery in
China. Chapter 3 lists the CMAs that currently recover large amounts of methane; these CMAs,
                                                                          5-1

-------
with their large methane reserves and well-established recovery systems, will remain important
contributors to China's coal mine methane industry.

Of the total methane that Chinese mines drain, more than 42 percent is from working seams.
In most cases,  the recovery efficiency is low. Under optimal conditions, such as thick coal
seams  with  good permeability (as  is the case at  the Fushun  CMA) mines achieve higher
recovery efficiencies.

Multi-seam recovery technology is used in many CMAs in China, such as Songzao, Tiefa and
Yangquan. Therefore, many mines currently use in-mine degasification from adjacent seams,
accounting for  nearly 53  percent  of the methane drained in China.  Mining relieves the
pressure of  adjacent seams, resulting  in improved  permeability. Mines  can  also  use the
adjacent seam degasification boreholes for in-mine pre-drainage and gob  drainage, creating
an integrated drainage approach that can recover up to 80 percent of the gas in place.

Gob  drainage significantly adds to the recovered quantities of methane, and is gaining more
attention in  China. In some  areas it  may  be feasible to use horizontal longhole drilling
technology to combine in-mine degasification from adjacent seams with pre-drainage and gob
drainage efforts.

The US and Germany have developed  horizontal and directional drilling technology, and the
Tiefa and Songzao  CMAs  have  imported  horizontal  and  directional  drills from  the US.
Unfortunately, these  types of technology  remain unaffordable for many Chinese mines.
However, changing market conditions for methane may improve the economic conditions and
provide incentives for investment in such capital-intensive technology.

5.1.3 SUGGESTED APPLICATIONS OF NEW TECHNOLOGY FOR RECOVERY USING
      SURFACE WELLS

The  Ministry of  Coal Industry considers the development  of coalbed methane to be  an
important  strategy for the coal industry. It recognizes that the progress of China's coalbed
methane industry will depend largely on recovering  methane from surface  wells.  In recent
years, China has initiated more than 20 coalbed methane projects (discussed in Chapter  3);
some of these have begun to produce methane, but their output is low at present.

Many of the geological  characteristics  of China's gassy mines differ from those  of other
countries.  The most obvious of these are the complex tectonic setting of China's gassy mines,
the occurrence of methane under high pressure with little or no water, and low permeability.

Enhancing the permeability of coal  seams at Chinese mines is of utmost  importance. China
has already begun to experiment,  on  a limited basis, with various methods of  increasing
access to in-situ  permeability. Generally, good results have been achieved  through the use of
hydraulic fracturing. At least one CMA has attempted an open-hole cavity well completion,
however the soft, non-cohesive nature of the mudstone comprising the roof and floor strata
caused problems.

Of the existing coalbed methane projects in China, about one-half are operated in cooperation
with  foreign  companies.  At this preliminary stage of coalbed methane development, China
needs advanced technology and training, as discussed in Section 5.2.3 below.
                                                                                 5-2

-------
5.1.4  MARKETS FOR METHANE

Near-Mine Residential or Industrial Users

Medium quality gas can  be used in the vicinity of CMAs, eliminating the need for costly gas
treatment or compression, and providing an affordable fuel  source  for residential users and
small  industry.  Near-mine uses of  recovered  medium  quality gas  include: residential  or
commercial space  heating;  use in boilers  for central heating, steam production or power
generation; cooking; and industrial uses that do not require high heating value gases.

Methane for Power Generation

The sale of electricity generated from coal mine methane offers opportunities at various scales
determined by the quantity  and quality of  methane produced. Smaller (1.5 up  to 15 MW)
turbine electric power generation sets can be used as a supplementary power supply to the
mine  or nearby  industrial consumers,  and as peak load supply in areas where seasonal
brownouts are prevalent. These turbines offer the advantage of single units with the option of
additional units that can be added as development proceeds.

Mines may install larger  units (25 MW and  greater) in remote  regions  to augment or replace
the electricity supplied by the regional power grid. In Australia, a mine and power company are
presently installing methane-fueled turbine generation sets with  even  greater generation
capacity. Revenues captured from  the sale of the generated electricity will make a welcome
contribution to the mine's cash flow stream. Installation of larger power generation facilities is
more likely to  be  economic where gas supply is assured and  production rates can  exceed 100
cubic meters of methane per minute.

Injection of High Quality Methane Into Local or Regional Transmission Pipelines

Development  of coalbed methane resources from unmined coal seams, and recovery of gas
from sealed gob areas, can offer the opportunity to exploit those markets open to high heating
value  natural  gas.  Because  the heating value of the gas developed  from these sources is
relatively high, mines can offer it as  a substitute for conventional  natural  gas.  Potential
consumers are local industries and  commercial enterprises, as well as more distant consumers
that can receive natural gas delivery via regional transmission pipelines.

5.2 ISSUES RELATED TO PROJECT DEVELOPMENT

5.2.1 PROJECT IDENTIFICATION AND DEVELOPMENT THROUGH STRATEGIC TEAMING

Consumers are  segregated by location  into two groups:  those  consumers  near the  gas-
producing  mines, and those  consumers located  in more distant cities or industrial centers.
Each  market group  possesses unique characteristics  and  challenges  for the  methane
producer, requiring an appropriate match of  technical expertise, technology,  and economic
goals.

The ability to  match expertise to the technical challenges of a coal mine methane recovery
project is generally dictated by the technology that  is to be  employed by the project. Simply
                                                                                 5-3

-------
increasing methane recovery using existing technology and techniques requires little or no
additional expertise; whereas a major utilization project, such as generating electricity with a
gas  turbine,  will require  specialized  knowledge  of  the  equipment  to be  employed.   If
specialized expertise  is not available to  the  mining partner,  it may require outside  help to
identify the most appropriate experts. The mining partner must assess its long term needs for
knowledge and advice, and have assurance that the expertise will be available to meet those
needs.

The structure of the joint venture will affect the mix of money, technology, and manpower each
of the participants must bring to the venture so that they may enjoy equitable  benefits and
return on their investment. As an example, treatment of personnel costs can differ depending
on the structure of a joint venture.  In China, if the partnership is a Contractual Joint Venture,
the cost will be  expensed  and shared  according  to  the distribution  of  profits; but if the
partnership is an  Equity Joint Venture the cost of supplying the experts and training Chinese
counterparts can  be considered as part of  the capitalization  of the new entity. Joint venture
formation  is encouraged in China, and  laws  regarding the  formation  of  these  entities are
written so that these joint ventures are treated as equally and fairly as wholly-owned Chinese
entities. The best joint venture option for a  given development project depends on the details
of the project; partners should design and plan in a way that best emphasizes each  of their
strengths.

Developing a team that will be able to meet the needs of the market and  effectively compete in
the marketplace is the greatest challenge facing the joint venture. Project developers  must
consider the following economic  parameters when preparing  for discussions regarding the
market and the best way to compete:

•  the size of the project, in terms of the  amount of gas that will be produced and the amount
   of capital needed for its development;
•  the length of time over which the project is likely to produce revenues;
•  the desired monetary return on the investment, and the time required  for that return.

5.2.2  DISCUSSION OF KEY INVESTMENT, PERMITTING AND TAX ISSUES

Forms of Business Enterprises
The  principal forms  of foreign  investment  enterprises  in  China  are  as  follows  (Price
Waterhouse,  1995):

   •   Equity joint ventures. An equity joint venture is  a separate legal entity and takes the
      form  of a  limited  liability  company registered  in China.  The partners have joint
       management of the  company, and they distribute profits and losses according to the
       ratio of each partner's capital contribution.

      The Ministry of Foreign Trade and Economic Cooperation has overall responsibility for
       approving equity joint ventures and for issuing the approval certificates. The equity joint
      venture  law requires that  the foreign  partner  to the  venture contribute  at least 25
       percent of the  registered capital. In general, the Chinese partner will contribute cash,
       land development or clearance fees  and land use rights, while the foreign partner will
       contribute  cash,  construction materials, equipment, and machinery. The profits  and
       losses of an equity joint venture are distributed according to the ratio of each partner's
                                                                                   5-4

-------
       investment.  During  the life  of  an equity joint venture,  the  foreign partner's  equity
       contribution cannot be repaid.

   •   Cooperative/contractual joint ventures. A cooperative venture may operate  under a
       structure similar to that of a Western-style partnership  with  unlimited  liability,  or the
       parties to the venture  may apply for  approval to have  the company structured as a
       separate legal entity with limited liability. The profit and loss distribution  ratio is defined
       in the contract and can  vary over the contract term.

       To establish a cooperative joint venture, the Chinese and foreign  partners must submit
       such documents as the signed agreement, contract, and articles of association to the
       department in  charge  of foreign  economic relations and trade  or the relevant local
       government authority for examination  and approval. If it is agreed in the cooperative
       joint  venture contract that all of the venture's fixed  assets will belong to the  Chinese
       party after the  venture's operating period has expired, then the parties to the venture
       may  also state in the contract that the foreign  party can recover its investment  during
       the contract period.

   •   Unincorporated joint ventures.  Joint ventures that  are  established by two  or more
       parties for a particular project and dissolved upon  the  completion of the project are
       generally structured  as unincorporated joint ventures.  Many of these  projects are
       engaged in coproduction of offshore oil and other minerals. The foreign  venturer in the
       coproduction project is taxed in its own name on the basis of its own operating profit,
       computed by deducting  its  share of  the exploration,  production and development
       expenses from its hare  of the oil or mineral production from the coproduction.

   •   Wholly foreign-owned enterprises. Wholly foreign-owned enterprises are established
       exclusively with the foreign investor's  capital. They  are limited liability companies, the
       profits and  losses of which are borne  solely by the foreign investor. The law specifies
       that  wholly foreign-owned enterprises are to  be "conducive to the development of
       China's national economy."

       There are more  restrictions  on  approval of wholly foreign-owned enterprises than on
       joint  ventures. Another disadvantage is the absence  of a local partner to assist in such
       areas as labor recruitment and obtaining access to marketing and  distribution channels.

Regulatory and Permitting Issues
Prior  approval   is required  for  the establishment of  all  foreign  business  ventures,  and
registration with the appropriate government authorities  is mandatory. The Ministry of Foreign
Trade  and  Economic  Cooperation  is responsible for  the approval of foreign investment
projects. Many of the key aspects of permitting, however, take place  on the local level.  Those
seeking to develop coalbed methane projects must therefore become familiar with local  and
regional, as well  as  national, government requirements.  Potential investors  should make
contact with local and regional  authorities in the early stages of project conception.

Tax Issues
On the  national  level,  the   principal  taxes  applicable to  foreigners, foreign  investment
enterprises,  and foreign corporations doing business in China are:
                                                                                    5-5

-------
•  income taxes;
•  taxes on transactions;
•  property taxes; and,
•  other taxes, including customs duties, stamp taxes, vehicle taxes, and resources taxes.

In addition to these national taxes, businesses may be subject to various local taxes. These
taxes are set by local authorities and are often negotiable. The CMA or other Chinese partner
can be of assistance in such negotiations.

Special tax incentives are  offered to enterprises operating in Special Economic Zones,
Economic and Technological Development Zones, and Old Urban  Districts of the 14 coastal
cities,  as well as other  special open  zones. Subject to certain conditions, enterprises with
foreign investment established in  the  Special Economic Zones  and engaged in the service
industries may be eligible for tax exemption from the first profit-making year, followed by a two-
year 50 percent reduction period.

Additional information on China's tax system is available from Price-Waterhouse (1995); and in
the publication "Investment in  China",  compiled  jointly  by  the China  Foreign Investment
Administration, the China Economic and Trade Consultants Corporation, and the Ministry of
Foreign Trade and Economic Cooperation.

5.2.3  GUIDELINES FOR POTENTIAL JOINT VENTURE PARTNERS

This section provides information that should  be useful to  potential joint venture  partners
interested in developing  coalbed methane projects in China. The purpose of this section is to
help foreign  partner understand the Chinese business environment and the need for expertise,
technology,  and investment; and  to aid the Chinese partner in understanding  the  potential
needs and expectations  of the foreign  investor with regard to regulations, policies, incentives,
and return on investment.

Needs of the Chinese Partner
The  exploration, development, and production technologies and methodologies associated
with  coalbed methane and conventional energy fuels are constantly advancing. In  order to
effectively execute  coalbed methane  projects, Chinese  partners  need  state-of-the-science
expertise and training in the following areas:

•  Exploration  Technology. Several  developments  in  geophysical  technology  in  the past
   decade have boosted the ability to evaluate coalbed methane potential. Three-dimensional
   seismic surveying has evolved rapidly in recent years and is an important tool for defining
   subsurface structural and stratigraphic trends.  In addition, modern borehole logging and
   imaging  techniques  provide  data  that  were  previously  unavailable  to geologists and
   engineers attempting to evaluate methane resources. Much of this  technology has  not
   been  available to Chinese partners, who could benefit from expertise gained elsewhere.

•  Development Technology. Advanced  drilling techniques,  including horizontal, directional
   and longhole drilling, can be important to the success of coal mine methane projects. In
   many cases, hydraulic  fracturing, cavity completions and other stimulation techniques  will
   be required  to  overcome problems with low  permeability in  Chinese coals. It will be
                                                                                  5-6

-------
   necessary to train Chinese engineers in the use of these techniques, and methodology for
   selecting technology appropriate to specific project conditions.

•  Production Technology. There are currently some innovative trends in the US and Australia
   in solid-state monitoring  and control of methane drainage.  These methods are used  to
   reduce air entrainment in the gas stream during the production process, thereby improving
   the quality of the gas.

Chinese partners may  need assistance in developing  expertise in project development and
management.  In particular,  foreign  experts  can assist with  feasibility  and market studies,
implementation of accounting and reporting systems and procedures that are required by most
lending institutions  or foreign  partners,  and  new and  efficient strategies  for  managing
personnel and equipment needs.

Needs of the Foreign Partner

Before entering into a joint venture, foreign partners must feel confident that they are investing
under reliable and clearly defined circumstances. In particular, foreign investors will require:

•  Clearly  Documented  Regulations.  Foreign  partners  want  clear  documentation  and
   understanding of all rules and regulations related  to business formation and resource
   licensing. They need to  thoroughly understand all national and local government policies
   that may affect their investment,  including those  related to business structure,  taxes, and
   repatriation of profits.

•  Equal /Access to Markets.  Foreign investors  need assurance that they  will  be  at no
   competitive disadvantage in  selling  their  product,  and that pricing  will be fair  and
   unregulated. It may  be necessary to establish a mutually agreed-upon market price.

•  Incentives  for Coalbed Methane Development.  Foreign investment in coalbed methane
   projects could be substantially increased  if China creates  incentives for  coalbed methane
   development and use. Such  incentives could, for example, take the form of tax credits for
   companies that use coalbed methane (or electricity generated by coalbed methane).  These
   incentives could  be temporary, in place just long enough to  give this emerging  industry a
   boost, and  stimulate the use of methane.

•  A Firm  Basis for  Economic  Projections. Investors need a sound  basis  for estimating
   revenues, taxes, production costs, and the rate of return that can be expected.  They also
   need  reliable data that will help them determine the size of the project,  the size  of the
   investment, the life of the investment, and the time required for return on the investment.

5.2.4 A HYPOTHETICAL COALBED METHANE PROJECT

This  section describes and discusses a hypothetical power generation project, with a Chinese
coal  mining administration and American power generation firm as partners. The American firm
is experienced  in methane resource development, and  includes a  team of power generation
installation experts. The intent of this hypothetical project is to use coalbed methane from the
CMA to produce electrical  power via the use of a combined  cycle gas turbine  generation
facility. The joint venture would thus earn revenues from the sale  of this electricity.
                                                                                  5-7

-------
In addition to contributing money to the project, the CMA and the American firm would each
contribute other essential, yet  unique,  resources. The CMA would,  obviously,  provide  the
methane resource itself; in addition, it  would contribute an understanding of the laws and
regulations related  to  the project.  These  regulations would  encompass  a  wide range of
matters, from taxation issues to environmental concerns. The CMA would also provide skilled
manpower for the project. The CMA would be responsible for monitoring and  maintaining  the
methane concentration in the gas to be used,  and for managing gas storage facilities so that a
reliable quantity of gas is available at all times.

The American firm, on the other hand, would provide the resource development expertise and
some of the  capital, as well as technology and technical  know-how related to gas turbine
electricity generation. The firm would use its experience in assessing the quantity and quality
of the  methane resource, and estimating the potential life  of the project based  on resource
availability. It would also play a key role in evaluating the economics of the project. In addition,
the American firm  would be  responsible for securing the turbines,  compressors, water
treatment equipment and other necessary components of the generation system. It would
provide experts who have had first-hand experience in installing gas turbine systems that can
use low  or  medium  quality mine  gas fuel to generate electricity.  It would  also  contribute
understanding and experience  in the areas of business development and management, as
well as electricity markets and marketing.

There  are four primary steps  involved  in  executing a project of this type:  1) a preliminary
evaluation; 2) a detailed evaluation; 3) project  design; and 4) project implementation.

1. Preliminary  evaluation.  The partners should  first  work  together  to determine  basic
   information, including the scope of the project,  the market for the electricity, and  the role
   each  partner will play. The Chinese partner should investigate permitting and licensing
   requirements.

2. Detailed evaluation. If the project appears  prospective based on the preliminary evaluation,
   further evaluation is in order. This would typically include:

       •   a review of existing data and information related to the methane resource, including
          geologic maps  and  mine plans, and data related to coal production and methane
          liberation;

       •   a review of data related to the market potential for the electricity, including current
          and forecast energy supply and demand, and current electricity contracts in place;

       •   an analysis of engineering factors, including the  efficiency of the current methane
          drainage system, projected methane production  decline rates,  estimated recovery
          factor, and optimum power plant capacity; and,

       •   an economic analysis,  including  gas transmission  and  power  plant capital and
          operating costs over the life of the project at various discount rates, cost  savings
          attributed to the project, and overall cash flow analysis.
                                                                                   5-8

-------
3.  Project Design. If the detailed evaluation indicates project feasibility, the design phase can
   begin. In this example,  the American firm would  design  the  gas drainage and  power
   generation systems based on  the layout of the  existing drainage  system  (including
   borehole layout), amount of gas available,  and demand for the  electricity. All engineering
   details of the project would be included. Project design should be sufficiently flexible to
   allow for changes in electricity demand or gas availability; e.g., there should be avenues for
   future expansion of the facility if desired.

4.  Project Implementation. After all parties have agreed on the  project design, implementation
   can begin. Progress should be monitored closely and re-evaluated on a regular basis. The
   American  partner would  provide  Western-style  project  management  know-how  that
   includes  tracking progress, results,  costs, savings, and  project  benefits. This would allow
   the project design to be optimized based on project results.

The  above  outlined project is but one example  of many possible types of joint coalbed
methane ventures  between Chinese and  foreign partners. Each  partner would  make an
important contribution to the  venture, with the benefits from the sales of the gas and  increased
efficiency enjoyed by each. In addition, they would have the satisfaction of knowing that their
project is increasing mine safety, and helping reduce methane emissions to the atmosphere.
                                                                                   5-9

-------
                                  CHAPTER 6
            POLICIES TO ENCOURAGE COALBED METHANE
                          DEVELOPMENT IN CHINA
Numerous barriers currently prevent China from achieving economic methane recovery from
coal  mining to its full  potential.  Critical  barriers include the lack of an  appropriate  policy
framework, limited capital for project investments and equipment, and the need for additional
information and experience with  technologies. Artificially low gas prices,  and difficulty with
repatriation of profits, create barriers to the development of foreign investment in joint ventures
for production of domestic energy  resources (USEPA, 1993).

Coalbed methane policies in  the US have  focused  on  incentives for  recovery of  coalbed
methane from vertical wells in unmined areas. As discussed in previous chapters, China has
tremendous opportunities for  increased recovery and use in its  large, gassy  underground
mines. If China is to take full advantage of these opportunities, however, government-provided
incentives for  coal mine methane  use will likely be necessary. Incentives that focus on use of
methane will inherently encourage its recovery. These incentives could be eliminated  once
coal mine methane becomes competitive with conventional natural gas and coal.

Section 6.1  below discusses policies that have been proposed  or adopted internationally to
promote coalbed methane recovery. Sections 6.2 and 6.3 discuss existing foreign support and
investments in Chinese coalbed methane projects and policy options for China, respectively.

6.1  DISCUSSION OF INTERNATIONAL POLICIES

6.1.1 INCENTIVES

US Gas Industry: Market Forces and Policy Change

The US is the world's second largest gas producer,  accounting for 24 percent of the total gas
produced worldwide. US policies and regulations influence coalbed methane development,  as
the coalbed methane produced is  distributed into the natural gas  pipeline system. An overview
of gas  policy  and regulations practiced  in  the US may  be relevant to China's developing
coalbed methane industry.
                                                                              6-1

-------
Since the late  1970's, major  policy changes  within the US gas industry  have stimulated
increased competition and  had a significant effect on wellhead prices. Figure 36 illustrates
annual natural gas wellhead prices, supply and  demand for 1978 through 1993. Prior to 1978,
gas prices were very low, due  to a single ceiling rate (regulated prices) for all US production
resulting in  lower  rates of investment in gas  exploration and  production.  This  resulted  in
increased demand for gas  and widespread gas shortages. From 1978 to 1984  deregulated
wellhead prices and gas exploration and production dramatically increased; as the market was
saturated, demand fell.  Since  then,  wellhead  prices have stabilized,  achieving  a dynamic
balance between gas supply and demand.
            FIGURE 36. EFFECT OF INCREASING COMPETITION ON NATURAL GAS PRICES
     $3.00 -i
                                                                      H—Wellhead Price
                                                                      •—Annual Demand
                                                                      	Annual Supply
     $0.00
        1978
               1980
                     1982
                            1984
                                  1986
                                        1988
                                               1990
                                                     1992
                                                           1993
 mcf = 103 cubic feet
Mmcf = 106 cubic feet
Tax Credits: US Section 29 Tax Credit

The  Crude Oil Windfall  Profits Act  of  1980  provided an  incentive  for  production  of
unconventional  fuels.  The  intent was to create a production  tax credit for those times when
low oil prices restrict the competitiveness of unconventional gas, including coalbed methane.
The original tax credit has been revised several times and extended twice (1989 and 1990).
Even though the Energy Policy Act of 1992 extended credits for other types of unconventional
gas production, it expired  for  coalbed methane at the end of  1992.  However,  qualified
companies whose gas production facilities qualified before 1992 will receive the credit until the
year 2002. To be eligible for the credit,  wells must have been drilled between 1980 and 1992
(Lemons and Nemirow, 1989).

The tax credit is calculated as follows (Soot, 1991):
             TC = (US $3/BOE) x IAF x PH

Where:
TC =  Tax credit in US S/MMBTU;
BOE = Barrel of oil equivalent, 5.88 MMBTU;
IAF =  Inflation adjustment factor (Based  on GNP implicit price deflator);
PH =  Phase out factor (Ph<1);  PH = 1-(Domestic oil price - US $23.50/bbl x IAF)/
       (US$6/bbl x IAF).
                                                                                 6-2

-------
Table 17 shows historical and projected  increases in  the coalbed methane production  tax
credit, based on a 4 percent inflation rate.

    TABLE 17.   SECTION 29 COALBED METHANE PRODUCTION TAX CREDIT
YEAR
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
INFLATION ADJUSTMENT
FACTOR (IAF)
1.8095
1.8819
1.9572
2.0355
2.1169
2.2016
2.2896
2.3812
2.4764
2.5755
2.6785
PRODUCTION TAX CREDIT
$US/Million(106)BTU
0.936
0.973
1.012
1.053
1.095
1.139
1.184
1.232
1.281
1.332
1.385
(Data for years 1995-2002 are projected)
The tax credit stimulated tremendous growth of the coalbed methane industry in the  United
States throughout the 1980's. Producers applied it primarily to vertical wells in unmined areas.
Annual coalbed methane production increased from 708 million cubic meters in 1983 to 20.7
trillion cubic meters  in 1993. However, a study  by  ICF Resources Inc. (Oil and Gas Journal,
1992) concluded that, as of 1992,  most gas production claiming Section 29 credits had been
developed using conventional technology in the most geologically favorable eligible areas, and
that the credit contributed to low wellhead prices during a period of surplus supply. Unlike the
US in 1992, however, China faces gas shortages, rather than a surplus.

As discussed in Section 6.3 below,  China should develop tax credit policies that will help
stimulate its coalbed methane industry. The Section 29 tax credit could serve as one model for
these policies, although some variations on  this approach may be  more appropriate to China's
taxation system.

Incentives to sell coalbed methane  to nearby power plants or utilities

Use  of  coal  mine methane  to generate electricity has benefits beyond  immediate market
incentives.  The Chinese government may want  to consider an approach similar to  that
described below,  as a means of favoring power projects that using  methane that otherwise
would have been wasted.

The  US  Public Utility  Regulatory  Policies Act of 1978  (PURPA) was designed to promote
conservation  of energy  and energy  security by  removing barriers  to the  development  of
cogeneration facilities and facilities that employ waste or renewable fuels. Such facilities are
called qualifying facilities, or QFs.  Under PURPA, utilities are  required to purchase electricity
from QFs at each  utility's avoided cost of generating power. An electricity generation facility at
                                                                                6-3

-------
a coal  mine methane project may be granted QF status if the coal mine methane meets the
definition of "waste" fuel.

In the  past, at least one US coal mine methane facility applied for and obtained QF status
(USEPA,  1995d).  This  project involved  generation  of 19.8  MW of electricity.   The  coal
company was able to justify that the gob gas had no other commercial uses. In particular,  long
pipeline distances, low  natural gas prices,  and  high upgrading costs  rendered a pipeline
project uneconomic. The gas would have been vented and, therefore, wasted, unless it was
used to generate electricity on-site. The mine owners  were able to support this argument and
the facility thus obtained QF certification.

Expanding Pipeline and Gas Gathering and Storage Infrastructure

Countries with a fully integrated natural gas pipeline system have an advantage in recovering
and using pipeline-quality coalbed methane. These are countries with a well-developed natural
gas industry, and extensive oil field services, materials, and infrastructure. This natural gas
infrastructure lowers the initial  capital costs required for distribution and marketing of natural
gas.

In many countries, the  remote location of coal  basins with  tremendous coalbed methane
potential results in  extremely high costs for building pipelines and  gathering systems.  On-site
use (such  as power  generation) and  local use (co-firing or co-generation) of these energy
resources may  be  more cost-effective. In a complementary action, government  policy could
help expand local and regional gathering systems; for example, in China additional gathering
systems for key state-run CMAs could provide the incentive necessary for increased coalbed
methane use.

6.1.2 LEGAL NEEDS

Coalbed Methane Leasing and  Ownership

Unresolved legal issues concerning coalbed methane  ownership represent a major barrier to
recovery and use of this resource (USEPA, 1994b). Coalbed methane ownership is a complex
issue because of the nature of the resource  itself. The strata containing conventional oil and
gas resources are usually deeper than the strata containing the coal resources. Thus, rights to
mineral reserves located on the same tract of land may be easily segregated, according to
strata,  between the owner of the coal rights and the owner of the oil and  gas rights. However,
a discrete geologic separation does not exist for coalbed methane.  Coalbed methane is a gas
resource  located  in  the same strata as coal  reserves,  making separation of ownership
problematic.

Until recently, miners considered  coalbed  methane a hazard to coal mining,  not a potential
economic resource. Therefore,  leases have not historically included coalbed methane, and the
owners of the coal  rights, oil and gas rights, and surface rights may all claim ownership of the
coalbed methane.  The  situation is particularly complicated in  the Appalachian region of the
eastern United States, where there are often multiple  mineral resource owners. In the United
States,  ownership  of coalbed  methane is not standardized,  and only those  states that  are
actively exploiting the resource have established clear ownership provisions. In many states,
unclear ownership provisions  have  constrained  coalbed  methane  development.  The  US
                                                                                 6-4

-------
Congress passed coalbed methane ownership legislation as part of the Energy Policy Act of
1992. Under this act, states which lack regulatory procedures to address ownership issues had
until  October  1995  to enact ownership legislation, or the federal government would impose
legislation administered by the US Bureau of Land Management (EPA, 1994b).

In  the United  Kingdom,  a bill  is currently before  parliament that would  establish a legal
framework for long-term coalbed methane production. There are numerous coalbed  methane
exploration licenses in England, Scotland, and Wales, and several US companies have begun
exploration  projects. During the recent three  rounds of Tenders inviting  the  licensing of
coalbed methane exploration,  15 British and US companies won the  licenses  with a total
exploitation area of 9 million acres.

Countries with established oil and gas production  have instituted policies for the acquisition of
hydrocarbon leases or concessions. Countries with significant coalbed methane resources, but
no previous oil and gas development, lack this legal framework. In several  countries whose
economies are in transition, laws that govern ownership and leasing of mineral resources are
currently unresolved. In Eastern Europe, for example, many US and foreign-based companies
are pursuing exploration and development  concessions on vast  coalbed methane resources;
but the absence of laws which define the ownership of these lands makes leases difficult to
acquire.

In  Poland, the government  is  establishing policies for the exploration and development of
coalbed methane, based in part on the new  Geological and Mining Act guidelines (February
1994). Poland is addressing issues  related to exploration concession licenses, and laws which
govern foreign investment, to create opportunities for joint ventures with foreign companies to
develop coalbed methane resources.

6.2 FOREIGN SUPPORT AND INVESTMENT IN CHINA'S COALBED METHANE

Since the 1980's, the global environment has been the focus of  international attention. A key
issue concerns greenhouse  gases, such as carbon dioxide and methane, their effect on the
atmosphere, and potential long-term impacts on global climate.  In June 1992  the United
Nations Environment and Development Conference  in Rio de Janeiro passed the Framework
Convention on Climate Change. Over 150 heads of government jointly signed the  Convention,
and committed to reducing greenhouse gas  emissions in their respective countries.

Methane liberated during coal  mining is a greenhouse gas, approximately 24.5 times  more
potent than CO2 in  terms  of the impact on global warming over a  100 year time-frame.
Methane is also a  clean and  efficient energy source, equivalent in quality to conventional
natural gas. Various international government agencies and non-governmental organizations
encourage coalbed methane recovery and use, as it not only creates a new energy source, but
also protects the environment.

6.2.1  UNITED NATIONS GLOBAL ENVIRONMENT FACILITY (GEF)

Based on USEPA investigations, methane liberated  during coal mining from Chinese mines
accounts for one-third of the world's total. The  UNDP later built on  the  findings  of these
USEPA studies, and through a definitional  mission developed a project to provide incentives
for China to recover and use the coalbed methane liberated  during  coal  mining,  improve
                                                                               6-5

-------
regional and global atmosphere quality, and create an additional energy source. The  UNDP
signed a project agreement for development of coalbed methane resources in China with the
former Ministry of Energy in  June, 1992. The project is supported by the Global Environment
Fund  Facility (GEF) with US $10 million, and includes three coalbed methane development
projects and one coalbed methane resource evaluation project. The goals of these projects
include:
•  to define the necessary  technologies and organizations for the Chinese government to
   establish coalbed methane development strategies;
•  to introduce and demonstrate coalbed methane development technologies; and
•  to advise Chinese central and local government  policy-makers of the potential  economic
   significance of coalbed methane development.

6.2.2  US ENVIRONMENTAL PROTECTION AGENCY (USEPA)

According to studies undertaken by the  USEPA, China has a  great opportunity to profitably
recover coalbed methane liberated  during coal mining.   Coalbed methane  could reduce
China's need for coal burning power plants by approximately 25 percent by 2020. One  barrier
to project  development  is the lack of capital and technical  expertise that foreign companies
may bring to a project. The development of a coalbed methane industry in China also creates
potential business opportunities for US and international businesses.  The USEPA will assist
Chinese and US companies to create partnerships for methane recovery, and to support the
transfer of information and technology necessary to  evaluate, develop and manage coalbed
methane projects. As part of the cooperative activities between the United States and  China,
the USEPA, the Chinese Ministry of Coal Industry (MOCI), and  the China Coal Information
Institute have created the China Coalbed Methane Clearinghouse. Its role is to disseminate
information to Chinese  and  international  experts on coalbed  methane technology,  markets,
and policies. In  addition, the Clearinghouse is involved in activities which promote cooperation
in coalbed methane development between China and  international companies.

6.2.3  US DEPARTMENT OF ENERGY (USDOE)

The Deputy Energy Secretary of the USDOE reported to a US Senate Hearing that foreign
investment in all energy sectors, including the coalbed methane industry, is needed for China
and other Asian countries. Development of coalbed methane  projects in China would be a
long-term  cooperative  opportunity for US  businesses. On  March 5, 1995 in Beijing, the
Chinese Coal Minister and US Energy Secretary signed the Protocol for Cooperation for Fossil
Energy Research and Development between MOCI, China, and USDOE for coalbed methane
recovery and use.  The planned  cooperative project will  include an  evaluation of China's
coalbed methane resources and demonstration projects to apply new technologies for coalbed
methane recovery and use.

6.2.4  US INITIATIVE ON JOINT IMPLEMENTATION (USIJI)

At the 1992 Earth Summit in Rio, the United States joined more than 150 countries  in signing
the Framework  Convention  on  Climate Change, which explicitly provides  for  signatories to
meet their obligation to  reduce greenhouse gas emissions "jointly with other parties". Thus,
Joint Implementation refers to arrangements between entities in  two or more countries, leading
to the implementation of projects that reduce, avoid, or sequester greenhouse gas emissions.
                                                                               6-6

-------
In October,  1993 the United  States established the US Initiative on  Joint Implementation
(USIJI). An interagency Secretariat, chaired by the USEPA and the USDOE, administers the
organization, which  promotes the development of overseas projects to reduce greenhouse
gas emissions.  USIJI's funds come from companies, governments, private banks, trust funds,
and regional development banks.

According to a brochure prepared by the USIJI  secretariat,  the panel evaluating  projects
submitted for inclusion in the USIJI program will consider several issues, including:

•  Specific measures to reduce greenhouse gas emissions;
•  Appropriateness of methodologies for calculating emissions reductions;
•  Non-greenhouse gas environmental impacts of the project;
•  Development impacts of the project; and,
•  Acceptance by the national or federal government of the host country.

The USIJI's Evaluation Panel will examine project proposals within 90 days of their submission.
So far, the  USIJI has not received any project  proposals from the  Chinese government
agencies. The USIJI  encourages  MOCI  to submit project proposals for projects that reduce
greenhouse gas emissions (including coalbed methane projects).

6.3 POLICY OPTIONS FOR CHINA

6.3.1  REVIEW OF CHINA'S POLICIES ON RECOVERY AND USE OF COALBED METHANE

China is encouraging  coal mines to expand recovery and use of coalbed methane through the
following  policies.

State Investment Plan for Capital Construction

In 1982,  the State Planning Commission began incorporating coalbed  methane use into its
plan for capital construction of energy conservation projects. In 1989, the State Council drafted
the "Decision  on  Current  Industry  Policies", in which coalbed  methane development was
designated one of the  key industries to be financed in the Catalogue of Industry Development
Priorities. The State  Planning Commission,  together with the Ministry  of  Finance  and the
Development Bank, has set aside a certain  percentage of low-interest investment loans for
coalbed methane development projects.

Coal Industry Development Program

In 1994,  MOCI included coalbed  methane  development  as one of  its three  strategies for
development of China's  coal industry. The  "1994-2000  Coal Industry  Programme for
Developing Utilization, Economic Diversification and Service Industries", indicated that coalbed
methane  development should be given priority. The Programme proposes  developing seven
coalbed  methane use  projects during the next seven years,  increasing utilization capacity by
280 million cubic meters,  and investment by 1.1  billion yuan. At present,  the special low-
interest loans given to MOCI by the State amount to 3 billion yuan, a portion of which can be
used for comprehensive coalbed methane use projects.
                                                                                6-7

-------
Coal Mine Safety Technology Fund

The Coal Mine Safety Technology Fund was founded in the early 1970's. Its goal is to improve
safety conditions at coal mining areas. Initially, the source of the fund was a portion of MOCI's
Technical  Renovation  Fund  granted  by  the  State Economic  Commission.  The  funding
amounted to approximately 70 to 100 million yuan  per year, of which one third was used for
gas drainage projects. In 1988, the then-existing  MOCI was dissolved and the National Coal
Corporation, Northeast and Inner Mongolian Corporation,  and China Local Mine Corporation
were established. The State no longer provides technical renovation funds to coal mines and
each corporation has to raise its own safety technology funds.

MOCI was later re-established and currently retains a portion of the relief fund of 1 yuan  per
ton of coal,  which is remitted every year by various  coal mines. MOCI uses this  fund as a
technology-based safety measure fund. Many  coal mines have  financial problems and  the
budget  for  coal  mine  safety is insufficient.  Some  of  the more economic  mines fund
technology-based safety measures on their own.  For instance, in 1994,  the State-owned key
coal mines in Shanxi Province invested 43 million yuan in gas control, an average of 0.7 yuan
per ton.  They plan to increase this to 1 yuan  per ton  in 1995.

Tax-Preferential Policies

In September 1985, the State  Council approved  the  National  Economic  Commission's
"Catalogue of Comprehensive Utilization of Resources". In this Catalogue, coalbed methane is
classified as a "waste resource";  the recovery of waste resources is eligible  for tax reduction
policies. The products of comprehensive  use projects created  with self-raised funds and
included in the Catalogue of Comprehensive Utilization of Resources will pay no income and
adjustment taxes for the first five years. However, for the products of comprehensive use
projects constructed with government funds, product,  income, and adjustment taxes must be
paid in accordance with the National Tax Law.

The document "Provisional Regulations on Comprehensive Utilization of Resources" issued by
the State Economic Commission and the Ministry of Finance in 1986 discusses financing for
utilization projects. Loans for projects at State-run enterprises can be repaid after the project
begins.  For those projects financed both internally and by loans, profits should be used first to
pay loans; if the payment period of a project exceeds five years, after paying all loans with  the
profits, the tax interest should be paid  according to the regulations; those who have paid all
loans within  five years will continue enjoying the reduction of income and adjustment tax until
the end  of five years, according to the proportion of self raised funds in the total investment.
The periodic reduction and exemption of production  taxes shall be examined and approved by
the appropriate tax  authorities.  The Ministry of Finance is in  charge of examination and
approval for the State-run  enterprises, whereas  the  relevant province- or municipality-level
departments or bureaus are in charge of examination and approval for local  enterprises. The
reduction  and exemption of taxes for  introduced technologies and  imported  equipment for
utilization projects are implemented according to administrative methods applied for renovation
projects using introduced technologies.

According to the State Council's  Stipulations on Environment Protection (issued May,  1984),
the profits from pollution control projects will not be paid as government revenue for the first
five years, even once the new tax  law is  implemented.  Products produced by collectively-
                                                                                 6-8

-------
owned enterprises within the coal industry (mainly waste stock, waste gas and waste water)
will not be subject to income tax.

Incentive Policies for Methane-Fired Power Stations

The  "Notice  on Additional  Provisions Concerning  Perfection of Existing  Comprehensive
Utilization Policies" issued by the State Economic Commission and the Ministry of Finance in
1986 stipulates that the  procurement price of electricity produced by power plants connected
to the supply network is  determined, in principle, according to the power generation cost plus
the average power generation profits of local large power supply networks. In addition to power
supply costs,  line losses, and power supply taxes, only 5 percent commission may be added to
the price of electricity sold via the supply network.

The development of methane-fired power plants and co-generation pants is encouraged. In
1989, the State Planning Commission issued "Provisions on Encouraging the Development of
Small-Scale Cogeneration Plants", which  requests local governments  to  allocate a certain
proportion  of collected  energy  and communication  construction  funds to be used as the
cogeneration  fund. The State would allocate a portion of special loans for energy conservation
and technical renovation,  and the loan  for capital construction of energy conservation, to
arrange special projects. For small cogeneration plants connected to the supply network, the
electric  power authorities will purchase and sell electricity at  market prices  and charge the
electricity plants only small fees for using the network.

Price Policies

In 1986, the wellhead gas price in most oil fields in China was 0.08 yuan per cubic meter. In
1987, the State Council decided to implement a contract system for constant gas output. There
was no  change in the price of contracted gas, while the surplus gas was sold at 0.26 yuan per
cubic meter. The differential income from the market prices and regulated  prices could be used
as a special fund for gas exploration and development.

The central government's 1994 wellhead price regulations for different areas are shown below:

   REGULATED WELLHEAD GAS PRICES IN 1994 (RMB Yuan per 1000 cubic meters)
Area
Sichuan Province
Others
Fertilizer Manufacture
470
440
Residential
530
460
Industry
490
520
Commercial
670
520
The CNPGC is currently responsible for their contracted amount of 8.8 billion cubic meters per
year, which must be sold at the regulated price. The surplus gas production is permitted to be
sold at market price, but no higher than 900 yuan/1000 cubic meters. Due to artificially low gas
prices, most gas enterprises are uneconomic.

Much of the gas drained from coal  mines is used by mining area  residents for cooking. As a
social benefit, this gas is free or very inexpensive. This low price makes gas drainage and use
projects uneconomic,  seriously  hindering  coalbed  methane  development. Some  would-be
foreign investors have  already encountered this problem.
                                                                                 6-9

-------
Industrial Management

The State Planning Commission clearly stipulated in its "Reply on Management of Exploration
and Development of Coalbed Methane Resources" in February 1994 that the exploration and
development of coalbed methane in  mining areas should be approved in advance by legal
representatives of coal  mining enterprises and coal authorities;  and that the exploration and
development of coalbed methane in mining  areas  under national planning  should  obtain
MOCI's advance approval. Accordingly, in April MOCI formulated the "Provisional Regulations
and Rules for the  Management of Coalbed Methane Exploration  and  Development" which
appear in Appendix D of this report.

6.3.2  THE COAL INFORMATION INSTITUTE'S POLICY SUGGESTIONS FOR PROMOTING
      DEVELOPMENT OF COALBED METHANE IN CHINA

The CM recommends the following policies to the authorities for use in decision-making, based
on its analysis of  the  above relevant policies and considering the development and use
potential of coalbed methane in China. The opinions expressed in this section are those of the
CM.

1.  Adopt coalbed methane  development   as  one  of the  national energy strategy
   objectives. If the government adopts policies favoring coalbed methane development, its
   progress will  accelerate markedly and  coalbed methane will play  a significant role in
   China's energy  mix.  Considering that coalbed methane development has  been listed as a
   priority for national  industry development,  this report suggests that the  State Planning
   Commission incorporate coalbed methane development in  its  Ninth Five-Year Plan for
   energy development, and consider  giving it major  support while formulating industrial
   policies and arranging national energy investment so as to promote its development.

2.  Determine  a  coalbed  methane  development  strategy.  The  coalbed  methane
   development strategy should adopt the principle of giving priority to surface recovery, and
   secondarily to in-mine drainage. Plans for near-term, medium-term,  and long-term goals
   should be made. In the near term, emphasis should be placed on successful completion of
   existing projects and demonstration projects. In the medium term, several key objectives
   should be met, and technical projects should be undertaken. For the long term, compulsory
   coalbed methane development in large mining areas, and infrastructure projects, should be
   planned.  Currently,  MOCI is undertaking  an assessment of national coalbed methane
   resources. Based on this assessment,  it  plans to  select  mining areas with favorable
   conditions on which to focus coalbed methane development and build two or three coalbed
   methane production  bases by the end of this century. In the future, coalbed methane will
   be considered an important aspect of mine area development.

3.  Develop coalbed methane projects by using multiple investment sources.  Coalbed
   methane development shall be  considered as the key State-supported industry for
   capital construction. The State Planning Commission and Ministry of Finance  and Banks
   should arrange for access to a certain proportion of  coalbed methane investment loans
   with low interest. Since  coalbed methane development in China is still in  its early stages,
   loans and central government-supplied capital input  may each contribute to funding for
   investment in key coalbed methane projects. Key aspects related to investment are:
                                                                               6-10

-------
       •   A portion of capital construction loans for energy conservation can be allocated to
          coalbed methane projects.

       •   Coalbed methane drainage and utilization belong to the category of comprehensive
          resource use. When arranging for State financing, the loan for coalbed  methane
          projects should be factored into the overall arrangement. In addition, a portion of a
          low-interest State loan can be used.

       •   Since coalbed methane recovery can significantly improve mine safety, the CM
          suggests using a certain proportion of the safety fund for coalbed methane projects.

       •   Since  recovery  of  coalbed  methane  is  beneficial  to  the  protection of  the
          atmosphere,  the  State should  consider  coalbed  methane  projects to  be
          environmental protection projects.

       •   As the development and use of coalbed methane can provide gas  and electricity to
          local areas and create job opportunities, local governments should actively support
          coalbed methane projects and take part in investments.

       •   When  possible, enterprises should raise funds themselves for coalbed  methane
          projects.

       •   The  State  should develop policies to encourage foreign  investment.  Incentive
          policies could make foreign investment one of the most important  sources of funds
          for coalbed methane development.

4.  Preferential  tax  policies.  In  previous documents  issued by  the  State  Planning
   Commission  and  the Ministry of  Finance,  coalbed  methane drainage and use  were
   classified as waste resource and environmental protection comprehensive  use projects.

   It  is recommended that the government give  the  following  preferential tax policies to
   coalbed methane projects:

       •   place coalbed methane projects in the  revised Catalogue  of  Comprehensive
          Resource Use;

       •   waive income taxes and investment orientation adjustment taxes  for five  years, or
          formulate a tax credit policy similar to that adopted in the US;

       •   the State has reduced the value added tax (VAT) tax of coal enterprises to about
          3.5 percent. Coalbed methane enterprises should enjoy the same  preferential  VAT
          policy, i.e. a 3.5% VAT; and,

       •   remit the resource compensation cost.

5.  Price policy.  At present, many urban residents still enjoy financial subsidies for gas  use,
   particularly in mining areas where recovered  methane is considered a social benefit for
   miners. As stated  in Section 6.3.1, this artificially low  price  can  render coalbed  methane
   projects  uneconomic and  cause  hesitation among   foreign investors. With  ongoing


                                                                                 6-11

-------
   economic reform and price liberalization in China, the market environment is improving, but
   further reform of gas prices is necessary. Local  governments in coal mining areas should
   try  to  change the  practice  of  artificially lowering coalbed methane prices  and create
   favorable market conditions for foreign investors.

6.  Improve the coalbed methane infrastructure.  Due to the lack of pipelines,  surplus gas
   must be directly emitted to the atmosphere when there is no demand by local residents.  In
   order to achieve large-scale production of coalbed  methane, marketing problems must first
   be solved. To sell coalbed methane to a  regional  market, a gas pipeline system must be
   built.  CM  recommends  that that the government  integrate  plans for developing  and
   transporting coalbed methane with plans for the  national natural gas pipeline. Before a
   national  gas pipeline system  is  constructed,  the central  government should  consider
   building gas pipelines from coalbed methane producing areas to nearby large cities. Gas
   pipeline construction belongs to  national infrastructure construction projects and should be
   funded and constructed by the government.

   For those mining areas that are  far from population centers and lack pipeline systems, the
   development of coalbed methane-fired power plants would  be  ideal. The CM recommends
   that the State encourage the development  of coalbed methane-fired power plants, treat
   them as comprehensive resource use  projects and give them preferential policies. For
   example, after a coalbed methane power plant is connected to the electricity network and
   is supplying  electricity, it should be allowed  to negotiate directly with the electricity
   consumer,  and the electricity department should charge the power plant only the  grid
   transmission cost.

7.  Strengthen  scientific research on coalbed methane. Coalbed methane development  in
   China is  still in its preliminary stages, and certain key technical problems must be solved.
   This CM  suggests that  the State Science  and Technology Commission  and the State
   Planning Commission incorporate coalbed methane research and development projects  in
   the  national  key scientific research plan  and increase  financial   support of research
   projects.

8.  Encourage  use of foreign  capital and introduction of  advanced technology. Since
   coalbed methane development falls in the category of environmental protection and clean
   energy projects, The United Nations, World Bank, Global  Environmental Facility, Asian
   Development Bank,  and US  Initiative on Joint Implementation are all  potential funding
   sources.  It is recommended that  the government should give the necessary preferential
   policies to joint venture and other cooperative coalbed  methane projects, and reduce  or
   eliminate tariffs on  technologies and equipment imported for  coalbed methane  projects.
   This could be undertaken in light of the policy for preferential methods of management and
   tariffs used in renovation projects at existing enterprises with new technologies.
                                                                                 6-12

-------
                                  CHAPTER 7
                CONCLUSIONS AND RECOMMENDATIONS
                           FOR FURTHER ACTION
7.1 OVERVIEW

As outlined in  this  report, China has tremendous  coalbed methane resources, as well as
increasing demand for energy, including natural gas. China's coal industry, as the largest coal
producer in the world,  has acquired substantial experience in recovering coalbed methane
using in-mine methods.  Use of this methane, however, is in its initial developmental stages.
Recent reforms in the energy sector have promoted increased use of natural gas, and MOCI is
committed to develop coalbed methane as a key strategy for the coal industry.

Based  on this  report,  as well as the current trends in  China's energy demand, coalbed
methane development should be a priority  with the Chinese government.  Mechanisms  for
coalbed methane development should be evaluated to  develop appropriate policies, incentives
and a regulatory framework. This is an opportune time to evaluate coalbed methane and its
potential  role in China's energy mix,  as the energy sector is currently undergoing a  major
restructuring program. Many barriers to coalbed methane development, including government
subsidies, have already been  eliminated. China's  move towards  a  more  market-based
economy creates an environment conducive to developing additional energy sources such as
coalbed methane.

This chapter summarizes the policies, incentives, technical activities, feasibility assessments,
outreach, and investment considerations that  promote coalbed methane recovery and use in
China.  This includes current activities that need to be expanded, as well as recommendations
for additional actions.  Section 7.6 summarizes conclusions and  recommendations made by
the China Coalbed Methane Clearinghouse.

7.2 FOLLOW UP TECHNICAL ACTIVITIES

7.2.1 FEASIBILITY ASSESSMENTS

Cooperation with international agencies and foreign governments is important for obtaining
technical and financial assistance for specific coalbed methane projects. Section 6.2 outlines
existing foreign  support and agencies playing an active role in  expanding China's coalbed
methane industry.
                                                                              7-1

-------
Establishment of policies  by the  Chinese government to encourage foreign  companies  to
invest in such projects could also create long-term benefits.  Follow-up strategies include:

•  training Chinese  technical  experts and  government personnel on  mine  safety  and
   productivity,  as  well as  energy and  the  environmental  benefits of increased coalbed
   methane development;  and,
•  studies to evaluate the feasibility of project development at specific sites, leading to the
   implementation of demonstration projects.

Technological and economic feasibility determine the potential for commercial development of
coalbed methane. Relevant feasibility assessments for China include:
•  production enhancement;
•  the impact of coalbed methane projects on the environment;
•  reservoir modeling;
•  determination of optimal well placement;
•  supply and demand analysis; and,
•  investment risk analysis.

Feasibility studies should assess the necessity of the development of a given project.  Among
the key considerations are technical viability of the project, and the technical risks associated
with  the  project,  relative  to methane  recovery and  use options.   Project economics  and
financial  viability should also be  addressed.  Important related issues,  including regulatory,
legal, and environmental issues, should also be examined.

In preparing feasibility studies, consultants or corporate experts should work closely  with in-
country personnel from the mining  community, relevant local  government agencies,  and
industries,  and national government agencies.  Widespread  participation during the project
design and assessment stages may help expedite project approval and development states for
those projects considered worthwhile.

7.2.2 TRAINING

Personnel training and information services play a key role in promoting coalbed methane
development. Some training related to developing  China's  coalbed methane has  already
occurred; several technical personnel have been to the US to receive training. Also, activities
of the recently established China  Coalbed Methane Clearinghouse involve various aspects of
training and technology transfer (see Section 7.3).

Training programs can be  designed for mining industry technical  personnel and  government
representatives.  Technical personnel training  emphasizes methane  recovery,  including  pre-
mine drainage from the surface,  methane use, and resource assessment.  Programs for
government representatives  include development of specific environmental and regulatory
guidelines to ensure safe and efficient implementation of methane recovery projects, legal and
economic training, and training in  project  feasibility assessment.   Mining economics  and
business management courses would also provide beneficial information for coalbed methane
project participants.
                                                                                  7-2

-------
These training programs should be coordinated with the Clearinghouse and with other follow-
up  studies.   Agencies interested in providing  training should  work closely  with Chinese
representatives to identify specific needs and design relevant programs.

7.3 OUTREACH: THE COALBED METHANE CLEARINGHOUSE

In August 1994, the Ministry of Coal Industry (MOCI) established the China Coalbed Methane
Clearinghouse in Beijing.  The Clearinghouse is part of MOCI's China Coal Information Institute
(CM). The CM supplies information on coal-related topics to top-level decision makers at MOCI,
as well as to subordinate  branches and enterprises. The Clearinghouse is one of 21 divisions
of the CM, which has approximately 700 employees.

The Clearinghouse has made significant contributions to the development of coalbed methane
in China. In addition to co-authoring this report, the following activities have taken place or are
currently ongoing by the Clearinghouse:
                                         BOX 13. PROVIDING ASSISTANCE TO FOREIGN
                                           COMPANIES: A CLEARINGHOUSE ACTIVITY

                                         In  December,  1994 the  China  Coalbed  Methane
                                         Clearinghouse hosted a technical exchange between
                                         Conoco  and China's  Ministry  of Coal  Industry
                                         (MOCI).  Conoco  representatives  presented their
                                         experience in coalbed  methane  recovery  for more
                                         than 15 senior MOCI officials and mining experts.
                                         The  Clearinghouse provided  Conoco  with  the
                                         assistance   and  information  needed  to  assess
                                         methane development opportunities  in some key
                                         coal mining  areas. It also explained the procedures
                                         for management of coalbed methane  projects  in
                                         China, and proposed some target areas for coalbed
                                         methane development. As a result, Conoco  is now
                                         pursuing projects in China (Sun, 1995).
•  Providing   consulting   services  and
   hosting technical seminars  (see Box
   13);
•  Publication   of   the   journal   China
   Coalbed Methane in both English and
   Chinese.  The  first  English-language
   issue of this journal was  published in
   May  1995,  and contains  numerous
   articles,  most   of  them  written   by
   Chinese experts,  on a variety of topics
   directly related  to coalbed methane in
   China;
•  Completion of a bibliographic database,
   and  a  database  containing  coalbed
   methane recovery and use data;
•  Completion of  a report  on  coalbed
   methane development in selected coal  producing countries, for use by MOCI in formulating
   coalbed methane policy;
•  Appointment of Mr. Sun Maoyuan, Clearinghouse Director, to membership on the Coalbed
   Methane Steering Committee of MOCI;
•  Participated in the Intergas '94, symposium in Alabama, US; and
•  Provided extensive information on coalbed methane development to Southwest Petroleum
   University  of China.  With assistance from  the Clearinghouse,  the university's  Well
   Completion Technology Center was awarded a  contract for coalbed methane research
   projects from the Pingdingshan CMA.
•  Organized  the  October, 1995  UNDP International  Conference  on Coalbed  Methane
   Development and Utilization;
•  Integration  into  the new China United  Coalbed Methane Co. Ltd. (China CBM), with Mr.
   Sun  Maoyuan as a member of its Board of Directors.

The Clearinghouse will continue to play a  key role in China's coalbed methane development,
and plans to undertake the following activities:
                                                                                  7-3

-------
•  Organizing experts to write a handbook of coalbed methane;
•  Dissemination of information on coalbed methane throughout China;
•  Organization of technical seminars and workshops;
•  Organization of technical training programs;
•  Presentation of policy recommendations for promoting coalbed development;
•  Setting up branches of the Clearinghouse in key coal basins;
•  Development and use of an economic analysis model for coal mine methane projects; and,
•  Development of materials for marketing Clearinghouse services.

7.4 DEMONSTRATION PROJECTS

Demonstration  projects for specific  methane  recovery  and use  options  can  expedite
development of coalbed methane resources, and effectively transfer necessary technologies.
There are various options for conducting demonstration projects, depending on the objectives
of the  international  funding agencies and  national  and local  officials. The  demonstration
projects should involve carefully selected project sites in  coal basins  with optimal  coalbed
methane conditions,  as defined in this report, and focus on  technologies most pertinent to
China.   Projects  that address  technical issues, such as  well  completion and stimulation
techniques, or those that investigate on-site use options, such as cofiring methane with coal or
using it in gas turbines,  would have direct applications for China.

Currently, a  GEF  project ("China Coalbed Methane Resources Development")  is underway in
China.  It includes three demonstration projects for coalbed methane recovery administered by
the Songzao,  Kailuan, and Tiefa CMAs.  The  projects are  GEF-sponsored;  UNDP is  the
executing  agency, and US contractors were selected  as  cooperative partners  with  the
individual CMAs. Section 3.5 includes a summary of each of these demonstration projects. In
addition,  MOCI, MGMR, and CNPGC are involved in coalbed methane development in several
mining areas; over 39 wells were drilled by the end of 1994.

Ideally, successful demonstration  projects  will be widely replicated by the mining  industry.
Demonstration projects should expedite development  of those  projects considered too risky or
uncertain for the private sector to undertake without some assistance.  Demonstration projects
may serve to convince Chinese experts that certain technical options with which they may be
unfamiliar can  work in site-specific conditions.  Since demonstration project results will  be
made public, they serve as an example within China and in other countries that various
methane recovery and use options are feasible, thereby stimulating a wider basis for interest.

7.5 INVESTMENT CONSIDERATIONS

In many regards,  China has a relatively favorable climate for foreign investment in  coalbed
methane projects. Because the nation  has recently suffered  from  energy  shortages,  the
government  is keen on energy-related projects, particularly those related to increasing China's
power-generating  capacity.

China has  recently  taken steps aimed  at  increasing  foreign investment in  energy-related
projects. For example, they are designating several key infrastructure projects to experiment
with the "build, operate and transfer" (BOT) method  of attracting foreign investment (China
Energy Report, 1995).   China is considering  more widespread adoption of the  BOT policy
                                                                                 7-4

-------
because  it has been difficult to attract foreign investors to some of the major infrastructure
development projects due to a perceived poor rate of return. China is thus shifting its method
of attracting foreign investment, from simply giving favorable conditions to providing for mutual
economic benefit and long-term cooperative agreements.

In order to increase foreign participation in coalbed methane development,  however, several
issues that will affect the desirability of investments by foreign companies must be resolved.
Some of these issues, such as taxation policies and legal frameworks for project development,
are  relevant to a wide range of business opportunities in China, and  the government will likely
address them  through general initiatives  to encourage  foreign investment. There are other
issues  specifically related  to coalbed  methane development,  however,  which  must  be
considered in developing policies to promote coalbed methane development in China. Among
the  issues (both  positive and negative) specifically related to coalbed methane development
are:

•  Ownership of  natural resources in China  is clearly defined.  The State  owns  all mineral
   resources, and development  of these resources by foreign entities  must be  approved by
   the State.

•  Chinese law  provides for the formation of joint  venture  entities for the development of
   mineral  resources.  Joint ventures are encouraged as a  means of developing resources
   and transferring technology.

•  Taxation  in  China  can be  complex  and development of  a  successful enterprise is
   dependent on thorough understanding of the tax liabilities associated with any business
   undertaken in  China. Local tax relief is available, and numerous areas such as economic
   and technological development zones are  present, within which  enterprises enjoy special
   tax holidays.

•  Commercial incentives for the development and use of coalbed methane will be necessary
   for large-scale development of coalbed  methane resources. Realistic pricing of the gas and
   the energy into which it is converted must be implemented. China is rapidly moving  in this
   direction by freeing energy prices in a stepwise fashion, and removing subsidies.

China will thus need to focus on  incentives for methane development and use,  as well as
realistic energy pricing,  as part of its ongoing formulation  of coalbed  methane policies. A high-
level group within  the Ministry of Coal Industry is currently drafting recommendations for policy
and development guidelines.

7.6    CONCLUSIONS  AND  RECOMMENDATIONS  BY  THE  CHINA  COALBED
      METHANE CLEARINGHOUSE

Following are conclusions  and  recommendations made by the  China Coalbed Methane
Clearinghouse:

1. Increased production of natural gas:   Currently,  China  has one of the fastest growing
   economies in the world, with steady annual growth in  energy production and consumption.
   Unlike several developed countries, which  rely on oil and gas for over half of their primary
   energy demand,  coal  comprises  approximately  three-fourths  of  China's  energy mix.
                                                                                 7-5

-------
   According to MOCI, coal production will increase from 1.29 billion tons in 1994 to 1.4 billion
   tons in 2000. China's current strategies for energy development focus on conserving and
   optimizing energy resources, and expanding natural gas production.

2.  Increased coalbed methane development: Although a newly exploited source of energy,
   coalbed methane is now recognized worldwide as a significant energy source. In the US,
   the coalbed methane industry has experienced tremendous growth  over the past decade.
   In 1983, annual coalbed methane production was 708  million cubic meters.   In 1994,
   production increased to 21.5 billion cubic meters, exceeding China's conventional natural
   gas  production  of 17  billion cubic  meters.  The Clearinghouse recommends that China
   include coalbed methane in  its strategic energy development.

3.  Selection  of target areas and coal  basins for coalbed methane development:  Since the
   geology of many of  China's  coal  basins  is complex,  geologic  conditions should  be
   considered in the selection of areas targeted  for coalbed methane development.   In
   addition to geologic conditions, other key selection criteria include infrastructure,  available
   technology, and  market  conditions. China's major coal basins with high  potential  for
   methane development are  described in this report. Among the areas that have recently
   attracted attention from investors is the Hedong Basin of Shanxi Province.

   In the US,  most coalbed methane projects are in coal basins whose ranks range from low
   to medium volatile bituminous.  Yet China has  many  coal  basins whose mines  produce
   anthracite, which is typically highly fractured and gassy. Examples include the major coal-
   producing regions of Yangquan, Jiaozuo, and Jincheng.  These anthracite regions should
   be considered as potential target areas for coalbed methane development.

4.  Environmental impacts: Coalbed methane is a greenhouse gas. Based on a  UN study on
   methane emissions, Chinese coal mines liberate 19.4 billion cubic meters of methane per
   annum,  accounting for one-third of the world's total from this source. The UN and USEPA
   are encouraging Chinese coal  mines to expand their methane recovery and use, as it
   benefits the  regional  and  global  environment.   It is  therefore  recommended that the
   Chinese authorities include methane recovery in their environmental  protection programs.

5.  Increase coalbed methane recovery:  Chinese coal mines have a long history of coalbed
   methane  recovery.   In  1993,  over 100  mines produced  543 million cubic meters  of
   methane,  led by Fushun and Yangquan CMAs. Although numerous mines have increased
   their methane recovery over the past several years, the recovery  rate for Chinese coal
   mines averages less than 20 percent.  It is recommended that the  efficiencies of existing
   recovery methods be improved.  For in-mine drainage, recovery from adjacent seams and
   gob  areas  using long holes should  be used.  A comprehensive drainage program before,
   during, and after  mining can increase recovery efficiencies up to 50 percent. Horizontal
   directional  drilling, as used  at the Tiefa and  Songzao CMAs, is an  efficient method when
   reliable, high power drills are used.

6.  Hydraulic  fracturing in mined areas:  In the US, methane is recovered in both mined and
   unmined areas.  In unmined areas,  coalbed methane well drilling and completion methods
   are modified from conventional oil and gas technologies.   In mined areas, companies
   recover methane using horizontal boreholes and gob wells, as well as vertical wells  in
   advance of mining.   Hydraulic fracturing  to  increase  permeability, and therefore  gas
   production has been  applied successfully in vertical wells in advance of coal mining.


                                                                                 7-6

-------
   Currently, there are vertical well degasification tests at the Tiefa,  Huaibei, and Jincheng
   CMAs.  It is recommended that additional hydraulic fracture tests be conducted at selected
   Chinese coal  mines.

7.  Development is  beginning: Coalbed methane development in China is now  beginning.
   Since  the  onset  of the  GEF-funded project  "China  Coalbed  Methane Resources
   Development" in 1990, methane recovery has come into focus, attracting the attention of
   MOCI, the CNPGC, and the MGMR. Through 1994,  39 vertical wells have been drilled in at
   least ten coal basins.

8.  Well drilling and completion:  In China, problems have occurred due to inappropriate use of
   technologies, including formation damage, roof strata  collapse, and inefficient  fracturing
   methods.  Advanced technologies used in the US, including  rotary percussion drilling and
   open  hole  completion,  may  be  applied to  China in  appropriate geologic conditions.
   Fracturing parameters and drilling fluids should also be selected to maximize production.

9.  Disposal of produced water: Water produced from coalbed methane wells often needs to
   be treated prior to discharge.  The US has developed regulations for disposal of produced
   water. The methods  used are  site-specific,  depending on water quality,  quantity and
   regional conditions. It is  recommended that China evaluate water treatment and disposal
   methods, and select those that are site-appropriate.  In addition, environmental regulations
   need to be  established for the disposal of produced water.

10. On-site coalbed  methane use:  Unlike the US, China  lacks a full integrated natural gas
   pipeline system  between mines,  cities and provinces.  This restricts large-scale use of
   pipeline-quality coalbed  methane. Some of the larger CMAs, including Kailuan,  have
   integrated pipeline systems that  connect the mines to the cities.  However, integrated
   pipelines are  non-existent in  most mining  regions, so that  gas produced is  supplied
   primarily for miners'  families  in the immediate area.   It is recommended that  additional
   pipeline infrastructure be built in key locations to allow the  distribution  and marketing of
   gas, including coalbed methane.

   Use of coalbed  methane should  be a priority in China.  The remoteness of many coal
   basins with high coalbed methane  potential results in  extremely high costs for pipeline
   construction.  On-site use, including power generation with gas turbines, is the most cost
   effective use of  coalbed  methane in these  areas.  Several  countries have  installed gas
   turbines  using methane as fuel, and  China  built a gas turbine demonstration  project in
   1990.  There  is international  interest in methane-powered power  generation projects in
   China; however,  the costs for using  China's  electric grid are prohibitive. Coalbed methane
   as an energy source has  numerous, cost-effective industrial uses, including feedstocks for
   producing ammonia, carbon black, formaldehyde, and other chemical products.  Jincheng
   CMA in Shanxi Province serves as a model for on-site coalbed methane use.

11. Gas prices and tax policy for surface wells:  China's central government should develop
   preferential policies to promote methane use.  Prior to  1993, the US  implemented state-
   regulated wellhead prices, which lowered prices and resulted in decreased gas production.
   Now,  US gas prices  are based on a free-market  system,  creating a  balance  between
   production  and consumption.  China's wellhead and sales prices for conventional natural
   gas are  regulated;  gas enterprises are commonly unprofitable due  to low gas prices.
                                                                                  7-7

-------
   Coalbed methane produced from coal mines is sold at an even lower price.  Freeing gas
   prices would provide a financial incentive to increase gas production and sales.

   Projects which  involve gas recovery and use from active mines are now included  in the
   Catalogue  of  Utilization of Comprehensive  Resources,  and  are  eligible  for  relevant
   preferential policies.  However, it is currently uncertain whether coalbed methane produced
   from surface wells qualifies for these same preferential policies. It is suggested that the
   State Planning  Commission include vertical coalbed methane wells in  the Catalogue of
   Comprehensive Utilization of Resources, qualifying for  preferential policies on taxation and
   investment.

12. State loans and funding for coalbed methane projects:  The state should allocate additional
   funds and loans for coalbed methane projects, as coalbed methane is now included in the
   Catalogue of Priorities of Current Industrial Development.

13.  MOCI loans for coalbed methane use: Coalbed methane development is an important part
   of comprehensive  use at high  gas coal mines,  as well as being cost-effective.   MOCI
   arranges state loans with low interest rates for the coal industry. Since coalbed methane
   recovery and use are  a  tertiary  industry  of the coal sector,  MOCI should  allocate  a
   percentage of loans specifically for coalbed methane projects.

14. Market  conditions and foreign investments:    Current market conditions and  policies in
   China may deter investment in coalbed methane projects.  Foreign investors are currently
   interested in coalbed methane projects in China. Changes in market conditions and policy
   could attract foreign investment. Examples include freeing natural gas prices, construction
   of pipelines in key areas, and preferential policies for power generation.

15. Demonstration projects and training:  Coalbed methane projects often require sophisticated
   technologies, and  technological barriers for site-specific projects in China need  to be
   addressed. It is recommended that funding for R&D coalbed methane projects is available
   for the key State R&D programs.   In addition, a training program should be available to
   educate both technical personnel of the mining industry, and government officials to aid in
   their decisions on energy policy.

16.  Clearinghouse  activities: Established in 1994, the China Coalbed Methane Clearinghouse
   provides an important  information  service and  promotes  the  development  of  coalbed
   methane in China.   The Clearinghouse currently plans to expand its activities to include a
   variety of information services for organizations and companies, both in China and abroad.
                                                                                   7-8

-------
                              REFERENCES CITED
American Gas Association, 1993, Status of the natural gas vehicle conversion  and refueling
      infrastructure: Energy Analysis (AGA Policy & Analysis Group), August 13,1993, 10 p.

Baker, R.W., Pinnau, I., and Wijmans, J.G., 1993, Nitrogen separation from natural gas using
      membranes: AICHE National Meeting, Houston, TX, March 28 - April 1, 1993.

Bend Research, 1995, oral communication.

Bai Qingzhao, 1995, Evaluation of target regions of coalbed methane development in China:
      p. 10 -13, in China Coalbed Methane No. 1, May 1995, China Coalbed Methane
      Clearinghouse, 54 p.

Biggs, Rod, 1995, CMG Development,  Bridgeport, WV, oral communication.

Byrer, Charles, 1995, USDOE/METC, Morgantown,  WV, oral communication.

Chen Weilong, Ma Qiang, Qin Yuying, and Lu Jing Chang, 1995, Application of injection/falloff
      test at Liulin pilot area of coalbed methane exploration and development in
      International conference on Coalbed Methane Development and Utilization, Beijing,
      1995, Proceedings, Vol. A: Beijing, United Nations, p. 301-305.

China Coal Industry Yearbook 1993: China Coal Industry Publishing House, 132 p.

China Coal Industry Yearbook 1994: China Coal Industry Publishing House, [In Chinese]
      349 p.

China Coalbed Methane Clearinghouse, 1995: China Coalbed Methane Number 1, May
      1995, 54 p.

China Energy Report, 1994, Dispute over oil and gas reserves continues: China Energy
      Report, v.  1, no. 7, p. 2.

China Energy Report, 1995, China examining EOT financing: China Energy Report, v. 2,
      no. 7, p. 2-3.

China Energy Report, 1996, State Council launches methane company: China Energy Report,
      v. 3, no. 5, p. 7.

Coal & Synfuels Technology, 1995, v. 16, no.  19, May 15, 1995.

Consolidated Natural Gas Company (CNG), 1987, Cofiring - A new combustion technique:
      Consolidated Natural Gas Company, 4 p.

Dadi, Z.  1992, Energy management system pricing and market mechanisms: US-China
      Conference.
                                                                           REF-1

-------
Dai Chong-xiao, 1993, History and overview of coalbed methane extraction in China: p. 429-
      433 in Proceedings of the 1993 International Coalbed Methane Symposium, v. II,
      Tuscaloosa, AL, May 17-21, 1993, 375 p.

D'Amico, Joseph and Reinhold, Herbert, 1993, A PSA Process for nitrogen rejection from
      natural gas: AICHE National Meeting, Houston, TX, March 28-April 1, 1993.
Department of Resources, Conservation and Comprehensive Utilization (DRCCU), 1994,
      China Energy Annual Review:  Wang Quingyi, ed., [In Chinese and English], 150 p.

Diamond, W. P., 1993, Methane control for underground coal mines: in Law, B.E., and Rice,
      D.D., eds., Hydrocarbons From Coal Tulsa, Oklahoma, American Association of
      Petroleum Geologists, Studies in Geology #38: p. 237-267.

Diamond, W.P., Bodden, W.R., Zuber, M.D., and Schraufnagel, R.A., 1989, Measuring the
      extent of coalbed gas drainage after ten years of production at the Oak Grove Pattern,
      in Proceedings of the 1989 Coalbed  Methane Symposium: Tuscaloosa, AL, 1989, p.
      185-193.

Dong Qiantai,  1995, The researches of the relationship between the geological features and
      coalbed methane occurrence law of Sanjiao mining area in Hedong Coalfield, Shanxi
      Province, in International Conference on Coalbed Methane Development and
      Utilization, Beijing, 1995, Proceedings,  Vol. A: Beijing, United Nations, p.  90-99.

Dorian, J. P., 1995, Energy in China:  Financial Times Energy Publishing,  149 p.

Eastern  Region Natural Gas Center (ERNGC), 1995, Warrior basin coalbed methane
      production data for 1994:  University of Alabama, Tuscaloosa, oral communication.

East-West Center/Argonne National Laboratory, 1993, National response strategy for Global
      Climate Change:  PRC Office of Environment-Asian Development Bank.

Economic and Social Commission for Asia and the Pacific, 1985, Stratigraphic correlation
      between sedimentary basins of the ESCAP region:  in ESCAP Atlas of Stratigraphy IV -
      PRC, v. X: United Nations, 81 p.

EIU (Economist Intelligence Unit) 1993, China and Mongolia country profile: London, The
      Economist Intelligence Unit, 80 p.

Energy Analysis Program/LBL,  1992, China's energy system - historical evolution, current
      issues, and prospects: Levine, Liu, and Sinton, eds., Annual Review of Energy and the
      Environment,  17: p. 405-435.

Energy Information Center (EIC), 1994, China - An untapped market for natural gas
      vehicles: Fuel For Thought; News letter of the Clean Coal Technology Information
      Center,  MSU - Billings, MT, 7/94, 4 p.
                                                                             REF-2

-------
Fay, J.A., Golomb, D.S., and Zachariades, S.C. 1986, Feasibility and cost of converting oil-
      and coal-fired utility boilers to intermittent use of natural gas: Massachusetts Institute of
      Technology Energy Laboratory, 32 p.

Fenggi, Z., 1992, To develop the coal market enthusiastically and open the price of coal
      progressively:  US-China Conference.

Fisher, Roger, 1995, Technical evaluation and development potential of coalbed methane
      resources in the San Jiao mine area, Shanxi Province, People's Republic of China, in
      International Conference on Coalbed Methane Development and Utilization, Beijing,
      1995, Proceedings, Vol. B: Beijing, United Nations.

Fushun CCMRI, 1995, Data presented to Raven Ridge Resources while in China, August
      1995.

Gas Research Institute (GRI), 1993, GRI Quarterly review of methane from  coal seams
      technology:  v. 11, no. 1, August 1993, 60 p.

Gas Research Institute (GRI), 1995, Gas cofiring - a viable dual fuel option: Chicago, Gas
      Research Institute, 7 p.

Gas Separation Technology (GST), 1995,  GST company brochure.

Guanghua Liu, 1990, Permo-Carboniferous paleogeography and coal accumulation and
      their tectonic control in the  north and south China continental plates:  International
      Journal of Coal Geology, v. 16, p.  73-117.

Hendrix, M.S., Brassell, S.C., Carroll, A.R., and Graham,  S.A., 1995, Sedimentology,
      organic geochemistry, and  petroleum potential of Jurassic coal measures - Tarim,
      Junggar, and Turpan Basins, northwest China:  American Association of Petroleum
      Geologists, v. 79, no. 7, July 1995, p. 929 - 958.

Huang Lianchen, 1995, Coalbed methane utilization of Fushun Coal Mining Administration:
      p. 42 - 44, in China Coalbed Methane No. 1, May  1995, China Coalbed Methane
      Clearinghouse, 54 p.

Huang Shengchu, 1995, unpublished data provided to Raven Ridge Resources via fax,
      August, 1995.

Hsu, Kenneth, 1989, Origin of sedimentary basins of China: p 207 - 227 in Chinese
      Sedimentary Basins, X. Zhu, ed, Elsevier Publishing.

ICF Resources, Inc., 1990, Economic analysis of China's coal and natural gas industries -
      Implications for coalbed methane development: Report to the USEPA, 97 p.

IEA Coal Research, 1983, Concise guide  to world coalfields: Paris, International Energy
      Agency,  17  p.

IEA, 1994, World Energy Outlook: Paris,  OECD/IEA, 305 p.
                                                                              REF-3

-------
IEA, 1996, Practical utilisation of methane: Greenhouse Issues (Publication of the IEA
       Greenhouse Gas Programme), no. 23, March 1996.

Jianliang Li, Schwoebel, J.J., and Brunner, D.J., 1995, Horizontal in-seam longhole methane
       drainage strategies for low permeability coal seams at Songzao, China, in International
       Conference on Coalbed Methane Development and Utilization, Beijing, 1995,
       Proceedings, Vol. B:  Beijing, United Nations.

JP International, 1990, Opportunities forcoalbed methane recovery and utilization in China;
       The potential for US-China cooperation:  Report to the USEPA.

JP International, 1991a, Review and use of coalbed methane in China:  Data Review.

JP International, 1991b, Geologic data, Songzao Mining Administration, 14 p.

JP International, 1991c, Investigation  into methane recovery and utilization in China's coal
       mines:  Data bank Analysis, June 30, 1991.

JP International, 1991d, Figures in China's coalbed methane resources - A national study.

Kruger, Dina, 1993, International opportunities to reduce coal mine methane: p.  599 - 608,
       in Proceedings of the 1993 International Coalbed Methane Symposium, v. II,
       Birmingham, AL, May 17-21, 1993, 375 p.

Lee, K.Y., 1989, Geology of  petroleum and coal deposits in the North China basin,  Eastern
       China:  U.S. Geological Survey Bulletin 1871, 36 p.

Lemons,  B.N. and Nemirow,  Larry,  1989, Maximizing the Section 29 credit in coal seam
       methane transactions: p. 238 - 245, The Journal of Taxation, April 1989.

Lewis,  Mike, 1995, Virginia Division of Oil & Gas; oral communication.

Li Dawei, Liu Huamin, Ma Jiarong, Zhang Shuqi, Zhang Suian, Li Jianwu, Yuan Ping,
       Zhang Qun, 1995, Developing and investing conditions forcoalbed methane resources
       in Huaibei Coalfield, China, in  International Conference on Coalbed Methane
       Development and Utilization, Beijing, 1995, Proceedings,  Vol. A: Beijing, United
       Nations,  p. 398-400.

Li Zhigang, Xia Hehai, Zhang Biao,  Liu Maoshen, and Gong Caixi,  1995, The practices of
       hydraulic fracturing technology in coalbed methane wells at the Liulin Pilot Area, P.R.
       China, in International Conference on Coalbed Methane Development and Utilization,
       Beijing,  1995, Proceedings,  Vol. A: Beijing, United Nations,   p. 306-314.

Liu Guanghua, 1990, Permo-Carboniferous paleogeography and coal accumulation and their
       tectonic control in the North  and South China Plates: International Journal of Coal
       Geology, v. 16, p. 73-117.
                                                                              REF-4

-------
Liu Hefu, 1986, Geodynamic scenario and structural styles of Mesozoic and Cenozoic basins
      in China: American Association of Petroleum Geologists Bulletin, v. 70, no. 4, p. 377-
      395.

Lunarzewski, L.W., 1994, Prediction of gas capture from active gas resources for
      coalbed methane utilization, in  The Silesian International Conference on Coalbed
      Methane Utilization Proceedings: Katowice, Poland, Coalbed Methane Clearinghouse.

Lunarzewski, L.W., Lunarzewski, A.L.,  and Pilcher R.C., 1995, A new approach to predict
      underground gassiness for design of gas capture and ventilation systems, in
      Proceedings of the 7th US Mine Ventilation Symposium: Lexington, Kentucky, Society
      for Mining,  Metallurgy and Exploration, Inc., p. 61-66.

Lunarzewski, L.W., Pilcher, R.C., Raizen, A., and Sturgill, C., 1992, Pre-feasibility study for the
      use of coalbed methane as fuel for power generation in the Songzao Coal Mining
      Association: Unpublished report submitted to the United Nations DESD,  10 November,
      1992,41 p.

Mayer, Brown, and Platt, 1993, China's power generation opportunities: Project Finance
      Newsletter no. 3/93.

Mehra, Yuv and Wood, Glen, 1993, Noncryogenic N2-rejection process gets Hugoton field
      test: Oil &  Gas Journal, May 24, 1993.

Meyer, H.S., Leppin, D., and Savidge, J.L., 1990, Gas Research Institute's gas processing
      research and development program: Unpublished document submitted to the Gas
      Research Institute, Chicago.

Miao Fen, 1993, Developing prospects of coalbed methane in major coal basins of eastern
      China: p. 57-60 in Proceedings of the 1993 International Coalbed Methane
      Symposium, v. I, Birmingham, AL, May 17-21, 1993, 382 p.

Moerman, A., 1982, Internal report on gas storage in Peronnes-Lez-Binche: S.A. Distrigaz,
      19 p.

MOE, 1991, Coalbed methane recovery in China:  An information report for consultants of
      UNDP.

Natural Fuels Corporation, 1994, Questions and answers - natural dollars and sense:
      Natural Fuels Corporation brochure.

Natural Fuels Corporation, 1995, Natural incentives - information from Natural
      Fuels Corporation:  fact sheet.

Oil & Gas Journal, 1992, ICF - Change section 29 tax credits: August 19,  1992,  p. 22-24.

Oil & Gas Journal, 1994, China's new oil import status underpins world's most dynamic
      petroleum scene: May 9, 1994, p. 33.
                                                                              REF-5

-------
Petroleum Information, 1994, Coalbed methane production report: Rocky Mountain Coalbed
      Methane Report, April 1994.

Petroleum Information, 1995, Coalbed methane production report: Rocky Mountain Coalbed
      Methane Report, April 1995 and May 1995.

Polish Coalbed Methane Clearinghouse, 1994, unpublished data provided to Raven Ridge
      Resources.

Price-Waterhouse, 1995, Doing business in the People's Republic of China: Price-
      Waterhouse World  Firm Services BV, 193 p.

Qie Bingyin and Lu Shaolin, 1995, Inherent patter and development of coalbed methane in
      Yangquan mining area in International  Conference on Coalbed Methane Development
      and Utilization, Beijing, 1995, Proceedings, Vol. A: Beijing, United Nations,  p. 298-
      305.

Quan Yuke, Wang Li, Hou Hongbin, Su Fuyi, and Cai Yunfei, 1995, Using simulation
      techniques to evaluate coalbed methane reservoirs of the Yangjiaping Pilot, Liulin
      area, in International Conference on Coalbed Methane Development and
      Utilization, Beijing,  1995, Proceedings, Vol. A: Beijing, United Nations,  p. 106-112.

Rice, D.D., Law, B.E., and Clayton, J. L., 1993, Coalbed gas - an undeveloped resource:
      p. 389 - 404 in The Future of Energy Gases, U.S. Geological Survey Professional
      Paper 1570, D.D. Howell, ed., 890 p.

Ryan, Megan and Flavin, Christopher, 1995, Facing China's limits:  p. 113 - 131 in General
      State of the World,  Worldwide Institute Report on Progress Towards a Sustainable
      Society, W.W. Norton, publisher.

Schraufnagel, Richard A.,  1993, Coalbed methane production:  p. 341 - 359 in Hydrocarbons
      From Coal, American Association of Petroleum Geologists, Studies in Geology # 38,
      Law, B.E., and Rice, D.D., eds, 400  p.

Schwoebel, J., Jianliang L., Xingguo Y., Shian Y., and Yongyan W., 1995, Application of
      innovative gob gas  recovery techniques at Tiefa, China, in International Conference on
      Coalbed Methane Development and Utilization,  Beijing,  1995, Proceedings, Vol. B:
      Beijing, United Nations.

Shen and Zhen, 1992, The overview of economy development, present situation and
      prospects for environmental protection and energy conservation in China: US-China
      Conference.

Shoemaker, Harold,  1994, Low quality natural gas upgrading: North American Coalbed
      Methane Forum, Morgantown, WV, October 11, 1994.

Sinor, J.E., 1992, Economic and market potential of the clinoptilolite process for methane
      purification: Unpublished document prepared for Gas Separation Technology,
      Lakewood, Colorado.
                                                                             REF-6

-------
Sinton, J., ed., 1992, China Energy Databook 1992:  Energy Analysis Program/Lawrence
       Berkeley Labs, LBL-32822.

Sinton, J., ed., 1996, China Energy Databook: Energy Analysis Program/Lawrence
       Berkeley Labs, LBL-32822 Rev. 3.

Soot, Pete, 1991, Tax incentives spur development of coalbed methane: p. 40 - 42, Oil &
       Gas Journal, June 10, 1991.

Stevens, S.H., Kuuskraa, J.A., and Schraufnagel, R.A., Technology spurs growth of US
       coalbed methane: Oil and Gas Journal, v. 94, no. 1,  p. 56-62.

Sturgill, C.L., 1991, Power generation - on-site use and sale to utilities:  Report prepared
       for USEPA product, Washington, DC, 26 p.

Sun Maoyuan, 1995, Unpublished data provided to Raven Ridge Resources via fax, July,
       1995.

Sun Maoyuan and Huang Shengchu, 1995, Important aspects of coalbed methane
       development in China:  p. 6 - 9 in China Coalbed Methane No. 1, May 1995, China
       Coalbed Methane Clearinghouse, 54 p.

Sun Maoyuan, Huang  Shengchu, and Zhu Chao, 1996, Investment opportunities for coalbed
       methane in China: Report prepared for the North American Coalbed Methane Forum,
       April 18-19, 1996, 8 p.

Thompson, H.A., 1991, It's 10° outside - do you know where your gas is?,  in GRID, Gas
       Research Institute Digest, Fall/Winter 1991-1992: Chicago, The Gas Research
       Institute, p. 12-23.

USDOE/EIA, 1993, International Energy Outlook, 1993: DOE/EIA 0484, Washington, DC.

USDOE/EIA, 1994, International Energy Annual, 1992: DOE/EIA 0219 (92), Washington,
       DC., 196 p.

USDOE/EIA, 1995, International Energy Annual, 1993: DOE/EIA 0219(93), Washington,
       DC, 158 p.

USEPA, 1993, Options for reducing methane emissions internationally, Volume II -
       International opportunities for reducing methane emissions: EPA 430-R-93-006 B.

USEPA, 1994a, Reducing methane emissions from coal mines in  Russia and Ukraine -
       The potential for coalbed methane development: EPA 430-K-94-003, 68 p.

USEPA, 1994b, Identifying opportunities for methane recovery at  US coal mines -  Draft
       profiles of selected gassy underground coal mines:EPA/430/R-94/012.
                                                                            REF-7

-------
USEPA, 1995a, Coal mine profits and environmental protection: Coalbed Methane
      Outreach Program, EPA 430-F-95-029, 12 p.

USEPA, 1995b, Economic assessment of the potential for profitable use of coal mine
      methane - case studies of three hypothetical U.S. mines: EPA/430-R-95/006, 27 p.

USEPA, 1995c, Reducing methane emissions from coal mines in Poland - A handbook
      for expanding coalbed methane recovery and utilization in the Upper Silesian coal
      basin:   EPA/430-R-95-003, 122 p.

USEPA, 1995d, Finance opportunities for coal mine methane projects -  a guide to Federal
      Assistance: EPA Expert Review Draft Copy.

Vejtasa, S.A., F.E. Biasca, D.V. Giovanni, and R.C.  Carr, 1991, Gas cofiring for coal-fired
      utility boilers: Draft report prepared for the Electric Power Research Institute, Palo Alto,
      California and the Gas Research Institute, Chicago.

Wang Hongling, Xu Jiamo, Ye Jianping, and Zhang Wenxian,  1995, Reservoir characteristics
      of Seam 11-1 and its CBM potential in Pingdingshan mining area, in International
      Conference on Coalbed Methane Development and Utilization, Beijing, 1995,
      Proceedings, Vol. A: Beijing, United  Nations, p. 131-138.

Wang Naixen and Li Jianren,  1995, Origin and progress of UNDP project - China coalbed
      methane resources development: China Coalbed Methane, No. 1, p. 3-5.

Wang Yinwei, Ye Xialing, Ji AnXin, Zhang Zhihui, and Li Fuguo, 1995, The progress and
      situations of prospective predictions  of the demonstration project for developing and
      utilizing the coalbed gas in Panzhuang Coal Mine, in International Conference on
      Coalbed Methane Development and Utilization, Beijing, 1995, Proceedings, Vol. A:
      Beijing, United Nations, p. 321-325.

West, Jim, ed., 1994, International Petroleum Encyclopedia: Tulsa, Oklahoma,  Pennwell
      Publishing, 368 p.

Xu Fangde, 1995, Drainage methods of coalbed methane from surface or underground in
      Fushun Mining Area in International  Conference on Coalbed Methane Development
      and Utilization, Beijing, 1995, Proceedings, Vol. A: Beijing, United Nations, p. 326-334.

Yang Zhongzhen, Zhang Bingguan, and Sun Maoyei, 1995, The evaluation  of the geological
      characters and the resources of the  coalbed methane in the Huainan coal field, in
      International Conference on Coalbed Methane Development and Utilization, Beijing,
      1995, Proceedings, Vol. A: Beijing, United Nations, p. 139-147.

Yunzhan Jia, 1990, A review of methane release related with coal mining in  China: in IPCC
      International Workshop on methane  emissions, USEPA.

Yunzhan Jia, 1991, Reform has pushed China's coal industry forward, in UNDTCD Symposium
      on Management of Economic and Environmental Aspects in the Coal Mining Industry,
      Prague, 1991, Proceedings, Vol. 1: Prague, United Nations, p. 63-78.
                                                                             REF-8

-------
Zhao Shu, Zuo Wenqi., Zhang Wenhui, and Wang Xingjin, 1995, Sino-Australia coalbed
       methane exploration project in Huawell's Liulin Contract Area, in International
       Conference on Coalbed Methane Development and Utilization, Beijing, 1995,
       Proceedings, Vol. A: Beijing, United Nations, p. 170-176.

Zheng Xuetao, 1995, Development prospects of coalbed methane in Pingle coal bearing area,
       Fengcheng coal mining area, and Qushi No.  1 well test situation, in International
       Conference on Coalbed Methane Development and Utilization, Beijing, 1995,
       Proceedings, Vol. A: Beijing, United Nations, p. 338-352.
                                                                              REF-9

-------
   APPENDIX A




LIST OF CONTACTS

-------
                        APPENDIX A - LIST OF CONTACTS
Sun Maoyuan, Director
China Coalbed Methane Clearinghouse
21 Hepingli Beijie
P.O. Box1419
Beijing 100713
tel:  (86) (10) 420-1328  fax: 421-5187
Internet address: abd310@istic.sti.ac.cn

Wang Zhenyu
Director, Senior Engineer
Fushun Branch of the Central Coal Mining
       Research Institute
Fushun, Liaoning 113001
tel: (86) (413)668-8521
Ministry of Foreign Trade and Economic
       Cooperation
2 Dongchangan Street
Beijing 100731
tel: (86) (10)519-8114
telecopier: (86) (10) 512-9568
telex: 22478 MFERT CN

Carol Bibler
Manager of International Projects
Raven  Ridge Resources, Incorporated
584 25 Road
Grand Junction, Colorado, USA
tel: (970) 245-4088 fax: (970) 245-2514
Internet address: tbc@ravenridge.com
Pan Zhenwu
Director General
Xi'an Branch of the Central Coal Mining Research Institute
44YantaRoad(N)710054
Xi'an, Shaanxi
tel: (86) (29) 723-4674

Meng Xiande
Project Coordinator
Office of International Cooperation
Central Coal Mining Research Institute
Qingniangoulu, Hepingli
Beijing 100013
tel: (86) (10)421-2752
fax:        421-9234

Karl Schultz, Coalbed Methane Program Manager
USEPA Atmospheric Pollution Prevention Division
401 M Street, SW
Washington, DC  20460
tel: (202) 233-9468  fax: 233-9569
Internet address:  schultz.karl@epamail.epa.gov

Voluntary Reporting of Greenhouse Gases
U.S.  Department of Energy
Energy Information Administration, EI-81
1000 Independence Avenue, SW
Washington, DC  20585
                                                                               A-1

-------
                        APPENDIX B

 EXPLANATION OF CHINESE RESOURCE AND COAL
           RANK CLASSIFICATION SYSTEMS
             Appendix B Includes the Following Figure and Tables:
                                                           Page
Figure B-1. Correlation of Chinese, German, and US Coal Rank Classification Systems	B-2
Table B-1. Relation Between Coalbed Methane and Coal Resource Classification
        Systems in China	B-3
Table B-2. Predicted Gas Contents for Coal Seams at Depths Greater than 1000 m	B-4

-------
                                   APPENDIX  B

  EXPLANATION OF CHINESE COAL RANK, COAL RESOURCE, AND COALBED
                METHANE RESOURCE CLASSIFICATION SYSTEMS
Coal Rank Classification System
China's coal rank classification system divides coal types into eleven categories, ranging from
anthracite to peat.  Figure B-1  shows  these categories, along with  their approximate
equivalents in the German and  US classification  systems.

Coal Reserve Classification System
Based  on the energy resource  classification method  recommended by  the  World  Energy
Conference, the Chinese energy  resources classification system consists of: solid fuels; liquid
fuels; gaseous fuels; hydropower;  nuclear energy; electrical energy;  solar energy; biomass
energy;  wind energy;  ocean energy; geothermal; and nuclear fusion. In addition,  energy
resources can be divided into several categories: primary vs. secondary energy;  renewable
vs.  non-renewable  energy;  conventional  vs. alternative  energy;  and commercial vs.  non-
commercial energy

The  Chinese coal reserves classification system is based  on three exploratory stages:  coal
prospecting; preliminary  exploration; and detailed exploration. Reserves are divided  into
Grades A, B, C and D.  Of these,  Grades A and  B are the best defined  and  highest-confidence
level of reserves. The following table is an approximate correlation between the Chinese and
US coal reserve classification systems.
China              United States

Grade A Reserves   Measured Reserves
Grade B Reserves   Indicated Reserves
Grade C Reserves   Inferred Reserves
Grade D Reserves   Hypothetical Resources
The terms commonly used to describe China's coal reserves are as follows:

Industrial reserves: The sum of Grade A,  B, and C reserves;  used as a reference for mine
design.

Proven reserves: Total of Grade A and B reserves.

Available reserves: Equal to demonstrated reserves, minus mined reserves.

Future reserves:  Grade D reserves; obtained from coal exploration  and used as reference to
future planning of coal industry.
                                                                                B-1

-------
Figure B-1 Correlation of Chinese, German, and US Coal Classification Systems
Rank
China
Peat
Young Brown
Coal
Old Brown
Coal
Long Flame
Coal
Gas Coal
Fatty-gas Coal
Gas-fatty Coal
and Fatty Coal
Coking Coal
Lean Coal
Meager Coal
Anthracite
Germany
Torf
Weichbraunkohle
Mattbraunkohle
Glanzbraunkohle
Flammkohle
Gasflammkohle
Gaskohle
Fettkohle
Esskohle
Magerkohle
Anthrazit
Meta-Anthr.
USA
Peat
Lignite
Sub-_ _
Bit. B
\A
C \
en
B §
_2
m
A £
_c
03
IE
Medium
Volatile
Bituminous
Low
Volatile
Bituminous
Semi-
Anthracite
Anthracite
Meta-A
Refl.
Rm .,
oil
— 0.2
— 0.3
— 0.4
— 0.5
— 0.6
— 0.7
- 0.8
- 1.0
1 2
— 1.4
— 1.6
— 1.8
— 2.0
- 3.0
— 4.0
Vol. M.
d.a.f.
%
— 68
— 64
— 60
CC
- 52
— 48
— 44
in

— 36
— 32
no
— 24
-20
- 16
- 12

— 8
A


Carbon
Content
d.a.f.
— ca. 60
ra 71
ra 77
ca 87

— ca.yi
Bed
Moisture
— ca. 75
n 35
n ?5
rn ft 10

Cal. Value
Btu/lb
(kcal/kg)
7200
(4000)
9900
(5500)
12600
(7000)
15500
(8650)
15500
(8650)
Applicability of Different
Rank Parameters


l
'oT
•f
_c
C/}
03
£:•
^
c
o
-8
s

hydrogen (d.a.f.)
1
_c
C/}
03
£:•
T3^
i_





vitrinite reflectance _

0)
•1
.C

-------
Coalbed Methane Resource Classification System

Total coalbed methane resources include the recoverable volume of methane from coal seams
and adjacent rocks. Currently,  coalbed methane resource estimates  for China refer only to
mineable coal seams, excluding adjacent strata and unmined seams.  Key factors that affect
these resources are:

•  Coal occurrence, geometry,  and thickness;
•  Geologic conditions, including depth of burial, tectonic history, coal rank, and permeability;
•  Gas content and in-mine degasification; and
•  Economic and geographic factors.

Specific exploration and development programs for coalbed methane are relatively new in
China.  Currently, the classification of these  resources is related  directly to the existing  coal
reserve classification system, as coal  seams are both the source  rocks and the reservoirs for
coalbed methane. Thus coalbed methane resources are currently divided into three categories,
shown  in Table B-1  with their equivalent coal reserve classification system:

     TABLE B-1. RELATION BETWEEN COALBED METHANE AND COAL RESOURCE
                         CLASSIFICATION SYSTEMS IN CHINA
CATEGORY
COALBED
METHANE
COAL
I
Proven
Industrial
(A+B+C)
II
Indicated
Demonstrated
(A+B+C+D)
III
Prospective
Future/Hypothetical
(D Reserves)
In general, the absolute maximum  depth  of  burial  used to calculate prospective coalbed
methane resources in  China is  2,000 m.  However, resource estimates  may  sometimes
assume a maximum burial depth of 1,000  or 1,500 m, depending on the location, age, and
geologic setting of the specific coal-bearing region. Generally, a depth of 2,000 m is used for
north China, and 1,500  m is used for south China.  An exception is Liapanshui Basin in south
China, where 2,000 m is used as the maximum depth.  The current reserve calculation method
defines  reserve blocks based on the reserve category (I, II,  or III), depth of burial, age of the
coal deposit, and the specific coal-bearing region.  The coalbed methane reserves for a given
block are  calculated  using the Monte Carlo method1 for sample selection, then calculated
volumetrically as follows:

                Coal reserves (tons) x Methane content of coal (m3/ton)

Total coalbed methane reserves are the sum of the reserves in each block. For a given block,
coal reserves are a constant,  whereas gas content is a random variable. To determine the gas
content  of coal seams in reserve blocks at depths above 1,000 m, data are measured using
the direct method, primarily from core sample desorption.  Where measured gas content data
are lacking, gas contents are extrapolated using adjacent blocks or coal-bearing regions, as is
done for coal reserves.
1  The Monte  Carlo method  is a  random  sampling  process for generating uniformly distributed
pseudorandom numbers and using these to "draw" random samples from known frequency distributions.


                                                                                 B-3

-------
For estimating the gas content of seams in reserve blocks below 1,000 m, predicted values
based on coal rank are used, as shown in Table B-2.   Both measured and predicted gas
contents are calculated on an ash and moisture free basis.

   TABLE B-2. PREDICTED GAS CONTENTS FOR COAL SEAMS AT DEPTHS >1,000 M:
COAL RANK
(Chinese)
Long Flame
Gas Coal
Fatty Coal
Coking Coal
Lean Coal
Meager Coal
Anthracite 3
Anthracite 2
Anthracite 1
COAL RANK
(US Equivalent)
High Volatile
Bituminous C
High Volatile
Bituminous B
High Volatile
Bituminous A
Medium Volatile
Bituminous
Low Volatile
Bituminous
Semi-Anthracite
Anthracite
Anthracite
Meta-anthracite
R°max
(Percent)
0.50-0.65
0.65-0.90
0.90- 1.20
1.20- 1.70
1.70- 1.90
1.90-2.50
2.50-4.00
4.00-6.00
>6.00
GAS
CONTENT
(m3/ton)
5-6
7-8
14.2
14.89
17.35
19.82
26.19
25-30
2-3
REMARKS
Inferred by analogy
with Huainan CMA
Inferred by analogy
with Jixi CMA
Calculated
Calculated
Calculated
Calculated
Calculated
Calculated
Inferred by analogy
with coals in Fujian &
Jiangxi Provinces
                                                                            B-4

-------
                          APPENDIX C

               METHANE EMISSIONS DATA
                    Appendix C Includes the Following Tables:
Table C-1.  1992 Methane Emissions From China's Key State-Run Coal Mines	C-1
Table C-2.  1994 Methane Emissions From China's Key State-Run Coal Mines	C-4
Table C-3.  1993 Specific Emissions of Local Mining Areas Considered by MOCI to be
             High Gas	C-7
Table C-4.  High Gas CMAs in China and Their Average Specific Emissions	C-8

-------
TABLE C-1. 1992 METHANE EMISSIONS FROM CHINA'S KEY STATE-RUN COAL MINES, BY PROVINCE



Xijiang Uygur Autonomous Region
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Ningxia Hui Autonomous Region
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Gansu Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Shaanxi Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Yunan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Guizhou Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Sichuan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals
Number of Mines
Total


10

1

11


5
6
1

12


18
5


23


19
9
1

29


5
5


10


4
20


24


10
44


54
With
Drainage









3


3










1


1










15


15



26


26
Methane
Vented
m3

12,636,000

4,293,360

16,929,360


9,236,000
65,663,700
1 ,854,760

76,754,460


17,142,200
23,537,000


40,679,200


28,163,900
118,516,500
1,152,730

147,833,130


3,264,200
20,189,600


23,453,800


9,402,100
348,522,000


357,924,100


19,202,400
490,301 ,900


509,504,300
Methane
Drained
m3









8,020,000


8,020,000










3,500,000


3,500,000










40,620,000


40,620,000



154,140,000


154,140,000
Methane
Total
m3

12,636,000

4,293,360

16,929,360


9,236,000
73,683,700
1 ,854,760

84,774,460


17,142,200
23,537,000


40,679,200


28,163,900
122,016,500
1,152,730

151,333,130


3,264,200
20,189,600


23,453,800


9,402,100
389,142,000


398,544,100


19,202,400
644,441 ,900


663,644,300
Drained &
Utilized
m3









3,400,000


3,400,000
























8,080,000


8,080,000



90,940,000


90,940,000
Drained &
Vented
m3









4,620,000


4,620,000










3,500,000


3,500,000










32,540,000


32,540,000



63,200,000


63,200,000
Total
Emitted
m3

12,636,000

4,293,360

16,929,360


9,236,000
70,283,700
1 ,854,760

81 ,374,460


17,142,200
23,537,000


40,679,200


28,163,900
122,016,500
1,152,730

151,333,130


3,264,200
20,189,600


23,453,800


9,402,100
381 ,062,000


390,464,100


19,202,400
553,501 ,900


572,704,300
Coal
Output
t

2,914,200

1 ,206,000

4,120,200


2,896,800
6,331,700
521,000

9,749,500


5,584,900
627,000


6,211,900


7,507,800
6,548,300
323,800

14,379,900


783,000
1 ,823,500


2,606,500


1 ,224,500
10,437,700


1 1 ,662,200


5,087,300
13,102,000


18,189,300
Absolute
Emission
m3/min

24.04

8.17

32.21


17.57
140.19
3.53

161.29


32.61
44.78


77.39


53.58
232.15
2.19

287.92


6.21
38.41


44.62


17.89
740.38


758.27


36.53
1,226.11


1 ,262.64
Relative
Emission
m3/t

4.34

3.56

4.11


3.19
11.64
3.56

8.70


3.07
37.54


6.55


3.75
18.63
3.56

10.52


4.17
11.07


9.00


7.68
37.28


34.17


3.77
49.19


36.49

-------
TABLE C-1. 1992 METHANE EMISSIONS FROM CHINA'S KEY STATE-RUN COAL MINES, BY PROVINCE

Hunan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Henan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Shandong Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Jiangxi Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Anhui Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Zhejiang Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Jiangsu Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals



18
34


52


16
28
1
45



49
3


52


8
15


23


7
17


24



11


11


20
2


22




3


3



14

14











6


6



5


5

















14,346,000
103,030,400


117,376,400


68,050,300
282,607,400
3,327,890
353,985,590



74,563,400
28,104,500


102,667,900


1 1 ,423,800
114,215,700


125,639,500


43,059,100
239,164,300


282,223,400



31,125,100


31,125,100


58,361,500
13,765,100


72,126,600




1 ,830,000


1 ,830,000



19,510,000

19,510,000











9,260,000


9,260,000



9,510,000


9,510,000

















14,346,000
104,860,400


119,206,400


68,050,300
302,117,400
3,327,890
373,495,590



74,563,400
28,104,500


102,667,900


1 1 ,423,800
123,475,700


134,899,500


43,059,100
248,674,300


291 ,733,400



31,125,100


31,125,100


58,361,500
13,765,100


72,126,600




1 ,050,000


1 ,050,000



10,610,000

10,610,000











5,060,000


5,060,000



6,100,000


6,100,000


















780,000


780,000



8,900,000

8,900,000











4,200,000


4,200,000



3,410,000


3,410,000

















14,346,000
103,810,400


118,156,400


68,050,300
291 ,507,400
33,278,900
392,836,600



74,563,400
28,104,500


102,667,900


1 1 ,423,800
118,415,700


129,839,500


43,059,100
242,574,300


285,633,400



31,125,100


31,125,100


58,361,500
13,765,100


72,126,600



3,099,400
3,864,300


6,963,700


19,415,900
19,701,400
934,800
40,052,100



31 ,927,700
1,869,100


33,796,800


3,174,900
4,190,500


7,365,400


6,684,400
18,241,300


24,925,700



1 ,032,800


1 ,032,800


15,182,700
1,200,100


16,382,800



27.29
199.51


226.80


129.47
574.80
6.33
710.60



141.86
53.47


195.33


21.73
234.92


256.65


81.92
473.12


555.04



59.22


59.22


111.04
26.19


137.23



4.63
27.14


17.12


3.50
15.33
3.56
9.33



2.34
15.04


3.04


3.60
29.47


18.32


6.44
13.63


11.70



30.14


30.14


3.84
11.47


4.40


-------
TABLE C-1. 1992 METHANE EMISSIONS FROM CHINA'S KEY STATE-RUN COAL MINES, BY PROVINCE

Heilongjiang Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Jilin Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Liaoning Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Nei Mongol Autonomous Region
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Shanxi Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Hebei Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals


28
32
1

61


27
18


45


11
35
3

49


29
3
5

37


44
28
1

73


39
19


58



4


4



1


1



12


12



2


2



13


13



7


7


107,696,000
373,780,800
3,821,300

485,298,100


20,704,100
100,819,400


121,523,500


13,855,200
416,812,900
34,354,710

465,022,810


68,150,100
21,068,200
26,168,490

115,386,790


245,560,900
692,284,200
37,455,470

975,300,570


87,432,800
210,480,500


297,913,300



16,340,000


16,340,000



330,000


330,000



132,850,000


132,850,000



1,400,000


1,400,000



114,530,000


114,530,000



20,660,000


20,660,000


107,696,000
390,120,800
3,821,300

501,638,100


20,704,100
101,149,400


121,853,500


13,855,200
549,662,900
34,354,710

597,872,810


68,150,100
26,439,000
26,168,490

120,757,590


245,560,900
806,814,200
37,455,470

1 ,089,830,570


87,432,800
231,140,500


318,573,300



0


0



0


0



114,880,000


114,880,000



0


0



95,620,000


95,620,000



10,390,000


10,390,000



16,340,000


16,340,000



330,000


330,000



17,970,000


17,970,000



1,400,000


1,400,000



18,910,000


18,910,000



10,270,000


10,270,000


107,696,000
390,120,800
3,821,300

501,638,100


20,704,100
101,149,400


121,853,500


13,855,200
434,782,900
34,354,710

482,992,810


68,150,100
26,439,000
26,168,490

120,757,590


245,560,900
711,194,200
37,455,470

994,210,570


87,432,800
220,750,500


308,183,300


26,951 ,900
21,893,400
1,073,400

49,918,700


5,672,800
6,529,300


12,202,100


2,460,200
27,404,800
9,650,200

39,515,200


18,239,500
917,100
7,350,700

26,507,300


66,693,600
36,230,100
10,521,200

113,444,900


30,728,700
12,781,200


43,509,900


204.90
742.24
7.27

954.41


39.39
192.45


231.84


26.36
1 ,045.78
65.36

1,137.50


129.66
50.30
49.79

229.75


467.20
1 ,535.03
71.26

2,073.49


166.35
439.77


606.12


4.00
17.82
3.56

10.05


3.65
15.49


9.99


5.63
20.06
3.56

15.13


3.74
28.83
3.56

4.56


3.68
22.27
3.56

9.61


2.85
18.08


7.32

-------
TABLE C-2. 1994 METHANE EMISSIONS FROM CHINA'S KEY STATE-RUN COAL MINES, BY PROVINCE



Xijiang Uygur Autonomous Region
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Ningxia Hui Autonomous Region
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Gansu Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Shaanxi Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Yunan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Guizhou Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Sichuan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals
Number of Mines
Total


10

1

11


3
6
1

10


15
4


19


19
10
1

30


5
5


10


4
19


23


11
43


54
With
Drainage









4


4



2


2



2


2










15


15



25


25
Methane
Vented
m3

4,994,400

2,671,890

7,666,290


16,240,900
79,468,100
1 ,893,770

97,602,770


16,618,500
30,131,200


46,749,700


19,173,500
156,557,700
967,050

176,698,250


4,075,710
35,282,330


39,358,040


5,242,000
368,068,300


373,310,300


15,034,200
465,686,600


480,720,800
Methane
Drained
m3









13,083,000


13,083,000



3,048,600


3,048,600



4,722,000


4,722,000










48,496,100


48,496,100



152,959,600


152,959,600
Methane
Total
m3

4,994,400

2,671,890

7,666,290


16,240,900
92,551,100
1 ,893,770

110,685,770


16,618,500
33,179,800


49,798,300


19,173,500
161,279,700
967,050

181,420,250


4,075,710
35,282,330


39,358,040


5,242,000
416,564,400


421 ,806,400


15,034,200
618,646,200


633,680,400
Drained &
Utilized
m3









5,629,000


5,629,000
























13,907,600


13,907,600



101,774,300


101,774,300
Drained &
Vented
m3









7,454,000


7,454,000



3,048,600


3,048,600



4,722,000


4,722,000










34,588,500


34,588,500



51,185,300


51,185,300
Total
Emitted
m3

4,994,400

2,671,890

7,666,290


16,240,900
86,922,100
1 ,893,770

105,056,770


16,618,500
33,179,800


49,798,300


19,173,500
161,279,700
967,050

181,420,250


4,075,710
35,282,330


39,358,040


5,242,000
402,656,800


407,898,800


15,034,200
516,871,900


531,906,100
Coal
Output
t

2,369,100

1 ,266,300

3,635,400


2,836,500
6,301,300
330,500

9,468,300


5,342,600
892,600


6,235,200


6,252,300
6,243,600
315,000

12,810,900


785,300
1 ,795,700


2,581,000


689,600
1 1 ,223,400


11,913,000


3,983,700
12,808,300


16,792,000
Absolute
Emission
m /min

9.50

5.08

14.59


30.90
176.09
3.60

210.59


31.62
63.13


94.75


36.48
306.85
1.84

345.17


7.75
67.13


74.88


9.97
792.55


802.52


28.60
1,177.03


1 ,205.63
Relative
Emission
m3/t

2.11

2.11

2.11


5.73
14.69
5.73

11.69


3.11
37.17


7.99


3.07
25.83
3.07

14.16


5.19
19.65


15.25


7.60
37.12


35.41


3.77
48.30


37.74

-------
TABLE C-2. 1994 METHANE EMISSIONS FROM CHINA'S KEY STATE-RUN COAL MINES, BY PROVINCE
Hunan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Henan Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Shandong Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Jiangxi Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Anhui Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Zhejiang Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Jiangsu Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

19
31


50


17
29
1

47


54
3


57


8
15


23


7
17


24



11


11


20
2


22


3


3



18


18










8


8



5


5















9,763,100
100,771,600


110,534,700


95,671,700
291,101,800
4,159,430

390,932,930


100,557,100
32,585,400


133,142,500


10,307,100
100,033,300


110,340,400


30,603,500
293,657,100


324,260,600



28,013,700


28,013,700


51,637,400
12,095,700


63,733,100


2,425,200


2,425,200



23,532,500


23,532,500










11,514,500


11,514,500



9,820,700


9,820,700















9,763,100
103,196,800


112,959,900


95,671,700
314,634,300
4,159,430

414,465,430


100,557,100
32,585,400


133,142,500


10,307,100
111,547,800


121,854,900


30,603,500
303,477,800


334,081,300



28,013,700


28,013,700


51,637,400
12,095,700


63,733,100


1,938,200


1,938,200



13,786,600


13,786,600










8,000,000


8,000,000



7,418,300


7,418,300
















487,000


487,000



9,745,900


9,745,900










3,514,500


3,514,500



2,402,400


2,402,400















9,763,100
101,258,600


111,021,700


95,671,700
300,847,700
4,159,430

400,678,830


100,557,100
32,585,400


133,142,500


10,307,100
103,547,800


113,854,900


30,603,500
296,059,500


326,663,000



28,013,700


28,013,700


51,637,400
12,095,700


63,733,100

2,969,400
3,338,100


6,307,500


19,550,500
19,405,400
850,600

39,806,500


37,877,000
1,816,600


39,693,600


3,050,600
3,811,400


6,862,000


4,824,700
22,377,400


27,202,100



906,700


906,700


15,744,100
1,096,400


16,840,500

18.58
196.34


214.92


182.02
598.62
7.91

788.55


191.32
62.00


253.32


19.61
212.23


231.84


58.23
577.39


635.62



53.30


53.30


98.24
23.01


121.25

3.29
30.91


17.91


4.89
16.21
4.89

10.41


2.65
17.94


3.35


3.38
29.27


17.76


6.34
13.56


12.28



30.90


30.90


3.28
11.03


3.78

-------
TABLE C-2. 1994 METHANE EMISSIONS FROM CHINA'S KEY STATE-RUN COAL MINES, BY PROVINCE


Heilongjiang Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Jilin Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Liaoning Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Nei Mongol Autonomous Region
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Shanxi Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

Hebei Province
Low Methane Mines
High Methane and Outburst Mines
Open-Pits

Totals

TOTAL - 20 PROVINCES
TOTAL HIGH GAS MINES
TOTAL RECOVERY SYSTEMS



24
32
1

57


24
18


42


10
30
3

43


26
4
5

35


39
24
1

64


36
15


51


318





4


4



1


1



15


15



?


0



20


20



9


9



131



39,904,100
436,600,600
1,248,740

477,753,440


13,833,600
111,365,400


125,199,000


17,316,200
393,823,400
37,950,150

449,089,750


30,137,890
71,034,500
18,883,200

120,055,590


244,526,800
680,270,700
38,328,650

963,126,150


72,981,000
176,982,000


249,963,000

4768251010






13,467,300


13,467,300



1,556,000


1,556,000



142,171,000


142,171,000






0



115,237,200


115,237,200



19,250,500


19,250,500

561284200





39,904,100
450,067,900
1,248,740

491,220,740


13,833,600
112,921,400


126,755,000


17,316,200
535,994,400
37,950,150

591,260,750


30,137,890
71,034,500
18,883,200

120,055,590


244,526,800
795,507,900
38,328,650

1,078,363,350


72,981,000
196,232,500


269,213,500

5329535210




















126,716,200


126,716,200



0


0



101,854,400


101,854,400



14,171,700


14,171,700

395196300






13,467,300


13,467,300



1,556,000


1,556,000



15,454,800


15,454,800






0



13,382,800


13,382,800



5,078,800


5,078,800

166087900





39,904,100
450,067,900
1,248,740

491,220,740


13,833,600
112,921,400


126,755,000


17,316,200
409,278,200
37,950,150

464,544,550


30,137,890
71,034,500
18,883,200

120,055,590


244,526,800
693,653,500
38,328,650

976,508,950


72,981,000
182,060,800


255,041,800

4934338910





23,543,400
15,242,100
738,900

39,524,400


4,645,400
5,903,600


10,549,000


3,512,800
23,791,300
7,697,800

35,001,900


13,429,600
3,654,300
8,430,000

25,513,900


66,943,200
37,474,000
10,501,000

114,918,200


29,741,300
12,368,000


42,109,300

468671400





75.92
856.29
2.38

934.59


26.32
214.84


241.16


32.95
1,019.78
72.20

1,124.93


57.34
135.15
35.93

228.42


465.23
1,513.52
72.92

2,051.67


138.85
373.35


512.20

10140





1.69
29.53
1.69

12.43


2.98
19.13


12.02


4.93
22.53
4.93

16.89


2.24
19.44
2.24

4.71


3.65
21.23
3.65

9.38


2.45
15.87


6.39





-------
TABLE C-3. 1993 SPECIFIC EMISSIONS OF LOCAL MINING AREAS THAT
          ARE CONSIDERED BY MOCI TO BE HIGH-GAS
REGION LOCAL MINING AREA
PROVINCE
AVERAGE SPECIFIC
EMISSIONS (m3/ton)
NORTH
Lingshan
Hebei
23.81
SOUTH
Tongxin
Lewei
Yarong
Longmenshan
Shangrao
Gannon
Wutong
Xuanjing
Ningzhen
Yilil
Puxi
Guizhou
Sichuan
Sichuan
Sichuan
Fujian
Jiangxi
Anhui
Anhui
Jiangsu
Jiangsu
Hubei
50.20
27.72
28.06
23.46
14.00
19.86
14.95
51.73
12.81
16.63
15.71
MOCI does not consider the coal mines in these LMA's to be key state-run mines,
and therefore emissions from these mines are not included in Tables C-1 and C-2

-------
TABLE C-4. HIGH GAS CMAs IN CHINA AND THEIR AVERAGE SPECIFIC EMISSIONS
REGION

Northeast
Northeast
Northeast
Northeast
PROVINCE

Northeast
Northeast
Northeast
Northeast
PROVINCE

Northeast
Northeast
Northeast
Northeast
Northeast
Northeast
Northeast
PROVINCE


North
North
North

North
North

PROVINCE

North
PROVINCE

North
North
PROVINCE

North

North

PROVINCE

North
North
North
North
North
PROVINCE
PROVINCE

Heilongjiang
Heilongjiang
Heilongjiang
Heilongjiang
TOTAL

Jilin
Jilin
Jilin
Jilin
TOTAL

Liaoning
Liaoning
Liaoning
Liaoning
Liaoning
Liaoning
Liaoning
TOTAL


Hebei
Hebei
Hebei

Hebei
Hebei

TOTAL

Shandong
TOTAL

Jiangsu
Jiangsu
TOTAL

Anhui

Anhui

TOTAL

Henan
Henan
Henan
Henan
Henan
TOTAL
COAL BASIN

Sanjiang-Mulinghe
Sanjiang-Mulinghe
Sanjiang-Mulinghe
Sanjiang-Mulinghe


Jiaohe-Liaoyuan
Yilin-Yitong
Yanbian
Hongyang-Hunjiang


Nanpiao
Hongyang-Hunjiang
Fuxin
Donhua-Fushun
Donhua-Fushun
Songliao
Nanpiao



Taixing-Shandou
Chengde
Jingtang

Jingtang
Xuanwei



Guangfang


Lunan
Xuhuai


Huainan

Xuhuai



Qinshui
Taixing-Shandou
Yuxi
Yuxi
Yuxi

CMA

Jixi
Shuangyanshan
Qitaihe
Hegang


Liaoyuan
Shulun
Huichun
Tonghua


Nanpiao
Yantai
Fuxin
Shenyang
Fushun
Tiefa
Beipiao



Fengfeng
Xinglong
Kailuan

Babaoshan
Xiahuayuan



Zibo


Yangchang
Xuzhou


Huainan

Huiabei



Jiaozuo
Hebi
Pingdingshan
Yima
Xinmi

# MINES
(94FUSHUN)




32





18








30









15


3



2





17






29
# MINES
(1991 JP)
15
9
6
2
32

10
5
3
10
28

1
2
13
8
3
5
4
35


5
4
1

2
3

15

2
2

2
2
4

7

6

13

8
7
4
3
2
24
1993 COAL
PRODUCTION (Tons)
11,644,200
10,015,500
10,060,100
13,130,700
72,270,000

3,979,000
3,803,800
1,610,100
3,809,300
24,240,000

1,954,200
NA
12,698,700
4,410,500
8,579,400
1,024,100
2,177,600
52,590,000


10,370,000
1,050,000
17,604,800

290,000
630,000

63,400,000

5,061,700
68,030,000

609,400
13,103,000
25,060,000

11,498,500

14,232,100

36,130,000

3,799,600
4,671,500
17,147,800
8,609,600
NA
92,790,000
SPECIFIC EMISISONS (m3/ton)
AVERAGE
29.84
15.77
19.18
16.17
29.53

16.36
22.63
15.52
18.25
19.13

12.29
22.35
29.08
26.18
31.58
12.73
24.57
22.53


21.28
14.65
12.00
15.82
21.77
28.00

15.87

14.66
17.94

13.97
13.16
11.03

12.00
18.41
12.00
11.45
13.56

19.97
15.73
NA
10.84
8.79
16.21
SOURCE
JP
JP
JP
JP


JP
JP
JP
JP, CM


JP
JP
JP
JP
JP
JP
JP, CM



JP
JP, CM
CM
JP
CM
JP



JP


JP
JP


CM
JP
CM
JP


JP
JP

JP
JP

1994 TOTAL METHANE (103m3):
LIBERATED




450,070





112,920








535,990









196,230


32,590



12,100





303,480






314,630
DRAINED




13,470





1,560








142,170









19,250


0



0





9,820






23,530

-------
TABLE C-4. HIGH GAS CMAs IN CHINA AND THEIR AVERAGE SPECIFIC EMISSIONS

North
North
North
North
North
North
PROVINCE

North
North
North
PROVINCE

North
PROVINCE

North
North
PROVINCE


South
PROVINCE

South
South
South
South
PROVINCE

South
South
South
PROVINCE

South
South
South
South
South
South
South
South
South
PROVINCE

South
South
South
PROVINCE

Shanxi
Shanxi
Shanxi
Shanxi
Shanxi
Shanxi
TOTAL

Shaanxi
Shaanxi
Shaanxi
TOTAL

Inner Mongolia
TOTAL

Ningxia
Ningxia
TOTAL


Zheijiang
TOTAL

Jiangxi
Jiangxi
Jiangxi
Jiangxi
TOTAL

Hunan
Hunan
Hunan
TOTAL

Sichuan
Sichuan
Sichuan
Sichuan
Sichuan
Sichuan
Sichuan
Sichuan
Sichuan
TOTAL

Guizhou
Guizhou
Guizhou
TOTAL

Qinshui
Daning
Daning
Qinshui
Qinshui
Qinshui


Ordos
Jinshaan
Ordos


Daqingshan


Zhuohe
Zhuohe



Suzhe-Wanbian


Pingdong
Pingdong
Jiyou
Pingdong


Lianshao
Chenzi
Chenzi


Chuannon-Qianbei
Chuannon-Qianbei
Chuannon-Qianbei
Chuannon-Qianbei
Huayingshan-Yongrong
Huayingshan-Yongrong
Huayingshan-Yongrong
Dukou-Chuxiong
Guangwang


Liupanshui
Liupanshui
Liupanshui


Yangquan
Datong
Xuangang
Xishan
Yinying Mine
Jincheng


Tongchuan
Hancheng
Cuijiagou


Baotou


Shitanjing
Shizuishan



Changguang


Fencheng
Yinggangling
Pingxiang
Leping


Lianshao
Baisha
Zixing


Furong
Nantong
Songzao
Zhonglianshan
Yongrong
Tianfu
Huayingshan
Dukou *
Guangwang


Liuzhi
Shuicheng
Panjiang








24




10


4



6



11





15




31










43




19

9
4
3
2

1
19

3
3
2
8

6
6

3
1
4


9
9

5
5
3
?
13

7
4
3
14

7
7
5
2
7
5
?
1
1
35

7
7
5
19

10,476,900
31,754,600
2,062,100
14,127,700
1 ,203,000
10,320,600
306,560,000

4,721,600
3,462,800
863,100
33,630,000

1 ,904,500
55,140,000

6,005,800
2,560,800
13,720,000


1,027,600
1,380,000

2,000,300
505,300
2,741,400
1,082,900
21,040,000

2,360,100
1 ,676,800
2,142,400
40,750,000

2,394,700
2,208,600
2,696,400
613,800
1 ,501 ,800
1 ,345,900
669,800
NA
1,667,200
79,350,000

1,454,100
4,122,200
5,014,000
45,290,000

25.95
21.42
11.81
12.35
NA
19.00
21.23

17.08
16.48
10.32
25.83

45.50
19.44

12.48
14.27
14.69


27.64
30.90

28.55
37.86
30.62
18.86
29.27

37.88
23.20
22.04
30.91

26.72
36.83
47.99
58.38
37.65
50.40
26.07
10.78
17.04
48.30

51.31
33.74
20.42
37.12

JP, CM
JP
JP
JP

CM


JP
CM, JP
JP


JP, CM


CM, JP
JP



JP


JP, CM
JP
JP



JP, CM
JP, CM
JP


JP
JP
JP
JP
JP
JP
CM
JP
JP


JP
JP
JP








795,510




161,280


71,030



92,550



28,010





111,550




103,200










618,650




416,560







115,240




4,720


0



13,080



0





11,510




2,430










152,960




48,500

-------
TABLE C-4. HIGH GAS CMAs IN CHINA AND THEIR AVERAGE SPECIFIC EMISSIONS

South
PROVINCE

South
South
PROVINCE

South
South
South
PROVINCE

Northwest
Northwest
PROVINCE

Northwest
Northwest
Northwest
Northwest
Northwest
PROVINCE


Yunnan
TOTAL

Guangxi
Guangxi
TOTAL

Guangdong
Guangdong
Guangdong
TOTAL

Gansu
Gansu
TOTAL

Xinjiang
Xinjiang
Xinjiang
Xinjiang
Xinjiang
TOTAL

GRAND TOTAL




Nanning
Guizhong


Yuebei
Yuebei
Guangzhou


Zhongqilian
Jingyuan-Jingtai


S. Junggar Basin
Talimu Basin
Talimu Basin
Talimu Basin
Chaidamu Basin







Nanning
Hongmao


Meitian
Quren
Maoming


Yaoji
Jingyuan


Uramqi
Guala Mine
Tiema Mine
Baojishan Mine
Lucaoshan Mine





5



NA




NA



4





0
0

318

?


?
?


?
?
?


1
1
2








281


24,020,000

226,200
810,100
11,960,000

920,400
1 ,084,200
118,600
9,510,000

2,718,100
3,350,800
18,060,000

2,166,600
NA
NA
NA
NA
23,920,000




19.65

19.69
24.48
NA

41.83
16.33
11.72
NA

14.49
11.25
37.17

16.00
15.24
22.56
NA
27.25







CM
CM


CM
CM
CM


JP
JP


CM
CM
CM
CM
CM





35,280



NA




NA



33,180






NA

4,424,810


0



NA




NA



3,050






0

561,290
There are 1 2 local mine areas (LMAs) that do not appear on this table, which are considered by MOCI to be high gas mines. They are listed separately in Table C-3 (Appendix C) of this report.
NOTE: Emissions data for CMAs in Guangxi and Guangdong Provinces from CM, 1995; No total emissions data are available for these provinces
Average specific emissions from JP data calculated using arithmatic average of all high gas mines within a given CMA







-------
              APPENDIX D

PROVISIONAL REGULATIONS AND RULES FOR THE
     MANAGEMENT OF EXPLORATION AND
        DEVELOPMENT OF METHANE

-------
                  Provisional  Regulation and  Rules
           For  the  Management  of  Exploration and
                 Development  of Coalbed Methane
      Editor; According to " La-w of Mineral
 Resources in tht Peoples Republic of China" and
 Reply from  the  State Planning  Commission on
 management  of  exploration and  development of
 coalbed methane. the  Ministry of Coal  Industry
 formulated and issued the " Provisional Regulation
 and Rules for the Management of Exploration and
 Development of Coalbed Methane"  in  April, 1994.
 Chapter 1   General Principle

     Article  I   This Regulation is formulated in
 accordance with the * Law of Mineral Resources in
 the  People's  Republic of  China ™ and  relevant
 regulations issued by the State Council» with an
 objective to  maintaining rational development and
 utilization   of  coaibed    methane   resources,
 strengthening  the management of exploration and
 development  of  coalbed methane  resources  and
 ensuring that  the exploration, planning, design
 and mining operation of coal resources will not be
 affected by the exploration and development of th«
 eoalbed methane,
    Article  2    Coalbed methane is  a kind of
 resource associated and co—generated with coal in
 the form of gas. which is an excellent clean energy
 and raw material for chemical industry. The state
 enjoys  the  ownership  of  all  coalbed  methane
 resources  and eccourages  the  exploration  and
 development of coalbed methane resources,
    Article 3   Agreement from the legal persons
 of the related coal mine enterprises and approval by
 the Ministry of Coal Industry  must be obtained
 before the  exploration  and development  of the
 coalbed methane  resource  in  mining  areas  of
 production   or  under  construction.   For  the
 exploration and development of coalbed methane in
 mining areas  under state  plans, the Ministry of
Coal Industry  should be solicited  for advice  and
 opinions.
    Article 4   The state shall exercise the right
 to make unified planning for :he exploration  and
development  of coaibed  methane  and  while  the
management  work shall be performed at different
levels.
    The Ministry of Coal Industry  shall supervise
and manage  the exploration and development of
coalbed  methane according  to  the principles of
comprehensive  exploration  and  development and
 reasonable distribution in conjunction with unified
 pianning,     comprehensive        exploration,
 comprehensive evaluation of coal resources.
     Departments  in charge  of coal industry  work
 in    provinces,    autonomous    regions-   aod
 municipalities under the direct  jurisdiction of the
 central   government   shall   be  responsible  for
 formulating and Implementing the exploration and
 development planning of coalbed methane in the
 respective  area and  shall exercise the  right to
 supervise  and  manage the   exploration   and
 development of coalbed methane ia accordance with
 this  Regulation.
     Article 5   The Ministry of Coal Industry shall
 perform  the   following  responsibilities  in  the
 exploration and development of coalbed methane:
     1. Formulating national plan of  exploration
 and development of coalfaed methane j
     2. Reviewing and approving coalbed  mtthane
 exploration plans;
     3. Reviewing and approving coaibed  methane
 development   projects  and  issuing  production
 license for coalbed methane development?
     4.  Supervising,  inspecting  and  managing
 exploration,   development  and  production  of
 eoalbed methane i
     5-  Coordinating  the relationships   between
 exploration and development of  eoalhed  methane
 and the exploration and mining of coal,
     Article  6   Any disputes in relation to the
 exploration and development of coalfaed  methane
 and exploration and development of coal  shall be
 settled by the Ministry of Coal Industry  through
 consultation with  the departments concerned and  /
 or with the  people's governments of provinces*
 autonomous regions and municipalities under the
 direct jurisdiction  of  the  central government.  If
 such consultation fails to reach an agreement,  such
 dispute  shall   be  filed   to  the comprehensive
 planning  department under the  State Council for
 final verdict.
    Article  7   The projec: proposal»  feasibility
 study reports  and preliminary designs   for  the
exploration and development of coalbed  methane
shalt be reviewed and approved by the departments
in charge  of  coal  industry in the  provinces,
autonomous  regions and  municipalities under the
central government before   submitting  to  the
Ministry of Coal Industry for review and approval.
    Article 8   The State encourages introduction
  48    CHINA COALBED METHANE NO,  1 MAY 1995
                                                                                          D-1

-------
of foreign funds and advanced foreign technology
to explore and develop coaSbed methane,
     All   projects   For   the   exploration   and
development of coaibed methane with foreign funds
and  foreign and overseas advanced technology shall
be reviewed and approved by the Ministry of Coal
Industry whose responsibilities shall include;
     1.   Approving  and  defining  the  area  for
oversea* cooperation,  delineating blocks for co —
operation,  defining  forms of co — operation and
approving the master planning for the development
of coaibed methane with foreign input,
     2. Sponsoring negotiations between domestic
enterprises and  foreign  enterprises,  signing and
implementing  letters of intent and contracts  for
joint exploration  and  development   of   coaibed
methane.
     3, Within the areas assigned for co—operatson
with  foreign   partners,   no  enterprises    or
organizations  shall   be   allowed   to  engage  in
activities  for  exploration  and  development  of
coaibed  methane  or sign economic  co-operation
agreements   with   foreign  enterprises   for   "he
exploration and development of coaibed methane in
such areas  unless   special   approval  has  been
obtained from the  Ministry of Coal  Industry.
     Article 9   The  state encourages and  fully
supports   positive    introduction   of    modern
development   technologies  and  equipment  and
intensified scientific  research for  coaibed  methane
development   by   relying  on   scientific   and
technological progress for continues improvement
of she development level,
Chapter 2   Coaibed Methane Exploration

     Article  10   The comprehensive  exploration
evaluation "work for coaibed methane resources in
mining  areas,  of  which  master  feasibility study
reports» master planning and  overall development
plan have already  been approved by the planning
organizations under  the  State Council  and by  the
Ministry of Coal Industry and in the key national
mining  areas  where pre-inv«mea± studies  are
under way shall be implemented after the. approval
by  the  Ministry   of   Coal  Industry  and  no
registration for th*t exploration of coaibed methane
la these areas shall be processed,
    The department in charge of coal  industry in
each province, autonomous region and municipality
under  the  direct  jurisdiction   of  the   central
government shall have the power to approve  the
exploration of eoalbed methane in the local mining
areas and shall file  such approval to the Ministry of
Coal Industry.
    Article  II    All  the information  for  the
exploration of coaibed methane shall be submitted
to the Ministry of  Coal Industry.  The  Ministry of
Coal Industry shall review and approve the findings
of geological exploration of coaibed methane.
     Article 12   For the additional exploration of
coaibed methane in mining areas or within the coal
properties, the extent of coaibed methane reserves
with content of over 8 cubic meters of methane per
ton of coal and  the  location  of coaibed methajie
should be cleariy defined and in  each coal property
a? least one borehole should be selected for in—situ
measurements  of  permeability,  strata   stress,
temperature at the bottom, of borehole and in coal
seams as well as other parameters in order to make
evaluation of coaibed methane reserves which shall
be submitted.
     Article 13   In any  boreholes where coaibed
methane outburst is encountered, such borehole
should  be regarded  as exploration   wells  where
regular   measurements   of    pressure t   flow,
temperature and other parameters  should be taken
and  analysis and  assays  should  be  made  to
determine  the  composition  and  contents  which
shall be used as :he basis for evaluation of coaibed
methane reserves.  In the event of such matters t
the departments in charge of coal industry  in  the
related   provinces,   autonomous   regions   and
municipalities under the central government should
be notified.
    Article 14   Trial extraction options must be
prepared before trial extraction of coaibed methane
in any exploration wells is conducted in  the course
of geological exploration.  Such  trial  extraction
should not exceed half a year. The option and time
— frame  for  such  trial  extraction  should  be
approved  by the  department in  charge  of  coal
industry ia  the respective provinces, autonomous
regions  and  municipalities   under   the  central
government.
Chapter 3   Coaibed Methane Development

     Article 15   AH feasibility study reports  and
general planning of  mining areas and  feasibility
study  reports of coal  mines  prepared  after  the
issuance of this Regulation should  include  the
planning of coaibed methane development*
     Article   IS     The  initiatives  from  local
governments at all levels and enterprises as well as
foreign businessmen  should be brought into  full
play  and  joint  development  and  utilization  of
coaibed methane should be encouraged.
     Article  17   For coaibed methane production,
license  of  eoalbed  methaae  development   and
production must be  obtained. The Ministry of Coal
Industry shall  formulate a separate management
rules for coaibed methane production license.
     For the  development  and  production   of
coaibed methane in the area of state—owned  key
coal  mines, coaibed methane production license  can
                                         CHINA CO ALB ED METHANE NO.  1 MAY 1995
                                                                                                  D-2

-------
 he  issued only by the Ministry of Coal  Industry
 with the agreement from the said mines and with
 the peliminary review by the  departmnts  in  the
 respective  provinces T  autonomous   regions  and
 municipalities under the central government.
     For  the  development:  and  production   of
 coalbed methane  in the areas of local coal mines,
 coaibed methane  production license shall be issued
 upon  the  agreement by the  said local  mines and
 approval  by  the  department  in  charge of  coal
 industry in  provinces,  autonomous  regions  and
 municipalities under the central government.  Such
 issuance should be  filed  to  the Ministry of Coal
 Industry.
     Article 18    In the  development of coalbed
 methane  on  coalfields,   continues  and  stable
 development  policy  should be followed under the
 guidance of cost effectiveness with less input and
 more output-
     The development  and  utilisation of coalbed
 methane must be  preceded by clear delineation  of
 resources  and assured source of users of coalbed
 methane T  which shall  be  planned and arranged  in
 the   scientific  procedure of  coalbed  methane
 production for the maximized utilisation of coalbed
 methane.   Advanced  and   effective  technology
 should be employed to maximize coalbed methane
 output and production  period, to achieve high rate
 of extraction and  to yield the optimum techno —
 economic benefits.
     Article  19   The  design and development of
 coal bee!  methane   projects must be   fit  into  the
 design and production requirements of coal  mines
 without  affecting  normal  mining operation in coal
 mines due to extraction, of coalbed methane.
     In order  to  improve the  design of  coalbed
 methane  development  projects, all   the  designs
 submitted  to  coal  industry authorities for review
 and  approval  should  be evaluated   by relevant
 technical department,
     Article  20     The  implementation  of  the
 construction  projects  for the  development  of
 coalbed  methane must be based on the approved
 design   to   achieve   unified   organization  and
 completion of the  projects and associated facilities
 within the shortest possible period.  For coal mines
 where methane is  drained from the  underground
 and   utilized,   the  existing  methane   drainage
 facilities should be  taken into consideration  for
 reasonable  utilization  of  these  facilities  when
 preparing designs  of methane recovery from  the
 surface.
     Article 21     Advanced  and  highly efficient
 construction techniques should  be employed  to
 achieve complete project construction including gas
extraction,   gas   supply,   gas   cleaning   and
 utilization. The project construction shall conform
 to  the  relevant   regulations  o(  environmental
 protection.
     Article 22  Upon the  completion  of all project
 items of coalbed methane development, acceptance
 inspection  shall  be  performed  according  to the
 relevant project quality standards. The designed
 target  should  be  achieved  within  the shortest
 possible time after  the  gas  wells are  put into
 production.
      Article 23    Coalbed  methane  research and
 monitoring  work  should be  strengthened  in. the
 course of coalbed methane development in order to
 timely ascertain the  behavior  of coalbed methane
 and  to make adjustment in  different mining levels
 so as to ensure smooth replacement of gas weils for
 stable and consistent  gas supply for a long period.
 Chapter 4   Development     of
 Methane and Development of Coal
Coalbed
     Article 24   The exploration and development
 of coalbed  methane should be subordinated to the
 development and production of coal.
     Article 25   Coal production enterprises shall
 not be held liable for losses suffered by  coalbed
 methane  exploration and development enterprises
 due to surface subsidence or due to other  reasons
 as a result of coal development.
     Article 26   If the original design should be
 modified  by coal  production enterprises  due to
 changes of geological  structure  and variation of
 coal seams. new approval should be obtained from
 the authority which approved the original design.
 If such modification will affect the exploration and
 development  of   coalbed  methane,  the   coal
 production enterprise which made this modification
 should send official notice half a  year in advance to
 the affected  enterprise  of  coalbed  methane
 exploration and development  in order to allow the
 affected  party  for'  emergency   measures.  Coal
 production enterprises shall not  be held liable for
 any  economic   losses   as  a  result  of  such
 modification.
     Article 2?   Coalbed methane development and
 production  enterprises   should   make  economic
 compensation to coal production enterprises if the
 latter suffer economic losses due to exploration and
 development of coalbed methane.
     Article  28     Coal  enterprises and  coalbed
 methane  enterprises  in  the  same  region  should
 establish a close co-operation relationship,  adhere
 to  the principle of  mutual  benefit  and  mutual
 understanding and correctly  handle  the  relation
 between  coai   mining  and  coalbed   methane
extraction. They should exchange developent plans
and necessary drawings.
    Article  29     All   coalbed  methane  wells
 (including exploration  test wells and production
wells)  must be cemented or sealed according to
relevant  regulations without  leaving any  hidden
danger to the coal mining operation.  No steel tubes
        CHINA COALBED METHANE NO.  1 MAY 1995
                                                                                                 D-3

-------
or any other objects which may affect coal mining
operation should be left in coal seams.  For those
objects  which  cannot be  removed,  their  precise
spatial locations must be provided to coal mining
departments.



Chapter  5   Supplementary Articles

    Article  30   The departments in charge of coal
industry in  provinces,  autonomous regions and
municipalities under the direct jurisdiction of  the
central government shall in accordance with this
Regulation  and  the  actual  conditions  in  the
respective   locality   formulate   implementation
procedures which shall be filed to the Ministry of
Coal Industry.
     Article 31    All  enterprises  which started
coaibed  methane exploration,  development and
production activities before the  issuance of this
Regulation   shall   complete    registration   and
necessary  formalities  in  accordance  with  this
Regulation within one year.
    Article  32     This  Regulation   shall  be
interpreted by the Ministry of Coal Industry.
    Article 33   This Regulation shall be effective
upon the date of issuance.
                                        CHINA COALBED METHANE NO,  1 MAY 1995    51
                                                                                                  D-4

-------
     APPENDIX E




FOR MORE INFORMATION

-------
FOR MORE INFORMATION...
For more information on coalbed methane recovery experiences, project potential, or program activities
and accomplishments, contact:

      Coalbed Methane Program Manager

      US Environmental Protection Agency
      Mail Code 6202J
      Atmospheric Pollution Prevention Division
      401 M Street, SW
      Washington, DC  20460

      Telephone:   202 233-9468
      Facsimile:   202 233-9569
      Internet:     schultz.karl@epamail.epa.gov
      Automated Faxback:  Call 202 233-9659 and enter #1740

 Selected list of EPA Coalbed Methane Outreach Reports:

•  USEPA (U.S. Environmental Protection Agency).  Finance Opportunities for Coal Mine Methane
   Projects: A Guide to Federal Assistance. Office of Air and Radiation (6202J). Washington, D.C.
   August 1995.

•  USEPA (U.S. Environmental Protection Agency).  Finance Opportunities for Coal Mine Methane
   Projects: A Guide for Vest Virginia. Office of Air and Radiation (6202J). Washington, D.C.
   August 1995.

•  USEPA (U.S. Environmental Protection Agency).  Finance Opportunities for Coal Mine Methane
   Projects: A Guide for Southwestern Pennsylvania.  Office of Air and Radiation (6202J).
   Washington, D.C.  EPA-430-R-95-008. June 1995.

•  USEPA (U.S. Environmental Protection Agency).  Economic Assessment of the Potential for
   Profitable Use of Coal Mine Methane: Case Studies of Three Hypothetical U.S. Mines. Office
   of Air and Radiation (6202J).  Washington, D.C.  EPA-430-R-95-006.  May 1995.

•  USEPA (U.S. Environmental Protection Agency).  Identifying Opportunities for Methane
   Recovery at U.S. Coal Mines: Draft Profiles of Selected Gassy Underground Coal Mines.
   Office of Air and Radiation (6202J). Washington, D.C.  EPA-430-R-94-012.  September 1994.

•  USEPA (U.S. Environmental Protection Agency).  The Environmental and Economic Benefits of
   Coalbed Methane  Development in the Appalachian Region.  Office of Air and Radiation (6202J).
   Washington, D.C.  EPA-430-R-94-007. April 1994.

•  USEPA (U.S. Environmental Protection Agency).  Opportunities to Reduce Anthropogenic
   Methane Emissions in the United States. Report to Congress.  Office of Air and Radiation
   (6202J). Washington, D.C.  EPA-430-R-93-012. October 1993.
                                                                                     E-1

-------
•  USEPA (U.S. Environmental Protection Agency). Anthropogenic Methane Emissions in the
   United States:  Estimates for 1990. Report to Congress. Office of Air and Radiation (6202J).
   Washington, D.C. EPA-430-R-93-003. April 1993.

•  USEPA (U.S. Environmental Protection Agency). Options for Reducing Methane Internationally -
   Volume 1: Technological Options for Reducing Methane Emissions. Washington, D.C. EPA
   430-4-93-006 A. July 1993.

•  USEPA (U.S. Environmental Protection Agency). Options for Reducing Methane Internationally -
   Volume 2: International Opportunities for Reducing Methane Emissions. Washington, D.C.
   EPA 430-R-93-006 B. October 1993.

•  USEPA (U.S. Environmental Protection Agency). A Guide for Methane Mitigation Projects: Gas to
   Energy at Coal Mines.  Draft. February 1996.
                                                                                    E-2

-------
E-3

-------