69537 A Strategy for Coal Bed Methane (CBM) and Coal Mine Methane (CMM) Development and Utilization in China Formal Report 326/07 A Strategy for Coal Bed Methane (CBM) and Coal Mine Methane (CMM) Development and Utilization in China Formal Report 326/07 Energy Sector Management Assistance Program Energy Sector Management Assistance Program Purpose The Energy Sector Management Assistance Program (ESMAP) is a global technical assistance partnership administered by the World Bank since 1983 and sponsored by bilateral donors. ESMAP's mission is to promote the role of energy in poverty reduction and economic growth in an environmentally responsible manner. Its work applies to low-income, emerging, and transition economies and contributes to the achievement of internationally agreed development goals through knowledge products such as free technical assistance; specific studies; advisory services; pilot projects; knowledge generation and dissemination; training, workshops, and seminars; conferences and round-tables; and publications. The Program focuses on four key thematic areas: energy security, renewable energy, energy poverty, and market efficiency and governance. Governance and Operations ESMAP is governed by a Consultative Group (CG) composed of representatives of the World Bank, other donors, and development experts from regions that benefit from ESMAP assistance. The ESMAP CG is chaired by a World Bank Vice-President and advised by a Technical Advisory Group of independent energy experts that reviews the Program's strategic agenda, work plan, and achievements. ESMAP relies on a cadre of engineers, energy planners, and economists from the World Bank, and from the energy and development community at large, to conduct its activities. Funding ESMAP is a knowledge partnership supported by the World Bank and official donors from Belgium, Canada, Denmark, Finland, France, Germany, Iceland, the Netherlands, Norway, Sweden, Switzerland, United Kingdom, United Nations Foundation, and the United States Department of State. It has also enjoyed the support of private donors as well as in-kind support from a number of partners in the energy and development community. Further Information Please visit www.esmap.org or contact ESMAP via email (esmap@worldbank.org) or mail at: ESMAP c/o Energy, Transport and Water Department The World Bank Group 1818 H Street, NW Washington, D.C. 20433, U.S.A. Tel.: 202.458.2321 Fax: 202.522.3018 Formal Report 326/07 A Strategy for Coal Bed Methane (CBM) and Coal Mine Methane (CMM) Development and Utilization in China Energy Sector Management Assistance Program (ESMAP) Copyright © 2007 The International Bank for Reconstruction and Development/WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Produced in India First printing July 2007 ESMAP Reports are published to communicate the results of ESMAP’s work to the development community with the least possible delay. The typescript of the paper therefore has not been prepared in accordance with the procedures appropriate to formal documents. Some sources cited in this paper may be informal documents that are not readily available. 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Contents Preface .............................................................................................................................. vii Acknowledgments ............................................................................................................... ix Units of Measure ................................................................................................................. xi Conversion Factors ............................................................................................................. xi Acronyms and Abbreviations .............................................................................................. xiii Glossary of Terms .............................................................................................................. xvii Executive Summary ............................................................................................................. xix Introduction .............................................................................................................. xix Government aims and targets ................................................................................... xx Current status of CBM/CMM .................................................................................... xxi CBM/CMM utilization .............................................................................................. xxii Barriers .................................................................................................................. xxiii 1. CBM/CMM Resources and Emissions .............................................................................. 1 CBM Resources .......................................................................................................... 1 CMM resources and emissions ................................................................................... 3 A large contributor to China’s GHG emissions ............................................................ 7 A growing problem .................................................................................................... 7 The problem can be mitigated .................................................................................... 9 2. CBM/CMM Recovery and Utilization .............................................................................. 11 CBM sources ........................................................................................................... 11 VCBM surface extraction in China ............................................................................ 12 CMM extraction in China ......................................................................................... 14 AMM extraction in China ......................................................................................... 15 Utilization of CBM and CMM .................................................................................... 16 Government plans and targets ................................................................................. 19 iii A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA 3. Administrative, Regulatory and Policy Framework ........................................................... 25 Legal framework ...................................................................................................... 25 Administrative framework for CBM and CMM ........................................................... 25 Policy and regulations on CMM drainage in China’s coal mines ................................ 28 Financial and fiscal incentives for CBM/CMM ............................................................ 29 4. Barriers to CBM/CMM Development and Scale-up ......................................................... 33 CBM regulatory regime ............................................................................................ 33 Financial barriers to CMM development .................................................................... 33 Health, safety and environmental barriers ................................................................. 35 Market barriers ........................................................................................................ 37 Technology barriers .................................................................................................. 38 Principal barriers to development of CMM utilization schemes ................................... 41 5. Comparative Experiences of Other Countries ................................................................. 43 CBM and CMM Resource Management .................................................................... 43 Promoting CMM extraction and utilization ................................................................ 46 CBM/CMM extraction, utilization technology and infrastructure ................................. 51 6. Conclusions and Recommendations .............................................................................. 55 Conclusions ............................................................................................................. 55 Recommendations ................................................................................................... 56 Annex I: CMM Extraction from KSOCM in China, (1980-2002) ........................................ 65 Annex II: Comparative Investment Costs US$/t CO2 Equivalent Annual Emission Destruction or Avoidance Capacity ............................................................... 67 Data Used in Calculations ....................................................................... 67 Methane destruction in a CMM Power plant ............................................. 67 CMM destruction by flaring ..................................................................... 67 CMM and CO2 emissions displaced by wind energy ................................. 68 Annex III: CBM/CMM Extraction and Utilization Technology ............................................... 69 CBM Technology Issues ........................................................................... 69 CMM drainage technology status ............................................................ 70 Utilization ............................................................................................... 74 Annex IV: An Overview of Some Major CMM Extraction and Utilization Schemes ................ 75 Jincheng Coal Mining Group (Shanxi province) ......................................... 75 Fushun (Liaoning province) ...................................................................... 75 Hegang (Helongjiang province) ............................................................... 76 Songzao (Chongqing province) ................................................................ 76 Huaibei (Anhui province) ......................................................................... 77 Yangquan (Shanxi province) ..................................................................... 77 Panjiang CMA (Guizhou province) ........................................................... 77 Huainan Coal Mining Group (Anhui province) .......................................... 78 Pingdingshan .......................................................................................... 78 iv CONTENTS Annex V: General Principles of CBM Production-sharing Contracts ................................... 79 Financial Sharing Model of the Standard Contract ........................................ 79 Further Details of the Standard Contract Finance Sharing Model ................... 80 Standard Contract Terms ............................................................................. 81 Annex VI: Preferential Finance and Tax Policies for CMM/CBM ........................................... 83 Policies Encouraging CMM/CBM Development in China ........................... 83 List of Comprehensive Utilization of Resources .......................................... 83 Catalog of the Industries, Products and Technologies Currently Encouraged by the State for Development .......................................... 84 Guidance Catalog of Industries for Foreign Investment ............................. 84 Preferential Policies for Western China Development ................................. 84 Taxation Policies for CBM Exploration and Development Projects ............... 84 Enterprises Income Tax ............................................................................ 85 Value Added Tax, Resource Tax and Royalty .............................................. 87 Tariffs and Other Taxes ............................................................................ 87 Annex VII: Internationally Financed CBM and CMM Projects ............................................... 89 References ........................................................................................................................ 93 v A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Tables Table 1: Summary of Recommended Strategy and Actions ............................................ xxiv Table 1.1: Major Coal-bearing Regions and Associated CBM Resources ............................. 2 Table 1.2: Comparison of CMM Scale between China and the U.S. in 2004 ....................... 4 Table 1.3: Assessment of CMM Extraction and Usability from Gassy Mines in 2004 ............ 4 Table 1.4: CMM Extraction in 2003 by Major Mining Groups ............................................. 6 Table 1.5: CMM Drained and Coal Produced from all KSOCM (1997-2004) ....................... 6 Table 1.6: China’s Estimated GHG Emissions in 2000 ........................................................ 7 Table 1.7: Structure of Energy Consumption in China ........................................................ 8 Table 1.8: CMM Emissions and Projections – Global and China (Mt CO2 equivalent) ........ 10 Table 2.1: Comparison of CBM Sources .......................................................................... 11 Table 2.2: International Cooperation Projects (PSCs signed by CUCBM to 2004/5) ........... 12 Table 2.3: Principal Uses of CBM from Different Sources in China .................................... 16 Table 2.4: Possible Mine-site Uses for CMM in China ....................................................... 17 Table 2.5: Industrial Uses of CBM ................................................................................... 17 Table 2.6: CMM Extraction and Usability Scenarios for Gassy Mines in 2010 .................... 20 Table 2.7: Projected Annual CBM Demand in Shanxi (Based on Shanxi CBM Report, 2005) ......................................................... 22 Table 3.1: Summary of Preferential Policies for CBM Projects ............................................. 30 Table 3.2: Summary of Preferential Policies for CMM Projects ............................................ 31 Table 4.1: Coal Mining Groups with Current or Pending CDM for CMM Projects ............... 35 Table 5.1: Policies Stimulating Utilization of CMM (Adapted from DTI, 2004) ..................... 46 Table 5.2: Improvement in U.S. CMM Drainage and Emissions Reductions ....................... 52 Table A3.1: Survey of Gas Drainage Problems ................................................................... 71 Table A5.1: Royalty Rates for CBM Cooperation Projects in Three Provinces and Regions of Qinghai, Xizang, Xinjiang and Shallow Sea Region ...................... 80 Table A5.2: Royalty Rates for CBM Cooperation Projects in Other Provinces, Autonomous Regions and Cities ................................................................. 81 vi Preface Globally, Coal Bed Methane/Coal Mine Methane development and utilization, and they are a (CBM/CMM) is attracting growing attention priority in China’s 11th Five-Year Energy mainly from the perspective of climate change. Development Plan. Better control and use of However, China has two additional and very CMM is now the cornerstone of the central compelling reasons for addressing the issue – government’s strategy to step up coal mine reducing coal mine fatalities and developing safety. However, the government has yet to cleaner energy resources to improve air quality introduce and implement specific policy in cities. measures and institutional changes to achieve the desirable results. In 2004, coal production in China resulted in the release of an estimated 18 billion cubic This Energy Sector Management Assistance meter (Bm3) Methane (CH4) (equivalent to 271 Program (ESMAP) activity aims at improving and Million Tons (10 6) Mt Carbon Dioxide [CO2]), understanding the status of the CBM/CMM representing 43 percent of global CH 4 investment and development in China as well released by the coal mining industry, and as the governing legal and regulatory accounting for more than a third of China’s framework, identifying the institutional policy emissions of anthropogenic methane. CH4- and technical barriers which need to be related explosions killed some 2,000 coal addressed and suggesting a series of actions miners, whereas it is estimated that more than which the government needs to take to 400,000 Chinese died prematurely because significantly scale up the development and of urban air pollution. Since coal will continue utilization of CBM/CMM. The report is not to meet most of China’s growing energy intended to provide a detailed blueprint. needs, even with an aggressive fuel However, it does provide recommendations, diversification policy and energy efficiency rationales and options for certain institutional efforts, the amount of CMM released by coal and policy choices which will have to be made mines is bound to increase some 2/3 above as well as suggestions for detailed studies to the present level by 2020. implement them. China has realized that Greenhouse Gas (GHG) In publishing this volume, we very much hope it emissions and other air pollutants will cause proves to be useful to the various government unacceptable local, regional and global agencies and institutes in China as well as the environmental problems unless it makes a major international community which is interested in effort to reduce. The government has shown China’s energy and environment, particularly the strong commitment to CBM and CMM CBM/CMM industry. vii Acknowledgments This report presents the results of a study The team is indebted to Mr. Wu Yin, Mr. Wang undertaken by the Energy and Mining Yang and Mr. Zhao Weiguo from the National Development Sector Unit, East Asia and Pacific Development and Reform Commission (NDRC) Region of the World Bank, with financial support for their support and assistance. . from ESMAP The report was primarily prepared by Mr. David Creedy (independent consultant) The team benefited greatly from fruitful and Mr. Jianping Zhao, Energy and Mining discussions with many government officials, Development Sector Unit, East Asian and Pacific particularly from NDRC, the Ministry of Land and Region of the World Bank, with substantial inputs Resources, the Shanxi Provincial Development from Mr. Shenchu Huang and Mr. Wenge Liu of and Reform Commission (PDRC), Shanxi Finance China Coal Information Institute (CCII). Bureau, Jincheng Municipal Government, Shanxi Energy Enterprise Group as well as The team gratefully acknowledges the review and representatives of many mining groups together valuable comments of the four peer reviewers: with individuals from Sino Gas & Energy, BHP Mr. John Strongman, Adviser, Oil, Gas, Mining Billiton, Chevron, Fortune Oil Plc and Clear World and Chemical Department, The World Bank; Energy in the private sector. Mr. Masaki Takahashi, Senior Power Engineer, Energy and Water Department, The World Bank; The following World Bank staff also provided Mr. Ray Pilcher, President, Raven Ridge Resources advice, comments, inputs and support: Incorporated (Inc.); and Ms. Pamela Franklin, Mr. Robert Taylor, Mr. Charles Leva, Ms. Team Leader, Environmental Protection Agency Veronique Bishop, Mr. Bert Hofman and Mr. (EPA), U.S.A . Insightful comments and Chunxiang Zhang. Editorial, publication and suggestions were also provided by Ms. distribution support was provided by Ms. Dominique Lallement, Adviser, Energy and Water Marjorie K. Araya and Ms. Ananda Swaroop Department, The World Bank. from the ESMAP Communications Team. The Team is grateful for the support and guidance An international CBM/CMM forum was extended to this work by the management of organized by CCII on behalf of the State Coal the East Asia and Pacific Region’s Energy and Mine Safety Supervision Administration Mining Sector Development Unit, the China (SCMSSA) of China, The World Bank and Country Program and the World Bank’s EPA, U.S.A. Energy and Water Department. ix Units of Measure Bm3 Billion Cubic Meters (109) Bt Billion Tons C Carbon CH4 Methane C2H6 Ethane C3H8 Propane CH3OH Methanol CO2 Carbon Dioxide DME Di-Methyl Ether Gt Giga Ton (109 Tons) GJ Giga Joules (1012 Joules) GWh Giga Watt (s) Per Hour km Kilometer km2 Square Kilometer Kt Kilo Tonnes (100 Metric Tonnes) ktpa Thousand Tons Per Annum kW Kilo Watt (s) m Meter m3 Cubic Meter m3/t Meters Cubed Per Metric Tonne Mt Million Tons (106) Mtce Million Tons Coal Equivalent Mtpa Million Tons Per Annum MW Mega Watt (s) MWe MW Electricity MWh Mega Watt (s) Per Hour N Nitrogen N2O Nitrous Oxide PJ Peta Joules (1015 Joules) t Ton Tm3 Tera (Trillion) Meters Cubed (1012) Conversion Factors 66.4m3 Methane (NTP) equivalent to 1 ton CO2 C equivalent to CO2 equivalent, multiply by 3.6667. xi Acronyms and Abbreviations AACI Asian American Company Inc. ADB Asian Development Bank AMM Abandoned Mine Methane ARCO Atlantic Richfield Company (petroleum) ASEAN Association of South-East Asian Nations CAIT Climate Analysis Indicators Tool CBM Coal Bed Methane CCERC Clean Coal Engineering & Research Centre CCGA China Coal Geological Administration CCIA China Coal Industry Association CCII China Coal Information Institute* CCRI China Coal Research Institute CDM Clean Development Mechanism CERs Certified Emission Reductions CHP Combined Heat and Power CMM Coal Mine Methane CMOP Coalbed Methane Outreach Program (U.S.) CNCA China National Coal Association CNPC China National Petroleum Corporation CNG Compressed Natural Gas CSIRO Commonwealth Scientific Industrial Research Organisation (Australia) CUCBM China United Coalbed Methane Company Limited DNA Designated National Authority DTI Department of Trade and Industry (U.K.) * Now renamed National Institute for Occupational Safety (NIOS). xiii A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA EB Executive Board EC European Commission ECBM Enhanced Coal Bed Methane EEG Erneverbare Energien Gesetz EPA Environmental Protection Agency ERI Energy Research Institute EU European Union FIs Financial Institutions FCO Foreign and Commonwealth Office (U.K.) GDP Gross Domestic Product GECs Gas Electricity Certificates (Australia) GEF Global Environment Fund GGAP Greenhouse Gas Abatement Programme (Australia) GHG Greenhouse Gas HSE Health and Safety Executive IGS Institute of Geological Survey Inc. Incorporated IPR Intellectual Property Rights IPCC Intergovernmental Panel on Climate Change JCAO Japan Coal Energy Center JMG Jincheng Mining Group JVs Joint Ventures KSOCM Key State-owned Coal Mine LNG Liquefied Natural Gas MA Mei Anquan (coal safety mark of approval) MDL Methane Drainage License MoLaR Ministry of Land and Resources MOST Ministry of Science and Technology MRI Mitsubishi Research Institute M2M Methane to Markets (Partnership) NAFTA North America Free Trade Agreement NCBP North China Bureau of Petroleum NCCCC National Communication on Climate Change of China NDRC National Development and Reform Commission NGACs New South Wales Greenhouse Gas Abatement Credits NSB National Statistics Bureau xiv ACRONYMS AND ABBREVIATIONS OEM Original Equipment Manufacturer PDRC Provincial Development and Reform Commission PEDL Petroleum Exploration and Development Licenses PSC Production-Sharing Contract PTC Production Tax Credit R&D Research and Development RE Renewable Energy RETs Renewable Energy Technologies SACMS State Administration of Coal Mine Safety SAWS State Administration of Work Safety SCMSSA State Coal Mine Safety Supervision Administration SCWSC State Council Work Safety Commission SETC State Economic and Trade Commission (now abolished at State level) SOCM State-owned Coal Mine (city or county government owned) SOE State-Owned Enterprise STIS Surface to in-seam (drilling) TVCM Town and Village Coal Mine UNDP United Nations Development Programme UNECE United Nations Economic Commission for Europe UNFCCC United Nations Framework Convention on Climate Change USEPA United States Environmental Protection Agency VAM Ventilation Air Methane VAT Value Added Tax VCBM Virgin Coalbed Methane WB World Bank xv Glossary of Terms Abandoned Mine Methane (AMM): gas applied to CH4 recovered from unmined coal produced from abandoned coal mine workings seams using surface boreholes. through abandoned mine entries and from boreholes drilled into underground roadways Coal Mine Methane (CMM): gas captured at or former workings. a working coal mine by underground CH4 drainage techniques. The gas consists of a AMM resources: the volumes of gas remaining mixture of CH4 and other hydrocarbons and in coal seams which have been destressed by water vapor. It is often diluted with air and mining and which could potentially be extracted associated oxidation products due to from abandoned mine workings. Reserves are unavoidable leakage of air into the gas drainage the volumes of gas expected to be recoverable boreholes or galleries through mining induced having taken account of groundwater recovery. fractures and also due to air leakage at imperfect joints in underground pipeline systems. Any gas Capture efficiency: the proportion of methane captured underground whether pre- or by volume captured in a methane drainage post-drained and any gas drained from surface system relative to the total quantity of gas goaf wells is included in this definition. released (comprising drained gas and gas Predrained CMM can be of high purity. emitted into the mine ventilation air) expressed as a percentage. Drainage efficiency can be CMM resources: the volumes of gas in coal determined for a single longwall panel or for a seams which will be released by planned whole mine. longwall extraction over the life of a mine. The technically recoverable CMM reserves are CBM resources: gas in place within all coal the volumes of usable gas which can be captured seams within a designated depth range at which by CH4 drainage systems and delivered to a the gas is potentially recoverable. utilization plant. CBM reserves: gas in coal seams which can be Goaf: broken, permeable ground where coal demonstrated as economically recoverable. has been extracted by longwall coal mining and the roof allowed to collapse thus fracturing Coal Bed Methane (CBM): a generic term for and destressing strata above and, to a lesser the CH4-rich gas naturally occurring in coal seams extent, below. typically comprising 80 percent to 95 percent CH4 with lower proportions of Ethane (CH2H6), Key State-Owned Mines (KSOCMs): coal Propane (C 3H 8), Nitrogen (N) and CO 2 mines formerly under the aegis of the Ministry depending on the coal rank. In common use, it is of Coal Industry of central government. xvii A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Ownership was transferred to provincial and potentially recoverable gas). regional governments on abolition of the Ministry of Coal Industry. Ventilation Air Methane (VAM): CH4 emitted from coal seams, which is not removed before CH4 drainage: methods for capturing the mining or captured, enters the ventilation air and naturally occurring gas in coal seams to prevent is exhausted from the ventilation shaft at a low it from entering mine airways. The gas can be concentration. Due to safety regulations, the removed from coal seams in advance of mining CH4 concentration is likely to be <0.8 percent in using predrainage techniques and from coal most instances. seams disturbed by the extraction process using postdrainage techniques. Virgin Coal Bed Methane (VCBM): CH4 rich gas recovered from coal seams which have not Natural gas: gas extracted from geological strata been disturbed by mining and which are not other than coal seams. Nevertheless, the gas could likely to be mined in the foreseeable future. This have originally migrated from coal seam sources. term is used to differentiate between surface CBM operations related to mining (CBM) and Technically recoverable gas: the estimated surface operations to produce gas for energy volume of gas that could be recovered using totally independent of coal mining, comparable available technology (sometimes termed to, in principle, with natural gas production. xviii Executive Summary Introduction pipeline infrastructure makes the United States an exceptional case which is not mirrored in The Government of China is planning to increase any other country. None of the other large significantly the development and use of CBM coal-producing countries of China, Russia, India and CMM to meet the growing demand for and South Africa have established significant primary energy sources, contribute to improve CBM production because of geological, the safety of mining operations and help to technology, infrastructure and investment achieve significant reductions in China’s barriers. Low financial margins compared with GHG emissions. conventional natural gas sources, preclude major commercial attention to CBM until China is short of clean energy, particularly strategic resources are in decline. In such cases, conventional natural gas. The proven per capital governments have provided specific incentives natural gas reserve is only 1/12th of the world to stimulate development as in the United States average. However, China has large CBM and Australia. resources with development potential which can be recovered from surface boreholes China’s CMM emissions are immense and are independent of mining and in advance of mining increasing. In 2004, the impact of China’s coal (CBM), and also captured as a part of output was the release of an estimated 18 Bm3 underground coal mining operations (CMM). of CH4 (271 Mt CO2 equivalent), almost 38 However, in order to meet its targets, the percent of China’s emissions of anthropogenic government must improve the administrative CH4. Its CMM emissions represent 43 percent framework for CBM resource management, of global CH4 released by coal mining and will introduce more effective CBM/CMM rise to more than 50 percent by 2020. The scale development incentives, raise the technical of the CMM problem facing China far exceeds capacity of the mining sector, expand gas that of the United States, the world’s second pipeline infrastructure and promote gas markets largest coal producer after China. The U.S. in coal mining areas. underground longwall production is only 14 percent of China’s 10 percent in terms of Most of the world’s production of CBM numbers of gassy mines, and vented CMM estimated at 60 Billion Cubic Meter (10) (Bm3)/ amounts to 25 percent of that in China. year is in the United States with lesser volumes produced in Australia, where gas prices are Total amounts of CMM released will increase by weaker, and rapid growth forecast for Canada more than 65 percent above the present level to satisfy the U.S. market. A unique combination by 2020 due to inevitable rise in coal production, of favorable geology, a mature gas market, but the increase in the volumes vented to the strong demand, good prices and well-developed atmosphere could be limited to a much lower xix A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA rate by improving capture, utilization and utilization by identifying them as a priority in destruction of the gas at coal mines. This is a China’s Eleventh Five-Year Energy Development major challenge for China which requires Plan (2005-10). attention at the highest level of government, otherwise, the sustainability of the energy However, no new, specific implementation sector will be undermined. measures have been introduced. Financial and fiscal policies previously introduced to encourage Despite installing gas drainage systems development and utilization of CBM and CMM, in most of the large gassy mines, and have had limited impact as is evident from the constructing more than 60 CMM utilization slow progress. projects in the last decade, only about 10 percent of the total CH4 released from coal Enhancing control and utilization of CMM is the mines in China in 2004 was captured. Of the cornerstone of the central government’s strategy total CMM released, only 4.3 percent was to improve coal mine safety and an utilized and the emissions thus avoided. interministerial coordination and guidance group Coal mines are draining increasing volumes has been established to set objectives and of CMM from underground, but utilization of provide oversight. the gas is not increasing at the same rate. Ambitious targets for CMM drainage quantities, Most of the CMM of usable quality is already drainage efficiency and utilization have been set. being exploited as a large, and probably By 2010, capture efficiency should reach increasing proportion of drained CH4 is of too 50 percent, the CH4 extraction volume 10 Bm3 low a quality to use safely and is vented. CMM and the total gas utilization in China should which is drained and surplus to use is also exceed 5 Bm3. Achieving these targets will be vented as flaring is not actively encouraged challenging. For example, major government by the government in contrast to New South programs to improve the environmental Wales, Australia, where a more stringent performance of the coal mining sector in the environmental protection regime has been United States resulted in whole mine gas established and venting of drained gas is not drainage efficiencies increasing from 32 percent permitted and must be flared. in 1990 to 42 percent in 2003. However, with There are large numbers of mines in China the support of government and international which release CH4 into the ventilation air but agencies, implementation of new policies, where gas quantities are insufficient to justify investment in new technologies, and setting installation and operation of CH4 drainage emission reduction as the primary goal, the systems. In 2004, 15 Mt CO2 equivalent of target for utilization, including destruction of unused drained CH 4 was vented into the CH 4, will be approachable by 2010, but atmosphere in China together with a massive failure to act will limit the potentially usable 244 Mt CO2 equivalent of CH4 exhausted at low CMM to just over 1 Bm3. concentration in Ventilation Air Methane (VAM) The government is committed to reducing GHG in 2004. VAM emissions will rise to 271 Mt CO2 emissions, including CMM, and fully supports the by 2010 unless action is taken to capture and Clean Development Mechanism (CDM) process, use more gas and also to tackle the problem of but has yet to develop detailed climate removing CH4 from ventilation air. change policy. Government aims and targets At present, there is no reliable sectorwide The government has shown its strong inventory of CMM emissions, there is no commitment to CBM and CMM development and incentive to encourage large-scale use and xx EXECUTIVE SUMMARY destruction of CMM, and the effectiveness of the foreign technical assistance and founded the CDM process as a market-based instrument to China United Coalbed Methane Company drive change is being limited by government Limited (CUCBM) in 1995 with the sole right to rules which do not allow revenue-sharing and form foreign cooperative CBM ventures. CUCBM participation of Joint Ventures (JVs) with foreign subsequently attracted more than US$150 majority ownership. million of foreign investment, but many of the choice exploration prospects were denied The government recognizes the potential to foreign JVs. Although more than 400 importance of CBM as a valuable energy resource exploration and pilot CBM wells have been and has set ambitious development targets. drilled since 1995, little commercial production has been achieved, current utilization projects The aim was to produce 3-4 Bm3/year by 2005 being largely demonstration. increasing to 10 Bm3 by 2010 and doubling by 2015, but these projections were too optimistic New drilling technologies are being introduced due to the vast drilling resource which would from the United States and Australia which will have been required and the limited number of allow the exploitation of low permeability coal favorable sites. By 2010, about 1.8 Bm3 could than could previously achieve commercial be produced annually and success with Surface production. However, CBM development will To In-Seam (drilling) (STIS) technologies could remain slow and concentrated in only a few perhaps increase this to 3.6 Bm3 or more. geologically favorable areas with market access A high proportion of the surface CBM unless the processes for obtaining rights are production in China in 2010 will probably be made more open, competitive and transparent, concentrated within Shanxi province where the and the large gas resources tied into existing geological conditions appear to be among the excessively long-term coal mining leases and are most favorable in China; there are large CBM separated and released. Lessons can be learned resources and provincial government policy is from Australia and the United Kingdom in to expand its exploitation to increase clean managing the regulatory issues and overlap with energy supply. mining activities. Current status of CBM/CMM A large increase in the quantity of CMM drained from KSOCMs has been achieved from 100 Mm3 The estimated CBM resources in China Tera in 1950 when the technology was first (Trillion) Meters Cubed (1012) at 300 Meter (m) introduced to 1.8 Bm 3 in 2004 – possibly -2,000 m below the surface of 31.5 (Tm3) are reaching 2.2 Bm3 by the end of 2006. Gas comparable with the total estimated resources utilization has also increased with some 700 Mm3 of 38 Tm3 for conventional natural gas, but the being used in 2004. Gas availability is increasing economically recoverable reserves of CBM are but improvements are needed. much lower due to geological, technological, market, regulatory and institutional constraints. Nearly 206 out of 621 KSOCMs now have CMM drainage systems, but average CH4 capture Surface CBM exploration and drilling started in efficiencies are only 23-26 percent. Growing the early 80s in China but little success was concerns about continuing mining accidents in achieved until 1996, when a pilot well field was China led the State Council to allocate US$265 developed as part of a United Nations million for expenditure in 2004 to help improve Development Programme/Global Environment coal mine safety, particularly by installing gas Fund (UNDP/GEF) capacity-building project. drainage and gas monitoring systems, and The government recognized the need for enhancing existing systems. The potential xxi A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA recoverable CMM reserves have thus been pipeline gas unable to satisfy the shortfall. increased. Installation of more gas drainage Greater use of CBM/CMM will reduce the systems, enhancement of existing systems, quantity of expensive Liquefied Natural Gas increased mining depth, and adoption of gas (LNG) imports. drainage techniques by merged, expanded and The estimated combined availability of CBM new local community-owned and private and CMM for utilization in 2010 is 5 Bm3 longwall mines means the volume of CMM equivalent to 179.5 PJ compared with a available for use will continue to rise over the projected natural gas demand of 3,570 next few years. However, poor gas drainage PJ. The expected CMM capture only represents standards, lack of investment in CMM utilization 15 percent of the total estimated gas release projects and grid access difficulty by from coal mines so there is substantial scope CMM-fired power generation means that too for increase. The CBM/CMM industry, little of this gas is of usable standard or is therefore, has potential for scaling up and being used, and GHG emissions from coal continued growth over a period of years. mines are rising annually. CMM is used widely in some coal mining areas Coal mines continue to emit gas after coal where it is distributed via pipelines to mining extraction has ceased. Abandoned Mine communities and neighboring cities for domestic Methane (AMM) extraction schemes have use, some is also used in colliery boilers and for proved a commercial success in many European small-scale power generation. About 90 MW countries, but no major AMM sites have been Electricity (MWe) of CMM power generation identified in China as mined out areas are equipment has been installed at KSOCM, generally less extensive than in Europe, and most and a further 150 MWe is planned or under mines flood quickly after closure. However, prior construction. Some gassy, local government and to closure of large mines in China, especially privately-owned mines are also installing gas where dewatering will be continued to protect capture and utilization systems. Nevertheless, neighboring mines from water inrush risks, the utilization of drained mine gas in China the potential for extraction and use of the gas remains low with more than half of the total should be examined. gas extracted released directly into the atmosphere. CBM/CMM utilization Commercial production and exploitation Coal in China is substantially cheaper than of the gas extracted from surface natural gas but great efforts are being made to CBM boreholes is limited to a few sites reduce coal-burning in cities and introduce more where gas is compressed and transported clean energy to improve air quality. CBM/CMM by truck to city consumers, used for small-scale can play an important role. power generation or piped a short distance to consumers. LNG is being investigated as an An estimated annual gas consumption of alternative to Compressed Natural Gas (CNG) 800-900 PJ/year in China is expected to grow Technology, and also gas-to-liquids chemical to 3,570 PJ by 2010. Natural gas transmission conversion technologies. infrastructure is being developed to serve major A lack of pipeline infrastructure, the immature cities, but there will be large local markets for gas market and the underdeveloped economy CBM. The demand for natural gas is expected of CH4-intensive areas are three major factors to reach 120 Bm3 by 2010 and 200 Bm3 by which need to be addressed in developing 2020. By then, the shortage in natural gas will China’s CBM and CMM utilization industry, and be 40 Bm3 and 80 Bm3, respectively, with Russian to attract the necessary investment. xxii EXECUTIVE SUMMARY Barriers Drained CH4 concentrations in Chinese coal mines tend to be highly variable and Improvement is hindered by institutional, legal purities of 10 percent and less are not and regulatory barriers together with technical unusual. At too many mines, drained CH4 and technology barriers. concentrations are below the prescribed legal safe minimum for utilization of 30 percent. The legal framework currently applicable to CBM The problem of maintaining CH4 purity is a and CMM exploitation is nonspecific, and is significant factor in finding CMM markets and encompassed by the state’s coal and mineral optimizing use. Poor CH 4 quality is often resources laws and petroleum production traceable to use of drainage methods regulations. The Ministry of Land and Resources which do not match the mining and geological (MoLaR) is revising its minerals allocation methods conditions and poor housekeeping and replacing them with more transparent bidding underground – poor sealing of drainage and auction procedures, but this reform has not boreholes from air ingress, inadequate drilling yet extended to CBM licensing and the processes equipment, leaking gas transport for allocating CBM exploration blocks still lack infrastructure in the mine, a lack of technical transparency and competition. knowledge of gas emission and control processes and ineffective management. Some CBM and CMM management suffers from the KSOCMs are looking for methods for utilizing dispersion of responsibilities between various low concentration gas rather than addressing organizations and departments after the the inadequacies of their drainage systems. Ministry of Coal Industry was abolished in 1998, Such a response is counter productive to the and CBM and CMM have not featured as improvement of mine safety and to the significant administrative issues in subsequent maximization of CH4 capture and utilization. coal mining sector reforms. Development and use of CMM is an “encouraged� activity under Recommendations the Coal Law, which is also undergoing revision. In order to significantly reduce CH4 emission Some transformed and consolidated Town and from coal mines and better exploit the gas Village Coal Mines (TVCMs) in gassy areas are recoverable from coal seams, the government operating gas drainage systems and are planning should introduce measures (summarized in to extend the scale of their CMM utilization. Table 1) to: These mines have not received the same level of attention or support as KSOCM. Local investment • Strengthen the CBM/CMM policy, legal in CMM utilization at all sizes of mines is inhibited and regulatory framework to improve by lack of funds in Chinese enterprises and poor resource management; access to capital markets. Bureaucracy, safety issues and market concerns deter foreign • Improve CMM availability and quality so investors. Major concerns of foreign investors are more can be utilized; the security of gas supply and the variability and often low purity of drained gas. Many schemes • Enhance incentives to promote expansion of are too small to interest Financial Institutions (FIs). CBM/CMM exploitation and destruction of However, CDM represents a major financing surplus drained CMM; and opportunity and many CMM projects are being developed at coal mines, but none have yet • Promote development of regional reached the registration stage, and restrictive development strategies to take advantage government rules are inhibiting its effectiveness. of specific local advantages. xxiii Table 1: Summary of Recommended Strategy and Actions xxiv China’s Problems Strategic Response CMM: Reduction of CMM emissions a priority with energy production optimized from use of CMM and destruction of • Major emitter of CMM methane maximized by flaring surplus gas financed and driven by the CDM and additional incentives. Increased capture, • Serious mine safety problems use and destruction of CH4 will automatically result in safer mining conditions. • Shortage of clean energy to CBM: Strengthen CBM resource management under a gas and petroleum licensing regime with open and competitive replace polluting coal in cities bidding for license areas Facts Current Status Areas to be Actions to Promote CMM Actions to Promote CBM Addressed Capture, Use and Destruction Extraction and Use • China released 18 Bm3 (estimate) • Uncertain CMM Policy, legal and • Policies and incentives to • Separate CUCBM’s roles of of CMM in 2004 resource due to regulatory optimize energy use and developer and regulator • 10% of total was captured by CH4 lack of inventory framework maximize CMM destruction • Introduce open and competitive drainage in mines for safety • CDM barriers • Establish CMM inventory bidding for CBM exploration reasons • CUCBM monopoly • Levy on CERs to offset lower blocks • 4.3% of total used for energy on JVs with foreign mitigation cost of flaring • Separate coal mining and CBM • China will emit 50% of global CH4 CBM developers • Allow revenue-sharing from licensing from coal mining by 2020 hindering CERs • Underpin PSCs and CBM (65% increase from 2004) investment in CBM • Enforce mine safety standards licensing with legislation A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA • China has large CBM resources to encourage capture of higher including mining interaction which could be exploited to agreements reduce dependence on coal, but quality gas • Prepare safety legislation ready • Allow qualified Chinese development is slow developers to form JV with for VAM use and destruction foreign CBM company • Mines with CBM interests to China’s CBM/CMM Achievements accept CBM license commitments or release • Introduced CMM drainage in stagnated coal areas 1950 • Quality of CMM CMM availability • Improve knowledge and • Drained CMM increased 100 Mm3 often too low for and quality practice of gas control, to 1,800 Mm3 from 1950-2004 safe utilization prediction methods, gas • Some 50% of large mines are drainage design and gassy and have gas drainage management systems • Establish technical support for CER delivery China’s CBM/CMM Achievements Current Status Areas to be Actions to Promote CMM Actions to Promote CBM addressed Capture, Use and Destruction Extraction and Use • > 60 CMM utilization schemes constructed • Level of investment Incentives and • CMM subsidy comparable to • R&D on advanced STIS (drilling) • 31.5 Tm3 CBM resources too low drivers (as lower GHG mitigation cost) technologies EXECUTIVE SUMMARY • >400 CBM exploration wells from • CMM use and • Train mine management 1995-2004 destruction not fully to present better CMM • > US$150 million foreign recognized as investment cases investment in CBM exploration low-cost GHG • Grant schemes for innovative attracted by CUCBM mitigation option. technology • R&D and demonstration Government CBM/CMM Aims • Loan facilities for local mines and Targets • Protect IPR to encourage technology transfer • Priority in Eleventh Five-Year • CMM abatement certificates Energy Plan (long-term: part of a national • Enhanced CMM capture and GHG trading system) utilization as a route to improved mine safety • 10 Bm3 CH4 captured by 2010 • Development of Regional differences • Special status for Shanxi province due to its rich CBM/CMM resources • 5 Bm3 methane utilized by 2010 CBM/CMM and preparation of an integrated natural gas/CBM/CMM • 10 Bm3 CBM produced by 2010 impeded by lack of development plan and policy framework integrated planning • Grant assistance for development of pipeline infrastructure • Competitive access to pipelines and contracts for transmission capacity • Coal-to-gas switching incentives to stimulate growth of the gas market Conclusions • China’s commitment to reducing GHG emissions can be advanced significantly, and at low cost, by stimulating greater use and destruction of CMM • Government CBM/CMM utilization targets are ambitious and will not be approached unless the above measures are rapidly and effectively implemented xxv A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Government policy, legal and • Government strategy to minimize GHG regulatory framework emissions from its mines, implemented through policies which encourage maximization of CMM priorities and strategy should be redefined. use and destruction of CH4; Reduction of CMM emissions should be the highest priority focus and a strategy for • Policy incentives which encourage surplus maximizing CH4 use and destruction is necessary drained gas to be flared, as is done in if China is to significantly reduce GHG emissions Australia and the United Kingdom, rather from coal mining. than vented to the atmosphere. Flaring is the lowest cost emission mitigation measure Policies aimed at reducing GHG emissions from with an investment cost of per ton(t) CO2 coal mines will automatically result in annual destruction capacity using imported improvement in safety and greater use of CMM equipment less than 1/5th of a modern for energy purposes provided international safety gas engine. The cost would be much lower standards are a prerequisite for compliance. once locally manufactured flare units are available; Successful GHG emission reduction drivers in other countries, Australia, for example, operate in a • A higher government levy on CERs generated market environment which China aspires to by flaring to offset the lower mitigation cost develop, but is still some way off from achieving. of flaring compared with utilization to ensure More rapid development of CBM and CMM flaring is a last resort; resources can be achieved if the Government of China continues regulatory reforms and further • Fiscal incentives against equipment and liberalizing of energy markets. construction costs for all GHG mitigation schemes; and The CDM has proved the most successful driver of CMM exploitation to date in China, • Strongly enforced mine safety standards but there are barriers preventing more effective requiring drained gas to be of a specified implementation. For instance, Chinese minimum purity (>30 percent) for utilization enterprises are forbidden to enter into to encourage mines to improve gas drainage revenue-sharing agreements thus removing a standards and performance, capture more powerful means of securing project investment. usable gas and become safer workplaces. The incentive for project investors to provide continuing assistance throughout a project to In order to formulate and implement effective ensure delivery of Certified Emission Reductions strategy, the full scale of the problem must be (CERs) is also removed. Reluctance to accept determined by preparing a reliable and complete flaring of surplus and unusable CMM also CMM emissions inventory. narrows the applicability of CDM and is contrary to the aims of the United Nations Framework The quantities of CH4 emitted from China’s coal Convention on Climate Change (UNFCCC). mines are not known to any degree of accuracy Unless these impediments are removed, CMM (IPCC Tier 1 method) and the data are emission reduction and energy recovery targets incomplete as they are based on the KSOCM will not be achieved. which represent only about half of China’s coal production. Without these data, the full potential The following measures would ensure that CMM for scale-up cannot be properly assessed is utilized wherever practical and feasible and and effective management of China’s CMM the surplus destroyed: resources and emissions established. xxvi EXECUTIVE SUMMARY For example, a survey of county, village competitive and effective CBM resource privately-owned mines in the highly gassy management if this clean energy is to be more Jincheng mining area revealed that in producing effectively exploited. 9.6 Mt of coal, some 332 Mm3 of CH4 was drained of which about 20 percent was utilized. CBM resource management in China involves a carve-up of potential prospective areas between It is recommended that: the State-owned petroleum and CUCBM monopolies. Resource is managed by those with • An IPCC Tier 3 methodology should be vested interests in the proceeds of development developed and applied to all the KSOCM and rather than by an independent government a survey undertaken to establish reliable Tier body serving the national interest. Foreign 1 estimators for the remainder of the coal CBM developers are required to sign a mining sector. Production-Sharing Contract (PSC) with CUCBM which sets out the rules, a minimum exploration Safety legislation should be extended to pave expenditure and other conditions. However, PSCs the way for utilization and destruction of VAM. are not sacrosanct and there is evidence that State- owned oil and gas companies have disregarded VAM represents a significant emission and the “license� boundaries in their exploration potential energy source as more than 70 percent programs. The PSCs have no formal legislative of the CH4 released from coal mines is exhausted standing but are intended to provide an at low concentrations. Technologies for internationally recognized form of cooperative removing and using low concentrations of CH4 agreement and a basis for negotiation. in ventilation air are being developed, but these will be costly requiring CDM support for viability At present, CUCBM and other State-Owned and new mine safety legislation to allow for safe Enterprises (SOEs) with CBM exploration interests use or destruction of CH4 at concentrations below (for example, Petrochina) apply to MoLaR for the lower explosive limit. China will become a CBM exploration and development licenses major target for CDM-financed VAM schemes which are issued on a first come, first served once a suitable technology is proven, and this basis, unless the area is reserved for other will lead to major reductions in emissions. purposes. CUCBM can decide whether to explore alone or to form a cooperative venture It is, therefore, recommended that: with a foreign company under a PSC. The • Safety legislation should be revised to allow current licensing system does not allow for any the use and destruction of VAM, but market competition, licences can be easily incorporating a large factor of safety below extended and there is no incentive to expedite the lower explosive limit of 5 percent CH4 exploration and development. As a result, in air. exploration is inefficient and development slow. Substantial CBM license areas have been let but CBM remains in coal seams until extracted at a not explored due to lack of resource, or ranked production borehole or disturbed by mining. Gas as of low interest by the holder. Some developers removed from coal seams ahead of mining, or have sought to build large portfolios of license in areas which are likely to be mined some time areas merely to try and impress investors, but in the future, reduces the future threat to the they have neither the intention nor the resources environment but, more importantly, provide a to explore and develop. Access to both coal and valuable source of energy comparable to large associated CH4 resources are also sterilized conventional natural gas. Institutional and by coal mine leases of 70 years or more which regulatory reforms are needed to establish fair, hinder and slow development. xxvii A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA The formation of CUCBM as a regulator to • Any qualified Chinese company should be protect the interests of China was an essential free to enter into a PSC agreement with a first step in establishing a CBM industry in China foreign company, but the terms should be and CUCBM has played an important role in subject to oversight by an independent managing foreign involvement and investment regulatory commission; and in CBM exploration. However, administrative and regulatory needs have now changed and it is • Licensing of coal should be separated from recommended that: the licensing of CBM rights. Mines currently with CBM interests should be required to • CUCBM should be divested of its make exploration and development monopoly privileges and allowed to commitments similar to those expected of operate as a commercial exploration and PSC holders or relinquish title to the gas. development entity; To prevent loss of coal reserves, a legally binding interaction agreement should • The role of CBM regulator should be passed be introduced. to MoLaR or a new Energy Ministry; The institutional and legal framework should be • A more open, competitive and transparent rationalized and strengthened. bidding process for CBM blocks is introduced; Both coal and mineral resources laws are currently being revised, but independent of each • The CBM industry should be integrated into other. Now would be an opportune time to the natural gas and petroleum industry due strengthen the legal framework of the coal to overlapping interests, but leaving CMM mining sector and, in particular, address CBM/ firmly in the coal mining sector; CMM safety and interactive issues. • An effective regulatory system should be CBM extracted independent of mining is a natural devised for managing the interaction gas production operation. CBM reservoirs between CBM and coal mining interests. are difficult and costly to develop in relation Australia (Queensland) has established to their production potential compared with a robust scheme which could be adapted conventional natural gas reservoirs, and for China; government policy should be aimed at encouraging the natural gas industry to develop • PSCs should be underpinned by legislation, those marginal resources most likely to be of and exploration and development license maximum future commercial and strategic boundaries enforced. Licensing terms should benefit. In contrast, CMM is an unavoidable be more stringent and strictly enforced. CBM by-product of mining with serious environmental license areas which do not receive the and safety impacts to be considered in addition requisite exploration attention within a to its energy potential. defined time period, not exceeding three years, should be relinquished and bids It is, therefore, recommended that: invited from qualified companies; • The revisions of the Coal and Mineral • The costs of holding license blocks should Resources Laws are examined and compared be increased to speed relinquishing of areas in detail and any conflicts resolved before which the developer has discarded or has promulgation. In reviewing the Coal Law, insufficient resources to explore; efforts should be made to identify the xxviii EXECUTIVE SUMMARY reasons for its inadequacy in addressing Implementation of an effective emissions safety issues, in particular underground gas reduction strategy for coal mines will require drainage, and also ensure there is no conflict application of combinations of surface CBM, with government aims of promoting underground CMM and emerging VAM increased CMM extraction and utilization; utilization technologies. The choice will depend on whether site-specific characteristics • CBM should be grouped and managed and the necessary capacity-building and along with other difficult natural gas sources technology transfer can be achieved with the such as tight sands, which should be subject help of a carefully designed and managed to similar incentives; and demonstration project. • With central government oversight CMM Coal mining companies are also in need of should remain firmly in the mining sector support with CDM projects to deliver CERs, but under provincial control. a professional service support industry does not presently exist. Without this support, CDM Improving CMM availability projects at mines will underperform substantially, and quality the Carbon(C) assets market will lose confidence Capacity-building is needed to fill serious in the sector and government CMM utilization knowledge and technology gaps at coal mines. targets will be unachievable. Investment in CH4 drainage equipment and New, fully mechanized private and locally-owned technology without an understanding of its mines in gassy areas are starting to recognize applicability is leading to wastage, and expected the potential benefits of CMM utilization, but this reduction in numbers and severity of accidents, sector of the coal mining industry, which is likely and increased gas availability for utilization are to grow in importance, does not presently not being achieved. The variable, and often low receive the attention it needs. quality of drained gas, is a limitation to efficient It is, therefore, recommended that: utilization which must be tackled within the mining operations. Major technical issues which • New fully mechanized private and need to be addressed include poor sealing of locally-owned mines be included in any new underground gas drainage boreholes, CMM promotional initiative; and inadequate design, monitoring and management of gas drainage systems and use • Capacity building be provided: of drainage methods unsuited to the geological and mining conditions. – To government advisers and planners, mine designers, technical staff and mine In order to improve CMM capture and quality, management to help them better coal mine staff need direct access to more detailed understand the current state-of-the-art information, knowledge and technology relating technology, its limitations and the to gas emission prediction, ventilation planning, fundamental principles of gas drainage gas drainage methods, equipment monitoring and control; and CMM utilization and destruction options. Coal mining companies need such improved – To coal mining companies so that they capabilities if they are to be able to assist local are able to assist local CMM project CMM project developers to analyze project risk developers to analyze project risk and and present properly detailed financial arguments present properly detailed financial to attract external investment. arguments to attract external investment; xxix A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA – To professional service support companies Gas abatement certificates modeled on the so that they can help coal mines with New South Wales scheme have attractions as CDM projects to deliver CERs; and part of an in-country GHG trading system, but could not be introduced until a national trading – By a CMM demonstration project at a scheme was established. Nevertheless, as selected coal mine for optimization of China’s GHG emissions will continue to grow, energy recovery and maximization of CH4 such an approach has merit as part of a destruction to international safety long-term strategy. A more rapid response could standards; the CDM or the Global be achieved with grant schemes similar to those Environment Fund (GEF) program should developed in Australia which have successfully be investigated as a financing source. encouraged demonstration of new and innovative CMM utilization technologies. Projects Strong incentives are needed to should be selected on merit and grants only vigorously drive change made available for properly designed, peer reviewed projects with a high chance of success. The government should further stimulate They should not be used to subsidize investment in CMM utilization and destruction. ill-conceived, replicated projects by coal mining Existing tax benefits in China have not been SOEs as has happened too often in the past. effective by themselves and CDM alone will not The government could partner with GEF to foster be sufficient to stimulate the level of investment such a scheme. required to achieve the government’s goals. Additional incentives are needed which will Domestic mining companies can benefit from encourage greater levels of both domestic and exercising greater corporate environmental international investment in CMM utilization responsibility as well as assisting the government and destruction. achieve its strategic aims. Domestic coal mining companies can reduce GHG emissions without A possible route is exemplified by China’s detriment to their business, especially if Renewable Energy (RE) Law which took effect encouraged by market-based and grant on January 1, 2006, introducing a pricing incentives as is demonstrated in Australia where mechanism which ensures a premium over the innovation, Research and Development in (R&D) lowest cost clean coal option and includes a CMM extraction and use are enabling government subsidy. This incentive would be increasingly effective results to be achieved thus particularly cost-effective if applied to CMM, as reducing long-term business and reputation risk the incremental cost of power generation using to major companies. Spin-off benefits which CMM is much smaller than the incremental cost directly benefit financial performance include of wind turbine power. A possible downside is improved gas control at the coalface, safer that the feed-in tariffs might polarize CMM working conditions, a local low cost energy toward power generation when, sometimes, supply and reduced mine operating costs. direct supplies of gas would be more beneficial to the local economy. However, in such R&D is needed to enhance understanding of the instances, CDM may provide an alternative characteristics of coal seam gas reservoirs in financing route which would help to balance Chinese geological conditions and to explore the choice of options. Surface CBM extraction use of the STIS drilling technologies developed connected with active mining, which results in Australia and the United States for extracting in avoidance of CH4 emissions, should be gas from virgin coal seams with marginal treated as CMM insofar as incentives permeability. These advanced STIS drilling are concerned. techniques could also have a role in enhancing xxx EXECUTIVE SUMMARY mine safety by improving the effectiveness of • Targeted R&D of CBM and CMM extraction both pre- and post-gas drainage methods. technology should be expanded; Wider application of advanced gas extraction and capture technologies are essential if China • Government should create policy incentives is to scale up its CBM/CMM industry. to encourage foreign service companies and JVs with the skills and experience to introduce, China would benefit from easier access to adapt and exploit new and advanced imported gas control technology for its mines CBM/CMM technologies in China; and and CMM utilization schemes. However, some foreign companies with key technologies are • Barriers to importation of key technologies reluctant to enter the China market due to lack should be removed by recognizing of protection of Intellectual Property Rights (IPRs), international safety testing standards for cost and risk of market entry, protracted approval certification of underground equipment, procedures for underground equipment rigorous enforcement of patent and IPR (but now being improved), competition with protection and ensuring transparent and low-cost Chinese equipment and lack of competitive bidding for tenders. transparency in bidding for tenders. Regional development strategies It is recommended that: An effective emissions reduction strategy must • CMM is treated similarly to RE in China and recognize regional differences. For example, enjoys a similar level of subsidy, as is the case development of CMM utilization projects in the in Germany; coal-rich Shanxi province should be a priority and would be much more cost-effective • Grant schemes similar to those used than RE. Where such conditions exist, CBM/ successfully in Australia should be introduced CMM development should be afforded to encourage demonstration of new and special status. innovative CMM utilization technologies; CH4 extraction and utilization from coal seams • Incentives to stimulate investment in CMM in economically underdeveloped coalfield areas extraction and utilization and CH4 emission will benefit local communities and provide reductions should be aimed at coal mines energy for displacing use of polluting coal in local, of all types. In particular, financing small-scale enterprises. arrangements and loan facilities should be made available through local, commercial Rational development of CBM requires banks to facilitate development of small-scale juxtaposition of market, gas transport CMM utilization schemes by local enterprises; infrastructure and geologically favorable conditions for commercial extractions, all of which • Key state-owned mines, in particular the are present to some extent in Shanxi province. large coal mining enterprises with However, in Shanxi, as in other coal-rich provinces, international expansion aspirations, there is insufficient cohesion between the planning should be aware of the importance of of CBM, CMM and natural gas transportation protecting reputation with regard to and utilization projects. environmental protection and encouraged to develop corporate policies which Construction of an accessible pipeline maximize benefits from available GHG infrastructure by the government in selected emission reduction incentives; areas will stimulate exploration and xxxi A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA development of CBM and CMM (by analogy It is recommended that: with road construction as an economic development stimulant to isolated • The Shanxi provincial government should communities). For example, in the Raton Basin develop an integrated development plan and in the United States, the lack of pipeline policy framework to help it meet its connections stalled CBM development for aspirations of a commercial and sustainable more than 20 years. A system of contract CBM/CMM industry; carriage, which allows an operator to contract a fixed transmission capacity, whether used • Grant assistance is given to constructing gas or not, would reduce construction risk, allow distribution infrastructure in special status multiple party access and ensure maximum areas and coal-to-gas switching incentives use of available capacity. Such an approach offered to consumers, but price subsidy has been adopted in most countries with newly should be avoided as this will lead to market developing gas industries and it is also inefficiencies; and applied by gas transmission companies in the United States. However, the usual practice in • All parties should be able to compete openly China is to adopt common carriage** and it is for access to gas pipelines and enter into not unusual for CMM pipelines to be operated contracts for transmission capacity to reduce well below design capacities. the exploration and development risk. ** For common carriage pipelines, there is no contracted allocation of capacity and consumers pay a composite fee with a fixed and a variable element. xxxii 1. CBM/CMM Resources and Emissions CBM Resources pipeline infrastructure makes the United States an exceptional case which is not mirrored in any Estimates for world Coal Bed Methane (CBM) other country. CBM is being developed in resources range from 100 to 260 Tera (Trillion) Australia, but market conditions are less Meters Cubed (1012) (Tm3), of which 80 percent favorable than the United States, and technical lie in Canada, Russia and China. The estimated barriers are limiting progress in some coalfield CBM resources in China in bituminous and areas. CBM exploration is gathering momentum anthracite coals between depths of 300 meter in India but large-scale commercial production and 2,000 m below the surface are around is some way off due to technical, geological, 32 Tm3. This is comparable with the total price and infrastructure barriers. estimated resources of about 38 Tm 3 for conventional natural gas. However, the reserves In China, about 400 surface CBM wells were of CBM potentially economically recoverable, drilled throughout the country from 1995 to independent of mining, will be substantially 2004 and more than 200 in the last few years. lower than the resource due to the low Some 150-200 Mm3/year of CBM is currently permeability characteristics of many of the being produced, some utilized and the coalfields, surface access constraints and remainder flared in the South Qinshui coalfield, remoteness from markets. Shanxi province, with minor production and utilization in Fuxin, Liaoning province. None of the three countries with largest CBM The Chinese government recognizes CBM resources have developed significant CBM development and utilization as a priority by its industries independent of mining although rapid inclusion in China’s 11th Five-Year Energy buildup in Canada is projected in response to Development Plan (2005-10). Within the next the strong natural gas demand from the United few years, a combined annual CBM and Coal States. Of the world’s largest coal-producing Mine Methane (CMM) production of 3 to 4 Bm3 countries of China, United States, India, is anticipated. Australia, South Africa and Russia, only the United States has a mature, commercial CBM There are 13 major coal-bearing areas in China sector – 45 Billion Cubic Meters (109) (Bm3) was where large CMM/CBM resources are produced in 2003 representing 8 percent of the concentrated. According to the China Coal total U.S. natural gas production, and this is Geological Administration (CCGA), the most similar to the total CMM release from the world’s significant CBM resources are found in the coal mining activities. A unique combination of central, eastern, western, south-western, north- favorable geology, a mature gas market, strong western and south-eastern parts of China. demand, good prices and well-developed However, these resources are not all readily 1 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA converted into potential reserves due to technical the average gas content is 9.8 Meters Cubed and economic barriers to development. Per Metric Tonne (m3/t), the concentration of Methane (CH4) in the coal seam gas is 91 Ten coal mining regions (excluding the Zhunger, percent, the average (CH4) resource density is Tuha and Yili basins of Xinjiang region) account 115 Mm3/km2 and the average gas saturation is for 68 percent of China’s total CMM/CBM 41 percent. No average coal seam permeability resources (Table 1.1). data are quoted. By 2003, there were 56 CBM exploration areas After many years of slow progress in China, throughout China, totaling nearly 66,000 interest in surface extraction of CBM seems to Square Kilometer (km 2 ). The domestic be increasing. This is mainly due to increasing companies involved in exploration included pressure from the government to improve gas China United Coalbed Methane Company control standards in coal mines accompanied (CUCBM), Petrochina, Sinopec, Yanchang Oil by financial support, the need to achieve high Bureau, China Coalfield Geological Bureau and coal outputs and the emergence of Surface the Institute of Geological Survey (IGS). Some To-In-Seam drilling (STIS) technologies which of these organizations are able to gather hold the promise of better and more valuable CBM data while undertaking cost-effective gas extraction than is achievable exploration tasks for government departments using vertical, hydraulically fractured wells. and, thus, gain competitive advantages. CUCBM has the monopoly right to form collaborative CBM resources are reasonably well defined but ventures with foreign CBM companies. The insufficient data have been gathered to registered area of CUCBM (and its international characterize production potential and allow partners) is about 40,000 km2 accounting for assessment of commercial feasibility in all but a 61 percent of all areas, and Petrochina holds few areas. Detailed coal seam permeability data 36 percent of all areas. In 115 CBM target are particularly lacking and viable market exploration areas from which data are available, scenarios are yet to be established where Table 1.1: Major Coal-bearing Regions and Associated CBM Resources Name Location CBM/CMM Major Coal Region Province(s) Resources Companies billion m3 Sanjiang- Nort-heast Helongjiang 401 Jixi, Hegang Mulenghe Basin Pohaiwan Basin East Shandong, Henan Hebei 1,375 Kailuan, Fengfeng Nanhuabei Basin East Jiangsu, Anhui and Henan 1,678 Huainan, Huaibei Jinzhongnan Central Shanxi 4,837 Yangquan, Jincheng Coalfield Pinle Basin South Jiangxi and Hunan 44 Pingxiang, Fengcheng Xiangzhongnan South Hunan 18 Baisha Ordos Basin West Inner Mongolia, Ningxia, 11,324 Baotou Shannxi and Shanxi 2 BM/CMM RESOURCES AND EMISSIONS Name Location CBM/CMM Major Coal Region Province(s) Resources Companies billion m3 Sichuan Basin South-west Sichuan 145 Furong, Tianfu Sichuan-Guizhou South-west Sichuan and Guizhou 1,121 Zhongliangshan Liupanshui South-west Guizhou 1,334 Songzao Zhunger Basin North-west Xinjiang 2,997 – Tuha Basin North-west Xinjiang 4,647 – Yili Basin North-west Xinjiang 925 – Source: Investment Guide for CBM/CMM (China Coal Information Institute (CCII), 2004). pipeline access is either problematic or not used or destroyed, will be vented to infrastructure nonexistent. Large-scale the atmosphere. VCBM, in contrast, will development of CBM will automatically follow remain in the coal until extracted and utilized the introduction of pipeline infrastructure to as a clean energy source comparable to which it has equal rights of access compared natural gas. with conventional natural gas in areas of the most promising geological conditions; current While the United States leads the world’s indications are that these will mainly be commercial VCBM production, China is the concentrated in Shanxi province. largest emitter of CMM releasing 43 percent of global CH4 associated with coal mining. The CMM resources and emissions immense scale of the CMM problem in China is illustrated by comparison with the United The gassiness of a coal mine depends on coal States, the world’s second largest coal seam geology, seam gas contents, the method producer (Table 1.2). of working and rate of coal extraction. CH4 emissions in some mines are low and can be There are about 300 large gassy Key diluted to safe concentrations by the ventilation State-Owned Coal Mines (KSOCMs) and air. Other mines which are more gassy need to approximately another 600 smaller locally-, employ gas drainage techniques to remove community- or privately-owned gassy mines. sufficient CH4, before or after mining, to ensure Average capture efficiency in the KSOCM is the planned rate of coal extraction can be 23 percent and there are no data for the other achieved without statutory CH4 concentrations gassy mines, many of which have rudimentary being exceeded in the mine airways. gas drainage systems if any, at all. Pending a survey, an overall average of 10 percent is CMM resources and reserves are thus dependent suggested as a reasonable target even if not on coal mining activity but are not easily currently achieved. A combination of inadequate quantified due to the lack of a detailed inventory. investment, design, materials, infrastructure management, monitoring and operations CMM is more critical than Virgin Coal Bed means that drained gas quality in all mines is Methane (VCBM), both as a Greenhouse Gas often poor and substantial volumes of drained (GHG) emission and as a potentially wasted gas may be neither satisfactory nor safe to meet energy source. This is because CMM is utilization purposes. For modeling, the usable released as a consequence of mining and, if gas is assumed to be 50 percent for gassy 3 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA KSOCM and 20 percent for other mines. On CMM resources are directly related to coal the above basis, an assessment of the current mining activities. Reserves depend on how much situation with regard to gas capture and use was of the gas from the seams disturbed by mining made using a simple model and the results are can be economically captured. The average total shown in Table 1.3. drainage efficiency (of gassy KSOCM) is low, about 23 percent at present, but the industry The predicted avoided emissions of 12 Mt CO2e believes that with further investment a drainage for KSOCM is close to the 11.6 Million Tons (106) capture efficiency of 50 percent could be (Mt) CO2e reported as used (Table 1.8) which attained using existing technology and suggests that most the of CMM of usable quality equipment. Gas drainage and utilization data are gathered annually by the State is already being exploited. Increased use will Administration of Work Safety (SAWS), but the require an improvement in gas quality, or force detailed information is not published. implementation of utilization technologies which are able to exploit hazardous gas concentrations Growing concerns about continuing mining – an undesirable direction. accidents in China led the State Council to Table 1.2: Comparison of CMM Scale between China and the U.S. in 2004 China3 USA4 Underground Coal Production (Mt) 1,858 367 Longwall Coal Production (Mt) 1,341 190 Net CMM Vented1 (Mt CO2 equivalent) including VAM 259 62 CMM Drainage Efficiency2 (%) 23 42 % Drained Gas Used 37 90 Source: Compiled based on: China Coal Statistical Year Book Coal Production in the United States, Energy Information Administration, October 2006 from www.eia.doe.gov/cneaf/coal/page/coal_production_review.pdf. 1 Net CMM vented means the total CH4 released by mining operations, including the amount captured and not used, as well as the VAM. 2 Drainage efficiency is the total amount drained relative to the total amount released in those mines which have a drainage system, and for China refers only to the KSOCM. 3 95 percent of total production from underground and an estimated 72 percent longwall. 4 Scaled from results of a 2003 survey. Table 1.3: Assessment of CMM Extraction and Usability from Gassy Mines in 2004 Type of Total CMM Present Capture Usable Gas % CMM Drained Avoidable Gassy Coal Released Mm3 Efficiency % and Usable Emissions Mines Mm3 Mt CO2e KSOCM 6,915 23 50 795 12.0 Other 7,755 10 20 155 2.3 Total 14,670 950 14.3 Source: CCII. 4 BM/CMM RESOURCES AND EMISSIONS allocate US$265 million for expenditure in 2004 By 1990, this had increased to 10 groups and, to help improve coal mine safety, mainly by by the year 2000, some 20 were practicing gas installing gas drainage and gas monitoring drainage (Annex I). Total mine gas extraction in systems, and enhancing existing systems. Thus, 2001 was reported as 980 Mm3, an increase of the technically recoverable CMM reserves have 6.8 percent from 2000 with figures for been increased. 2002 showing a further increase to 1.1 Bm3. Consolidation of mining groups and restricted The coal sector in China has undergone availability of recent data make continuing substantial reform to improve efficiency, safety detailed year-to-year comparisons difficult. Table and price stability. Large numbers of small illegal 1.4 shows CMM extraction volumes in 2003 and irrational mines have been closed and achieved by some major mining groups but the returns-to-scale are being achieved by larger list is incomplete. mining enterprises formed by merger and acquisition. Initial estimations indicate that CMM The overall volumes of CMM drained and coal emissions could have increased by more than produced annually from KSOCM in the period 1 Bm3 as a result of replacing small mine 1997 to 2004 are shown in Table 1.5. CMM capacity with industrial-scale longwall capture relative to coal production only started operations, and also from small mines changing to increase from 2003. Annual quantities of CH4 to longwall methods to comply with government extraction in both the Fushun and Yangquan coal guidance on coal resource protection measures. mining areas exceed 100 Mm 3, and the The increase is due to the greater extent of strata extraction quantities of CMM in Jincheng, disturbance and, hence, gas release around a Huainan and Panjiang are increasing rapidly. longwall compared with the room-and-pillar Projections based on the first half year for 2006 method employed in most small mines. indicate a possible 2.2 Bm3 drained by year end. No data for 2005 were available. CMM drainage technologies only capture a proportion of the gas released into mine The government policy is to encourage mining workings. Captures achieved in individual enterprises to combine into large, efficient and longwall mining panels can typically range from competitive super groups and this is concentrating 30 to 80 percent depending on the drainage both coal production and CMM extraction into technology used, the geology and the mining fewer organizational units, increasing conditions. Technologies also exist for removing opportunities for achieving-returns-to scale. the diluted CH 4 from mine Ventilation Air Methane (VAM) but are costly and only feasible There are more than 20,000 small coal mines in with Carbon (C) financing. The potentially China, each with coal production capacities drainable CMM resource in China achievable ranging from 20-600 Thousand Tons Per Annum using tried and tested technology is currently so (ktpa) producing almost half of China’s coal large that treatment of mine ventilation air has output. Ownership includes many local State- not yet attracted much attention. However, this Owned Coal Mines (SOCMs), Town and Village situation could change rapidly in the light of Coal Mines (TVCMs) and private mines. Statistics technological developments and the availability on “small coal mine� activities are unreliable but of CDM financing. as many as one-third are thought to be gassy. Installation of more gas drainage systems, The total quantity of gas extracted from the enhancement to existing systems and adoption of KSOCM has increased substantially over the last gas drainage techniques by some merged and 20 years. By 1980, there were five mining groups new local community-owned and private longwall draining gas each extracting 10 Mm3 per year. mines means the volume of CMM available for 5 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Table 1.4: CMM Extraction in 2003 by Major Mining Groups Coal Mining Group CMM Extraction (Mm3) Yangquan 252 Huainan 134 Fushun 112 Songzao 100 Pangjiang 90 Shuicheng 81 Jingcheng 74 Tiefa 74 Huaibei 55 Shitanjing (Ningmei) 51 Furong 48 Pingdingshan 34 Shenyang 32 Hebi 27 Tongchuan 25 Zhongliang 23 Liaoyuan 21 Tianfu 19 Jiaozu 18 Total 1,270 Source: CCII prepared for this study. Table 1.5: CMM Drained and Coal Produced from all KSOCM (1997-2004) Year CMM Drainage (Bm3) Coal Production (Mt) CMM Drained/Coal Production m3/t 1997 0.76 467 1.63 1998 0.74 500 1.48 1999 0.79 470 1.68 2000 0.87 536 1.62 2001 0.98 618 1.59 2002 1.15 712 1.62 2003 1.52 830 1.83 2004 1.93 920 2.10 Source: Compiled for this study. 6 BM/CMM RESOURCES AND EMISSIONS use will continue to rise over the next few years. and removals by sinks of GHGs. In Carbon Government policy is pushing small mines to Dioxide (CO2) equivalent terms, China’s total change from partial extraction to longwall GHG emissions in 1994 were 3,650 Mt with CO2, caving methods of mining to increase the CH4 and Nitrous Oxide (N2O) contributing to 73.1 proportion of the reserves extracted as a percent, 19.7 percent and 7.2 percent respectively resource protection measure. A result will be (NCCCC, 2004:3). China’s ranking as a GHG increased emissions and more mines will need emitter in world terms in 2000 is shown in Table 1.6. to install gas drainage systems in order to qualify for their mining licenses. The impact of China’s coal output in 2004 was the release of an estimated 18 Bm3 of CH4 (271 A survey of small coal mines in the Jincheng Mt CO 2e), almost 38 percent of China’s mining area revealed that virtually all practice emissions of anthropogenic CH4. Approximately, gas drainage. The highly gas anthracite coal 10 percent of the total CH4 released was lends itself to predrainage without which the coal captured in mine gas drainage systems and only would be unworkable. In producing 9.6 Mt of 4.3 percent was utilized and the emissions thus coal, some 332 Mm3 of CH4 was drained and avoided. Fifteen Mt CO2 equivalent of unused about 67 Mm3 (20 percent) used for domestic drained CH4 was vented to the atmosphere supply, heating at the mine and power together with a massive 244 Mt CO2 equivalent generation. These statistics are not generally of CH4 exhausted at low concentration in VAM. included in the national figures. However, as this is arguably the most gassy coalfield area in A growing problem China, the results should not be extrapolated to Since initiating economic liberalization in 1979, China estimate national emissions associated with the has become one of the fastest growing economies medium- and small-scale coal mines. in the world with its Gross Domestic Product (GDP) A large contributor to China’s increasing at an average rate of just over 9 percent GHG emissions per year. As part of its broader structural reforms, China has undertaken extensive efforts in economic In October 2004, China completed the Initial reform, energy efficiency improvement, Renewable National Communication on Climate Change, Energy (RE) development, forestation and slowing publicizing the estimated national 1994 population growth thus mitigating some of the inventories of anthropogenic emissions by sources potential GHG emission growth. Table 1.6: China’s Estimated GHG Emissions in 2000 Gases Mt CO2e Rank Percent of World CO2 3,476 3 14.5% CH4 779 1 13.2% N2O 645 1 19.1% PFC 5 7 5.4% HFC 37 2 16.2% SF6 3 4 7.8% Total 4,945 2 14.7% Source: World Resource Institute’s Climate Analysis Indicators Tool (CAIT), 2005. 7 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA However, China remains a developing nation serious threat to environmental sustainability with the GDP per capita at only 19 percent of in China. Emissions of pollutants will exceed the world average. There are also serious sustainable limits set by the government imbalances among different regions and and China appears to become the world’s between urban and rural areas. Rural population largest emitter of CO2, even if its per capita in China accounts for 60 percent of its total. emissions remain relatively low compared to Twenty nine million poor people live with annual industrial countries. income less than US$77 per person. More than 20 million farmers living in border regions and In order to secure the energy supply and protect remote areas have no access to electricity. Efforts the environment, China is taking measures to to redress this imbalance, future economic diversify energy supply and improve the energy growth and urbanization expansion in China will infrastructure. The aim is to increase the boost energy demand further, resulting in more proportion of clean energy in the mix, in GHG emissions unless countered with particular natural gas and (REs). CBM and significant, additional mitigation actions in the CMM can contribute to clean energy supply energy sector. but stronger incentives are needed to stimulate investment. China is the second largest consumer of primary energy, ranked after the United States. In 2005, By 2002, energy consumption and CO2 emission the total primary energy consumption in China growth rate both surpassed the GDP growth rate, reached to 2,220 Million Tons Coal Equivalent showing the urgency of measures needed to (Mtce), 3.7 times its 1980 level, equivalent to attain sustainable economic development. This the total energy consumption in EU-15 countries. rise is continuing unabated, in the first quarter The primary energy consumption mix is shown of 2006 GDP rose at just above 10 percent and in Table 1.7. electricity consumption at 11 percent. Two-thirds of China’s energy use is supplied Recent and projected future emissions of CMM by coal, which caused severe air pollution both globally and from China’s coal mines are when burned and it consumes almost all the shown in Table 1.8. Most of the emission data coal it produces. All projections show coal are derived using Intergovernmental Panel on supplying 60 percent or more of China’s Climate Change (IPCC) Tier 1 Type estimation primary energy in 2020. By 2020, fast methods and are, therefore, inherently growing energy consumption will pose a uncertain. However, emission avoidance is Table 1.7: Structure of Energy Consumption in China Year Energy Consumption Mix (%) (Mtce) Coal Oil Natural Gas Hydropower 1980 602.75 70.2 21.1 3.1 4 1990 987.03 76.2 16.6 2.1 5.1 2000 1302.97 66.1 24.6 2.5 6.8 2003 1678.00 67.1 22.7 2.8 7.4 2005 2220.00 68.7 21.2 2.8 7.3 Source: China Statistical Yearbook, 2004. 8 BM/CMM RESOURCES AND EMISSIONS largely measurement-based and the figures are operation. Flaring at US$6.5 ton CO 2 more reliable; variability in standards of equivalent annual destruction capacity (85 measurement and data collection mean a percent load, net of project emissions) provides relatively high degree of uncertainty but it is the lowest cost mitigation option (Annex II) and anticipated that the rigors of Clean Development should be introduced where CMM utilization is Mechanism (CDM) project validation and not feasible or pending design and construction verification at some key mines will force the of a suitable CMM scheme. The latter cost necessary improvements. There is also cause for applies to an imported, high efficiency, low concern over the accuracy of coal production data emission ground flare specifically designed for following retrospective revision of 1999 coal safe use at coal mines, operating at half output and consumption figures by the National capacity; this cost would reduce substantially Statistics Bureau (NSB). Reliable data are essential with the introduction of locally manufactured for effective planning and management. flare units. The problem can be mitigated The expected demand for natural gas in the years 2010 and 2020 will reach 120 Bm3 and Total amounts of CMM released will increase 200 Bm3 respectively. By then, the shortage by more than 65 percent above the present level in natural gas will be 40 Bm3 and 80 Bm3 by 2020 due to inevitable rise in coal production, respectively, necessitating imports to fill the but the increase in the volumes vented to the gap. Cancellation of all but two Liquefied atmosphere could be limited to a much lower Natural Gas (LNG) terminals due to rapidly rate by improving capture, utilization and rising costs of imports means continued destruction of the gas at coal mines. use of large volumes of coal and insufficient gas to meet projected demand. Greater There is a strong financial case for use of CBM/CMM will reduce the demand encouraging greater use and destruction of for imports. CMM as a priority GHG mitigation measure. The marginal cost of power generation using The environmental benefits of increased use CMM is 30-50 percent lower than that of wind of CMM and CBM are clear. In order to turbine power and the investment cost per Ton meet the planned increase in use of gas in (t) equivalent annual CO2 emission avoided China’s cities to reduce environmental for CMM is US$341 (85 percent load, net of pollution, every available resource must be project emissions) compared with US$277- mobilized including CBM to supplement 3502 (40 percent load) for a wind farm (Annex natural gas supplies and CMM for thermal II). A properly designed and managed CMM applications where medium quality gas will scheme can provide a reliable source of suffice. Policies aiding this process will energy to an established consumer, the mine contribute to a reduction in China’s GHG itself, whereas in comparison wind power emissions by reducing CMM venting and schemes are often remote and invariably encouraging fuel switching from coal to diurnally and seasonally intermittent in their CBM/CMM. 1 Based on a medium-scale CMM project in China. 2 Includes for a relative CH4 emission from displaced coal of 10m3/t. 9 10 Table 1.8: CMM Emissions and Projections – Global and China (Mt CO2 equivalent) Year China Total China World World China Coal China China China China China Avoided GHG Total Hard Coal CMM Total Mining CMM CMM Avoided CMM CMM CMM Emissions CH4 Output Mt Coal Emission Emissions Drained CMM Relative Relative Emissions CO2e Mt Mt CO2e Output Factor Mt CO2e Mt CO2e Emissions to Global to Total (%) CO2e (1) Mt m3/t (2) Mt CO2e CMM % CH4 China % 1994 3,650 720 3,276 449 1230 9.2 170 8.4 4.0 38 24 2.4 (5) (5) (4) (134) (12) (10) 2000 4,946 779 3,639 499 989 9.2 137 13.8 4.8 28 18 3.5 (114 (10) 2002 4,080 643 3,837 526 1,393 9.2 193 17.3 – 37 30 - (7) 2004 – – 4,629 634 1,956 9.2 271 27.1 11.6 43 - 4.3 2010 – 807 5,032 690 2,500 9.5 358 62 16.3 (8) 52 44 4.6 (11) (6) 150.6 (9) 75.3 (9) 21 (9) A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA 70 (13) 54 (13) 15 (13) 2020 – 953 5,783 793 3,000 10.0 452 – – 57 47 - (11) (6) (3) (1) Estimated using 9.1m3/t as a global estimator (IPCC Tier 1 method); assuming coal production 42 percent surface, 58 percent underground (based on 1990 data after United States Environmental Protection Agency (USEPA) 1994 and Irving & Tailakov) applying emission factors 1 m3/t and 15 m3/t respectively. (2) Based on value estimated using author’s model for 2004 for mixed types of mines and assuming no small mines by 2020. (3) The rounded mean of estimates provided by the Ministry of Science and Technology (MOST), Energy Research Institute (ERI) of National Development and Reform Commission (NDRC) and China Coal Industry Association (CCIA) (after Yu Zhufeng, Clean Coal Engineering & Research Centre [CCERC]) is 2.68 Billion tons (Bt) and the latest estimation by CCIA is 3 Bt. (4) Initial total combined hard coal and lignite value reduced by nominal 890 Mt to correct for lignite. (5) NCCCC (2004): Initial National Communication on Climate Change of China, October 2004. (6) Estimated from 2004 data assuming 1.4 percent annual growth (World Energy Investment Outlook, 2003 Insights, International Energy Agency (IEA)). (7) Estimated from ratio of year 2000 data. (8) Calculated as 2004 value plus anticipated CDM project reductions from fourteen mining groups totaling 7.756 Mt CO2e assuming 60 percent of target achieved. (9) Government of China target for capture of 10 Bm3 and utilization of 5 Bm3 CMM, NDRC. (10) Comparative, independent estimates based on Streets et al (2001). (11) After de la Chesnaye (2001). (12) Estimated as 2/3 of value supplied by China Coal Information Institute(CCII). (13) Best case from the analysis of feasible improvement in Table 2.6. Note: Dash (-) = Data not Available. 2. CBM/CMM Recovery and Utilization CBM sources differentiate it from surface CBM predrainage activities associated with mines; while both CBM is a clean fuel with similar properties to rely on similar technologies, the aims are natural gas when not diluted by air or other different and the difference is particularly noncombustible mine gases. It can be recovered relevant to gas extraction and utilization from coal seams by draining CMM from working projects seeking CDM financing. coal mines, extracting Abandoned Mine Methane (AMM) from abandoned coal mines The characteristics of these gas sources differ and producing CBM from unmined coal using in terms of reservoir definition, production surface boreholes. An additional term, VCBM, technology and gas composition. The is sometimes introduced to represent the gas advantages and disadvantages to producers extracted from virgin coal seams using surface and users of the various CBM sources are boreholes independent of coal mining to compared in Table 2.1. Table 2.1: Comparison of CBM Sources Source Advantages Disadvantages Virgin Consistently high gas purity Initial drilling and completion CBM obtainable (although in some costs high surface geological environments the gas is Land access costs for drilling and wells CO2-rich rather than production sites (VCBM) predominantly CH4) A large number of boreholes are Operations independent of coal needed together with surface mining activities collection pipework. Rugged Improves mine safety when terrain in may of China’s coalfield adjunct to coal mining operations. areas makes access challenging and High turndown capability with no may limit gas recovery potential safety or environmental emission risk – but a potential risk of damaging well performance Working CMM drained underground is Gas purity tends to be variable and is coal mines delivered to the surface at a fixed less than 30 percent at many mines (CMM) location using existing in China infrastructure installed for Potential interruption in supply can safety reasons occur as linked to the mining The gas is produced as a waste operation, but short-term supply product, the primary reason for fluctuations can be buffered using capture being mine safety gas holders 11 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Source Advantages Disadvantages Utilization reduces GHG No turndown capability due to the emissions by converting CH4 into risk of compromising safety in the mine less harmful CO2 High flow rates may be achievable Abandoned Access to the gas reservoir is Remedial work may be needed to adequately coal mines achieved using former mine entries seal surface entries (AMM) or boreholes The accessible gas reservoir will be Reduction in GHG progressively reduced in size by rising mine emissions from closed mines water unless mine water pumping Can adjust supply to match demand is continued within specified limits No major AMM projects have yet been identified in China due to high water inflows and relatively small reservoirs Source: Compiled for this study, information from authors. China has rich resources of CBM. Opportunities The need for overseas assistance to accelerate to extract and use the gas from virgin coal VCBM development was recognized by the seams, working coal mines and abandoned coal Government of China, and CUCBM was formed mines are being sought but China’s experience in 1995 to assist foreign cooperative ventures. in developing and exploiting these various In 1998, CUCBM signed the first CBM resources is limited. Production-Sharing Contract (PSC) with Texaco for the Huaibei mining area of Anhui province. VCBM surface extraction in China By the end of 2001, CUCBM had signed 11 PSCs with foreign companies including VCBM exploration and drilling started in the early Texaco, Phillips, Atlantic Richfield Company 80s in China. Little success was achieved until (petroleum) (ARCO), Greka, Virgin and Lowell. 1996 when a pilot well field was developed by These contracts covered a land area of North China Bureau of Petroleum (NCBP), with approximately 25,000 km2 and the total CBM technical assistance from the United States, in resources amounted to about 2 Tm3. CUCBM Shanxi province as part of a United Nations recently signed the 27th PSC. Development Programme/Global Environment Fund (UNDP/GEF)-supported project, Foreign cooperative projects are favored by Exploration for Deep Coalbed Methane. preferential policies and tax incentives, and some Table 2.2: International Cooperation Projects (PSCs signed by CUCBM to 2004/5) Block Area km2 Potential Foreign Partner Region/Province Resource Bm3 Huaibei 2,663 60 Chevron Anhui Sanjiao 448 63.5 Shanxi Sanjiaobei 1,126 55 Shilou 3,602 175 Linxing 3,325 300 Fengcheng 1,541 37 Greka Jiangxi Liulin 198 30 Fortune Shanxi 12 CBM/CMM RECOVERY AND UTILIZATION Block Area km2 Potential Foreign Partner Region/province Resource Bm3 Zhungeer 2,817 400 Chevron Inner Mongolia Baode 1,079 120 Shanxi Shenfu 3,001 600 Hengshanbao 1,807 230 Virgin Ningxia Qingshui 2,317 450 Phillips Shanxi Shouyang 1,963 230 Laochang, Enhong 1,072 140 Far East Yunnan Qinyuan 3,665 550 Greka Shanxi Panxie 584 20 Anhui N Shizhuang 375 75 S Shizhuang 455 90 Jincheng 151 28 Sino-American Huangshi 305 – Gladstone Hubei Baotian-Qingshan 947 160 Asia Canada Guizhou Total 33,134 3,814 Source: Modified from Investment Guide for CBM/CMM, CCII with new data from authors. US$150 million has been invested in exploration partly due to inappropriate completion methods. blocks covering a total area of more than Test wells were generally completed by hydro- 33,000 km2. The present situation is summarized fracturing (“fraccing�), a long-established oilfield in Table 2.2. CBM exploration activities in the technology However inadequately designed license blocks are not fully reflected in the list as “fracs� and the use of additives which damaged some license holders have involved others the natural coal permeability led to some wells through “farm-in� agreements to spread risk and underperforming. Additionally, there are increase exploration resources. many instances where the wells were not left on line to produce long enough to truly By the end of 1999, 201 CBM wells had been evaluate the production, protocols for drilled, mostly in existing coal mining, areas but production testing are nonexistent and many results were often disappointing and project operators have been reluctant to development progress was slow. Reasons for perform long-term tests for fear of wasting slow progress included lack of geological data the gas. to aid site selection, time taken to build experience of Chinese coalfield conditions, lack STIS (drilling) is being evaluated at a number of of CBM capacity within drilling and service locations in Shanxi province as an alternative to companies and administrative difficulties. “fracced� vertical CBM wells and is showing Lackluster results were partly due to low promise. This technology is discussed in more permeability in some of the explored areas and detail in Annex III. 13 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Surface CBM developments in Enhanced Coal Bed Methane (CUCBM) and the Shanxi province Canadian Government are cooperating in an ECBM (Annex III) project in Qinshui. Surface CBM development is progressing in Shanxi more than in other provinces. By the CUCBM has recently accelerated its drilling end of 2004, seven foreign companies were program and is establishing a rapidly rising involved in VCBM exploration, 13 PSCs production capacity, but it is not being matched covered tracts of 13,000 km2, 122 boreholes by sales, market development being considered had been planned or were being drilled and a secondary issue as CUCBM views itself as an 36 boreholes were completed in 2004. Nearly exploration rather than a development company. 146 Kilometer (km) of seismic was shot and foreign investment amounted to US$16 CMM extraction in China million. The Panzhuang CBM project, involving cooperation between a U.S. partner, CH4 is released from coal seams which are Jincheng Mining Group (JMG), and CUCBM, disturbed by mining activities. As coal production has installed 30 CBM wells. A domestic VCBM increases, more gas is released. There is a demonstration project in Qinshui basin, limiting coal production at which the gas emitted managed by CUCBM, has been approved into the mine roadways can no longer be diluted and developed for the 100 well field at a total to a safe and legally acceptable concentration. investment cost of 345 million yuan (Y) In order to achieve higher coal production, some (US$43 million) with 50 million yuan (US$6 of the gas must be intercepted before it can enter million) coming from the National the mine airways. This is achieved using CH4 Development and Reform Commission drainage techniques. Gas drainage in gassy (NDRC). An annual gas production of 100 working mines is an important safety measure Mm3 is expected. as well as a potentially major source of clean fuel. These two aspects are intimately linked and JMC has drilled 170 surface vertical CBM both have a high profile in China due to an wells (110 in Sihe East and 60 in Sihe West). unacceptably high number of gas explosions Some of this gas is collected and compressed and because of an urgent need to reduce GHG and sold as vehicle fuel Compressed National emission from coal mines. Serious explosions Gas (CNG), in Jincheng and Zhengzhou and have occurred in over 45 KSOCMs. CMM the remainder is flared. Future plans are to drainage was started in China’s coal mines in blend the CBM with CMM gathered from the 50s and the annual volume of CH4 drained surrounding mines to provide a reliable city has risen from 100 Mm3 in 1950 to 1.8 Bm3 in gas supply to Jincheng and other cities. 2004 in the KSOCM. A range of underground gas drainage methods has been developed The Qinnan area with its assessed reserves of involving both drainage before (predrainage) 75 Bm 3 will be a center of intensive CBM and after (postdrainage) mining. Predrained gas development with a projected annual production flows from underground in-seam boreholes at of 200 Mm3 by the end of 2005 and 3 Bm3 by many mines are often low due to the low the end of 2010. permeability characteristic of seams in many of China’s coalfields. Once seams are disturbed Advances are being supported by importing by mining activity, permeability is no longer an advanced technology. In 2004, the first STIS issue and a substantial volume of CMM is multibranch well was completed at the Sino-U.S. obtained from draining gas released from coal Daning coal mine and achieved a daily seams disturbed by mining (postdrainage). production of 20,000 Cubic Meter (m 3). The postdrainage methods most commonly 14 CBM/CMM RECOVERY AND UTILIZATION employed are cross-measures drilling, CMM comprises CH 4 diluted with various construction of drainage galleries above proportions of air, N (deoxygenated air) and long-wall panels and goaf drainage (using a CO2. The purity of CMM differs from mine to pipe laid across the face start line from a mine depending on geology, the mining cross-cut). Details of the current status of CMM method, the drainage methods in use, gas drainage in China are provided in Annex III. extraction rates, practices at the mine and the prevailing meteorological conditions. CH 4 More than 95 percent of the coal mined in China concentrations from 7 percent to 90 percent comes from underground workings of which of the drained gas have been observed at 47 percent (2004) is produced from KSOCM. various mines. The low purity drained flows Some 300 of the KSOCM are classified as gassy are generally a sign of incorrect choice of (>10 m3/t of gas released per ton of coal drainage method or inadequate design, mined). Two hundred and six out of 621 installation or system management. KSOCMs in China have CMM extraction systems at present and the government plans to set up AMM extraction in China gas extraction systems at all the KSOCM (which appears to indicate gas will be drained even The potential benefits of AMM extraction and where it may not be necessary). The average utilization schemes in China include employment CH4 capture efficiency in KSOCM with gas opportunities after colliery closure, clean energy drainage systems is currently only 23 to 26 from a waste product and a reduction in GHG percent. An increasing number of the small and emissions. There are no major schemes at medium local mines are installing gas drainage present in China. systems, but the CMM quantities drained and used are not included in the national statistics AMM schemes have proved a commercial and capture performance is thought to be success in many European countries including generally low. the Czech Republic, France, Germany and the United Kingdom. However, there are differences More than 30 percent of all China’s coal mines in China – fewer seams worked in the exhibit high gas emissions. China has 911 coal stratigraphic sequence, the mines are generally mines with high gas emissions and 896 gas wetter and flood quickly after abandonment, the safety monitoring and control systems had been closure process is protracted, the export of installed by the end of September 2005. By the electricity from small-scale power generation can end of August 2005, all the gassy KSOCM had be problematic, different methods of coal working installed safety monitoring and control systems. are employed and workings associated with a Of the 121 coal mining groups/bureaus, 66 are particular shaft or drift tend to be less extensive. linked to a national monitoring network. China has 42 coal production counties linked to the Large coal mines in China invariably remain national network and 24 counties that have a open for a considerable period even after full partial network link. coal production ceases for various reasons including salvage of equipment, mining of main China’s 4,462 high gas coal mines have roadway pillars, continuing dewatering to protect established 4,325 gas monitoring and control neighboring mines and to maintain employment systems. There are 20,213 low-gas coal mines as long as possible. During the closure period with 7,569 gas monitoring and control systems. the mine is ventilated, some gas drainage of This large undertaking and expenditure has sealed goaf areas may be practiced and not resulted in any significant reduction in significant volumes of GHGs can be vented. serious gas explosions. At one site, an estimated 420 Mm3 per year of 15 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA CH4 was emitted in the ventilation air from a Bm3 CH4 was reported as drained from KSOCM closed working where the main coal production and an estimated 2.34 Bm 3 drained from had ceased three years previously and still no all mines 3 corresponding to 13 percent sealing was planned. The U.K. government’s of the total gas released. Utilization schemes at Department of Trade and Industry (DTI) and the KSOCM consumed 700 Mm3 of drained gas Foreign and Commonwealth office have which can be increased, by say, 10 percent to sponsored projects in China to transfer AMM make some allowance for likely usage in planning and production technology and to non-State mines giving an overall consumption build capacity in AMM expertise in China. Initial of 770 Mm3. The unused drained gas vented to surveys indicate that the scope for stand-alone the atmosphere amounts to 1.57 Bm3 equivalent AMM utilization schemes are relatively few at to almost 24 Mt CO2. Much of this gas would present but that reservoir capacity in sealed-off have been of too low a concentration to use and abandoned workings linked to active mines safely, below the minimum permitted may represent a resource which could be used concentration of CH 4 for utilization of to help meet peak CMM demand, and one small 30 percent; low purity of drained gas is a major scheme has been developed. Coal mining limiting factor for utilization of CMM. groups are likely to have little time available for examining the potential of AMM until the safety The coal mining areas with the largest CMM issues afflicting working mines have been emissions are Yangquan, Huainan, Fushun, successfully tackled. AMM is, therefore, not a Songzao and Panjiang. An overview of gas major issue at present and need only be extraction and utilization at these and in considered on a site-specific basis where other gassy mining areas is provided in opportunities might arise in connection with a Annex IV. conventional CMM utilization scheme. However, The principal coal seam gas uses in China as depths of industrial-scale mines increase and are summarized in Table 2.3, mine-site uses conditions become gassier, there will be in Table 2.4 and industrial applications in opportunities in the future and the government Table 2.5. Much of the CMM used in China is should be aware of the potential. distributed via pipelines to mining Utilization of CBM and CMM communities and neighboring cities for domestic use, mainly cooking. Some CMM is Gas utilization has also increased but at a used in colliery boilers and for small-scale smaller rate than gas drainage. In 2004, 1.8 power generation. Small- scale power Table 2.3: Principal Uses of CBM from Different Sources in China CBM (VCBM) CMM AMM • Natural Gas Substitute • Heating and power • Supplementary generation at the supply to meet peak • CNG, LNG mine site CMM demand (only • Power Generation • Dedicated pipeline for recorded application domestic distribution system in China due to • Chemical • Dedicated local pipeline for generally poor Conversion industrial consumers conditions for AMM recovery) Source: Compiled for this study. 3 The reported drained gas volume for KSOCM has been increased by 30 percent to allow for gas drainage in non-State mines. 16 CBM/CMM RECOVERY AND UTILIZATION Table 2.4: Possible Mine-site Uses for CMM in China Uses Comments Firing or cofiring in Common in China. Generally, only uses a small proportion of the boilers for hot water drained gas and space heating Coal Drying Used in coal preparation plants in Poland, Russia and the United States. Of possible relevance to China as more coal is washed to meet increasing coal quality requirements Shaft Heating and Cooling Shaft heating is a mandatory process in northern China due to harsh winters to prevent ice hazards and protect miners. Shaft cooling is required in the warmer latitudes Power Generation Reciprocating engines, gas turbines and combined cycle plant have been used. Due to capital cost, some overseas schemes have a natural gas supply to ensure continuity of power output and, hence, revenue. Electricity surplus to mine requirements is sold to the grid Combined Heat and Power (CHP) Used in Poland to supply heat and power to a mine and a nearby town. Worthy of examination for China Source: Adapted from Creedy et al (2001). Table 2.5: Industrial Uses of CBM Application Comment Burner Process ovens, boilers – most common industrial use suitable for CBM and CMM although variable quality is sometimes a problem with CMM Vehicles Some CBM is used this way in China and interest is growing Fuel Cells Demonstrated in the United States but high capital cost. Of future interest for China once equipment costs are reduced Chemical Feedstock, Manufacture of carbon C block, formaldehyde, synthetic fuels, CH3 OH Petroleum Substitutes and Di-Methyl Ether (DME). DME production is at the development stage in China Source: Compiled for this study. generation using low-cost domestically In the absence of pipelines, compression stations manufactured gas engines are proving popular have been constructed to enable compressed CBM at coal mines due to their flexibility. The opinion (synonymous with CNG) to be transported by truck of some mining groups is that installation of to city consumers. More efficient transport can be power generation is less complex and less costly facilitated using gas liquefaction technology or than gas pipeline schemes. There would be LNG which reduces the gas volume 600fold. environmental advantages in using CMM in While suitable for shipborne transport, application district heating boilers and Combined Heat of this technology to road transport may be limited and Power (CHP) plant in cities. These due to the gas cooling requirement, container decisions should be market-driven and weight and poor road conditions in many project although the environmental advantages are areas. Gas-to-liquids technologies for producing clear the economics will not be favorable Methanol (CH3 OH) and vehicle fuels from CBM in all cases. are being examined by some developers. 17 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Gas flows supplied to CMM utilization schemes By the end of 1999, more than 20 coal mining typically lie in the range or 5 to 100 Mm3/a. The enterprises were operating some 60 CMM demand from domestic consumers varies widely utilization projects. Some 90 MWe of CMM both daily and seasonally, gas often being vented power generation equipment has been installed in summer. In comparison, a power generation at Chinese KSOCM and a further 150 MWe is scheme can consume gas at a steady base load under construction including 120 MWe by the rate throughout the year, offering higher returns JMG, Shanxi. Sihe mine of the JMG has laid on investment and greater reductions in GHG 12 km of underground gas drainage pipe, emissions as more gas will be used. There are established 16 gas extraction pumps and drilled relatively few CMM power generation schemes in 30 km of long, in-seam predrainage boreholes. China because local authorities and mining Annual gas extraction is around 200 Mm3 of enterprises, for social reasons, often consider which some is utilized in 4x400 Kilo Watt (s) (kW) domestic consumers as a priority. Achieving an gas-engine power generators and a 2x2 Mega electrical grid connection is problematic in some Watt (s) (MW) power plant. Yangquan Mining areas. However, there is potential to develop more Group, Shanxi province, has drilled over 120 CMM schemes to supply power to the mines km of underground gas drainage boreholes to themselves as they have a predictable base recover 25-350 Mm3 of gas per year. Gas is electrical load and offer a number of advantages distributed to 120,000 households through a to consumers for generated power. Drained gas main distribution system consisting of three gas flow rates must be maximized to protect safety of holders and 64 km of pipeline. By the end of underground operations, and, therefore, supply 2005, Huainan Mining Group will have installed and utilization demand are not easily matched. more than 24 MWe power generation capacity Financially optimum solutions generally involve and a projected 100 MWe by 2010. installing undercapacity utilization. Maximization of CH4 destruction for CDM purposes might then Nevertheless, the utilization of drained mine gas require addition of a flare to burn surplus gas in China remains low with more than half of the and this has been proposed at a few mine total gas extracted released directly into the sites but rejected by the Designated National atmosphere. In developing a more sustainable, Authority (DNA). environmentally responsible coal mining industry, more effort will need to be focused on A feature of most utilization schemes in China increasing the amount and quality of gas is that the mine forms a CMM company which captured and the quantity used. China should accepts the gas as delivered by the mine’s continue its efforts to encourage greater surface gas extraction plants and delivers it to international participation in mine gas utilization the consumer. The management of the CMM schemes to quicken the pace of work in this field. scheme and the CH4 drainage system are, Large-scale development and utilization of therefore, virtually independent. A disadvantage CMM in China will help to optimize the energy of this arrangement is that the mine has no direct structure and is of significance in ensuring a incentive to improve gas flow and quality. growing supply of clean energy. Possible means for motivating mines to improve drainage performance should be identified and CMM use is governed by the quality of the gas assessed. For example, bonus payments could drained by the mine and international practice be offered by the CMM company to the mine is to avoid extracting and using CMM with a based on revenue gained from sales of gas composition near or within the explosive range of adequate quality (> 30 percent CH 4 of 5-15 percent CH4 in air. Most countries set concentration) supplied in excess of the minimum safe CH4 concentrations for utilization contracted amounts. of drained gas. For example, the minimum CH4 18 CBM/CMM RECOVERY AND UTILIZATION concentration permitted for safe utilization at mines and also to generate heat and power. working mines in the United Kingdom is Most of these technologies will be costly, 35 percent subject to suitable monitoring and requiring CDM support for viability in most control safeguards, and Australia requires instances. Megtec System has developed a judgment based on formal risk assessment. thermal oxidation device called the Vocsidizer capable of removing all the CH 4 from a This safety issue is not taken seriously in Chinese ventilation stream and generating power. mines. Chinese regulations implemented by the Two pilot-scale tests have been successfully former Ministry of Coal Industry set a 30 percent completed in the United Kingdom and Australia minimum concentration value, but this is and feasibility studies have been undertaken in interpreted by some mining groups as applicable Huainan. A full-scale system was to be only to CMM for domestic use and others as completed in Australia by mid-2006 but has outdated and no longer applicable. Shengli experienced delays. Although the Megtec System Power Machinery Company has produced a may not necessarily be the optimum solution, gas-engine capable of running and generating it is a commercial equipment carrying full electricity from CMM containing 6-25 percent manufacturers support and maintenance thus CH 4. A proprietary water injection system reducing ownership risk. Alternative, but less protects the inlet pipe work from explosion proven VAM technologies include specially propagation risk. Following a utilization adapted lean burn turbines and catalytic workshop in Dongyin city, many mining groups, oxidation reactors developed in Australia and including Fuxin and Huainan, signed contracts Canada, respectively. A feature of most VAM to purchase this equipment. By October 2005, technologies is that additional drained gas must orders had been placed for 77 generating sets. be added to provide sufficient energy to generate While the technological solution to use of CMM power and the implications of displacing more of low purity is innovative, the safety implications efficient energy recovery must be considered on are cause for concern. a site-by-site basis. A more straightforward use of VAM could be combustion air in boilers at To ensure safety of utilization developments, and mine mouth power plants provided the gas can reduce uncertainty for developers, this issue be satisfactorily cleaned. should be resolved and clear guidance issued by the government. Many gassy Chinese mines Government plans and targets are now utilizing low concentration gas, or planning to install low CH 4 concentration CMM gas-engines, rather than addressing the inadequacies of their drainage systems, for Improving control and utilization of CMM is the example, in Guizhou province. Such a response cornerstone of the government strategy to is counterproductive to the improvement of mine enhance coal mine safety and gas drainage safety and to the development of a sustainable performance targets have been set, which will CMM utilization industry. drive growth in CMM availability and utilization: VAM represents a significant source of GHG • By 2006, capture efficiency should reach 30 emissions and energy as more than 70 percent percent, the CH4 extraction volume 4 Bm3 of the gas released from coal mines is exhausted and total gas utilization in China exceed 800 at low concentrations. Technologies for removing Mm3. In mining areas with gas drainage, 50 and using low concentrations of CH 4 in percent of the captured gas should be used ventilation air are being developed to reduce and areas not yet using gas should start to the major source of GHG emissions from coal do so; and 19 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA • By 2010, capture efficiency should reach development of CMM extraction and utilization 50 percent, the CH 4 extraction volume policy. The onus for delivering these objectives 10 Bm3 and the total gas utilization in China will fall on the provinces with the largest and should exceed 5 Bm3 with half of the drained gassiest coal mining sectors, Shanxi province gas being exploited. Gas utilization for in particular. residential and industrial purposes shall exceed 2 Bm3 and for power generation CMM capture and use by 2010 3 Bm3. Installed gas power generation capacity shall exceed 1,500 MWe with more Annual increases in coal production, a greater than 50 percent in combined cycle. It is proportion of production from longwall unclear whether the plan refers to CMM, operations and an expectation of increasing gas CBM, natural gas or assumes a combination. drainage capacities and performance will lead For CMM projects, where there are gas to increasing volumes of CMM availability. supply and quality risks, it will be difficult to The expected CMM quantities emitted and used justify and finance costly but highly efficient, in 2010 (Table 2.6) have been estimated combined cycle power generation in assuming from 2004 to 2010 the proportion many instances. of coal extraction using longwall methods increases from 40 to 80 percent in KSOCM, and Capture efficiency targets are assumed to apply from 20 percent to 40 percent in TVCM, thus only to KSOCM draining gas. Combined cycle increasing the overall average specific emission generation may allude to use of waste heat from factor from 9.2 to 9.5 m3/t. gas-engines for driving steam turbines rather than gas turbine and steam turbine combinations. The predicted emissions reduction of about 18 Mt CO2e for the scenario of no improvement The above targets are ambitious and largely in CMM drainage performance (Table 2.6) arbitrary in that technical feasibility, financial and corresponds fairly closely to the 16 Mt CO2e economic implications do not appear to have value predicted by adding expected reductions been assessed. Nevertheless, these objectives from CDM for CMM projects to the 2004 figure provide a reference against which CMM projects (Table 1.8). It is important to recognize that Table can be promoted and will strongly influence the 5.1 only refers to gassy mines as these are the Table 2.6: CMM Extraction and Usability Scenarios for Gassy Mines in 2010 Type of Gassy Total CMM Gas Used if no Gas Used if Gas Used if Coal Mines Released from Improvement Improved Improved Gassy Mines over 2004 Standards Standards Plus Mm3 Standards Mm3 Mm3 Use of VAM (1) (2) Technology Mm3 (3) KSOCM 8,835 1,016 2,120 2,792 Other 9,915 198 793 793 Total Mm3 18,750 1,214 2,913 3,585 Total Mt CO2e 282 18.3 43.9 54.0 Source: Compiled by authors for this study. (1) 23 percent capture and 50 percent usability at KSOCM; 10 percent capture and 20 percent usability at others. (2) 30 percent capture and 80 percent usability at KSOCM; 20 percent capture and 40 percent usability at others. (3) Removal and use of 10 percent of the total vented (unusable drained gas and ventilation air) at KSOCM only. 20 CBM/CMM RECOVERY AND UTILIZATION locations where lowest cost reductions can be certainty and the following very broad achieved. The CMM emissions from the assumptions have been made: 400 boreholes remaining mines will be exhausted to are installed per year for four years to 2010, atmosphere at very low concentrations, too costly the conservatively average flow is 3,000 m3/day to remove in any significant quantity. A and infrastructure exists, which allows all the gas combination of improved CMM drainage system to be sold. The estimated production is about design and management, more conventional 1.8 Bm3. Wide use and success with STIS (drilling) utilization supplemented by flaring, together with could raise the average gas production implementation of VAM technology at some key substantially; perhaps even double it to 3.6 Bm3 sites has the potential to reduce CMM emissions which is close to the value projected for Shanxi at coal mines by 3.6 Bm 3 or 54 Mt CO 2 by its provincial government. Although there are equivalent in 2010, most of which will be many instances where the application of recovered as useful energy. The best CMM directional drilling may be warranted, it is highly emission reduction which could reasonably be dependent on the geological structure and achieved is 15 percent of the total, well below properties of the reservoir and commercial success the government target which equates to will ultimately depend on the economics of each 21 percent (Table 1.8), or 5 Bm3 CH4. case. In any event, it is probable that a high proportion of the surface CBM production in China Examination of CMM capture and utilization in 2010 will be achieved within Shanxi province. potential on the basis of mine-type reveals that there is less scope than previously thought for The estimated combined availability of surface increased use and mitigation of CMM emissions. CBM and CMM for utilization in 2010 will be in Blanket application of an average 30 percent the range of 3.0-7.2 Bm3 depending on the capture, for instance, across all coal mines does degree and effectiveness of policy support. not take account of the large number of mines The average value is close to the NDRC target which vent gas but where quantities are for CMM use alone of 5 Bm3. There is, therefore, insufficient to justify installation and operation considerable scope for scaling up the CBM/ of CH4 drainage systems. CMM industry. However, the magnitude of the scale which should be targeted is uncertain Future CBM availability due to incomplete data on CMM emissions, uncertainties in the quantities of CMM drained CBM development has not advanced in China as and used, and the exclusion of non key originally planned by the government. State-owned mines from the statistics which The aim was to produce 3 to 4 Bm3 a year by could be of increasing importance. 2005, increasing to 10 Bm3 by 2010 and attaining 20 Bm3 by 2015. These projections may be too Shanxi provincial integrated CBM/CMM optimistic. If the average borehole gas flow was, development strategy say 3,000 m3/day (a generous figure for a national average), then some 2,700 production boreholes The Shanxi provincial government has prepared would need to have been completed by 2005 and a detailed review, plan and suggestions for the 18,200 by 2015. If, in addition allowances, were integrated development of CBM and CMM made for exploration, poor producers and extraction and use within its province. replacement boreholes, substantially more drilling Construction of CBM, CMM and natural gas would have been needed. transport infrastructure is included. CBM production from surface wells is, therefore, The estimated total CBM resource in Shanxi is difficult to project for 2010 with any degree of 10 Tm 3 distributed mainly in the Qinshui, 21 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Hedong, Xishan, Huoxi and Ningwu coalfields. pipeline (90 km) which is to be commissioned More than 80 percent of the resources are by the end of 2005. concentrated in the Qinshui (32,000 km2 at depths of 300-600 meters) and Hedong (1,700 Main development issues raised in the km2 at depths of 400-900 meters) coalfields Shanxi government report and they constitute the main commercial The provincial government has firm views on development opportunity. In north-east Qinshui, what it sees as the problems: total coal thickness is 15 m, CH4 contents range from 7-18 m3/t and CBM abundance is 280 • CBM and CMM development is uncoordinated Mm3/km2. In south-east Qinshui, total coal and a unified industrial policy is required; thickness is 10 meters, CG 4 contents are reported as ranging from 5-38 m3/t (but the high • Shanxi province should play a key role in the value is not tenable) and CBM abundance is development of CBM resources; 170 Mm3/km2. • The rights of coal and CBM development The projected annual demand in Shanxi is and extraction require policy to account for summarized in Table 2.7. There may be and adjudicate conflicts resulting from additional demand from Beijing and Tianjin overlapping interests; as well as from the neighboring provinces of Hebei and Henan. • Joint venture CBM activity has been slow which implies possibly ineffective partners; Pipeline transport • The price of CBM is not reasonable Three natural gas pipelines pass through Shanxi leading to conflicts between suppliers and province: Shaanxi-Beijing 1 (330 km); Shaanxi- consumers; and Beijing 2 (260 km); and the West-East (328 km). These will soon be at full capacity carrying • Investment in CBM development has been natural gas from the Tarim and Ordos basins to too low. eastern cities and, therefore, largely inaccessible for transport of virgin CBM produced in Shanxi. Issues to be addressed in Shanxi One natural gas pipeline, Linfen to Hejin, has been completed in Shanxi. Other internal The report suggests the following actions, some provincial pipelines are the Jincheng-Yancheng- of which may be considered controversial as a Zezhou CMM collection and distribution system means of addressing current deficiencies and (90 km) which is planned for construction in speeding the development of a large and 2006 and the Dayu-Yuanping natural gas sustainable CBM/CMM industry within Shanxi: Table 2.7: Projected Annual CBM Demand in Shanxi (Based on Shanxi CBM Report, 2005) Years Total Civil Industrial Power Chemical (Bm3) (Bm3) (Bm3) (Bm3) (Bm3) 2005 0.53 0.474 0.044 0.012 – 2006-2010 3.54 1.153 0.218 0.202 1.970 2011-2020 7.10 2.115 0.800 0.628 3.558 Source: See report references. 22 CBM/CMM RECOVERY AND UTILIZATION • The current CBM blocks are too large, • Policy should be introduced to encourage development too slow and they should be development of a CBM industry. reregistered under new terms and commitments; The Shanxi government views CBM as an • New policy is required to recognize the order abundant, largely untapped clean energy and priority of rights, CBM extraction first, source for the province, and its recovery as a mining second; new technology with industrial growth potential. Benefits of its exploitation are the • CBM administration should be devolved to assistance of economic development in some provincial level (this was done previously with poor areas, improved coal mine safety and a the KSOCM when the Ministry of Coal means of improving air quality in its polluted Industry was abolished); cities. The analysis and conclusions of the • Supervision and reporting of activities should provincial government may have technical be strengthened; validity but may not be economically sound and are certainly not concordant with the idea • A CBM price coordination system should be of market-driven systems where rationalized established (increased government intervention energy prices are driven by parity pricing of in the market); and energy equivalent products. 23 3. Administrative, Regulatory and Policy Framework CBM and CMM extraction are managed under other. The revisions should be examined in detail different regimes, but despite both being before promulgation and any conflicts resolved. generally aligned with coal sector interests, In reviewing the Coal Law, efforts should be regulation of interaction between them is poorly made to identify the reasons for its inadequacy defined and existing policies to encourage in addressing safety issues, in particular gas exploitation of both CBM and CMM resources control and gas drainage. have been largely ineffective. The administrative, regulatory and policy framework, therefore, The ownership of CBM rights has provoked needs to be reviewed and strengthened if controversy between coal mining and government plans to more fully utilize these petroleum industries and licensing regimes in resources are to be realized. other countries prior to the new law being passed to clarify the issue. China should seek Legal framework to forestall this future potential problem by rationalizing the present legal framework. The legal framework currently applicable to CBM CBM and CMM licensing regimes established and CMM exploitation is nonspecific and is elsewhere should be examined to aid this encompassed by the State’s Mineral Resources process, for example, Australia and the Law, the Coal Law and the Regulations for United Kingdom. Registering to Explore for Mineral Resources Using Block System, the Regulations for Administrative framework for Registering to Mine Mineral Resources, the CBM and CMM Regulations for Transferring Exploration Rights and Mining Rights. There may be overlap with The CBM and CMM administrative framework petroleum regulations under which natural gas is not well developed and suffers from the would be considered: Regulations of People’s dispersion of responsibilities between various Republic of China Concerning the Exploration organizations and departments after the Ministry of Offshore Petroleum Resources in Cooperation of Coal Industry was abolished in 1998. CBM with Foreign Enterprises and Regulations of and CMM have not featured as significant People’s Republic of China Concerning the administrative issues in subsequent coal mining Exploration of Onshore Petroleum Resources in sector reforms. CMM regulation essentially Cooperation with Foreign Enterprises. The latter follows that of coal mining which has been two regulations are applied to CBM development the subject of a previous World Bank study involving Chinese-foreign cooperation. (Mitsubishi Research Institute [MRI] et al. 2004) and together with CBM is now receiving special Both coal and mineral resources laws are attention from central government in a new currently being revised, but independent of each initiative to improve coal mine safety. 25 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA CBM exploration and extraction rights are licensed authorities. It is unclear whether CMM was by the Ministry of Land and Resources (MoLaR). included in this remit, but it is unlikely to have NDRC or Provincial Development and Reform been the intent of the State Council to give Commission (PDRC) is responsible for project CUCBM any jurisdiction over coal mining approval depending on scale, and CUCBM has activities which are the responsibility of provincial the exclusive right to form Joint Ventures (JVs) governments. In any event, a CBM developer with foreign CBM developers. CUCBM also cannot proceed with exploration without assists its foreign partners submit contracts for obtaining an agreement with the holder of approval by the Ministry of Commerce. mining rights. Government regulation and Where VCBM and coal mining activities are in management of surface CBM close proximity, coal mine owners should clearly extraction and Use be consulted, but there is no legal framework, policy or procedures, which address the safety As an emerging industrial sector, the CBM issues of CBM and coal mine interactions when industry in China is characterized by high risk. two or more different parties are involved. Such This makes it appropriate for China to adopt procedures have been successfully implemented international cooperation in the initial stages of in other countries and China could learn from exploration and development. Thus, China can these examples. In China, there is no clear learn the required advanced technology in return differential made between surface CBM activities for foreign investors participating in CBM undertaken for energy production, known as development and utilization. VCBM and CBM activities undertaken primarily to facilitate safe production of coal. By the end of the 80s, China had begun to successfully identify and develop CBM resources. The formation of CUCBM as a regulator to After observing the successful development of protect the interests of China was an essential CBM in the United States, many international first step in establishing a CBM industry in China. companies sought partnerships with China and However, as the industry has grown and started a total of 12 international partnerships were to mature, the regulatory needs have changed. initiated during this early phase. However, CUCBM has become a developer in its own right because few policies were in place to govern in conflict with its duties as a regulator for the such partnerships, and due to conflicts between government and JV partner with foreign different State agencies, many problems arose. companies. The contradictory position of CUCBM is compounded by the resentment of Administrative regime some coal mine operators to its intervention in CBM activities in their mining leases, thus The State Council sought to resolve the deterring partnerships between mining administrative problem in 1995 when it companies and foreigners which could be established CUCBM to coordinate all phases of beneficial to mining and safety; conversely, some international partnerships for CBM exploration partnerships between CUCBM and foreign and development. CUCBM was awarded the entities have been thwarted due to difficulties in monopoly right concerning CBM exploration, the relationship with the mining group. development and production through cooperation with foreign firms. Responsibilities If a CBM development project designed for included relevant tendering, negotiation, implementation in coal mine areas is to be contract signing and implementation once a implemented using foreign grants or free target block is approved by the competent State technical assistance, that is, if the projects are 26 ADMINISTRATIVE, REGULATORY AND POLICY FRAMEWORK nonprofit-making and noncommercial in nature, two rules regarding CBM exploration, but these it is not necessary for CUCBM to get involved. are not enshrined in any recognizable formal policy or law: Production-Sharing Contracts • To avoid infringing upon the existing coal CUCBM is the mandatory Chinese JV partner mining company in a region, CUCBM will for foreign investment in China CBM. CUCBM endeavor to exclude the coal mining area is owned 50:50 by the China National Petroleum from the CBM-potential area when Corporation (CNPC) and the China Coal cooperating with international partners to Construction Group, both State-owned develop a CBM project; and enterprises. International cooperation for surface development of CBM is implemented through • The coal mining company should be one of the mechanism of PSCs which ensures the the Chinese partners in the development foreign participant carries the exploration risks phase when CBM exploration is adjacent to but is able to recoup these expenses at the or within the coal mining area. development stage with the help of a package of tax incentives. Chinese CBM project developers do not need to involve CUCBM, neither do they need to Contract terms are typically for 30 years and a involve foreigners. sizable sign-on fee is usually required. Contracts are implemented in three phases – exploration, Regulations regarding foreign development and production. The contractor participation in CBM & CMM projects commits to an exploration work program and Specific projects call for different types of expenditure over a five-year period. Subsequent investment. A coal bed methane exploration and development costs are borne in proportion to development project is intended to develop CBM ownership, with the contractor preferentially resources on a large scale, using either of two receiving cash flow until a 9 percent rate of return investment forms: Chinese-foreign cooperation, is realized. CUCBM’s role is to facilitate local or independent foreign investment. However, for approvals and liaison with local and a coal mine methane recovery and use project, government bodies. A joint management because CMM is developed within areas where committee, including CUCBM, comprises the exploration and mining rights have already decision–making body. The PSC requires been obtained, foreign investors can only commitment to training and technology transfer participate using Chinese-foreign cooperation at the contractor’s cost and preference for or Chinese-foreign JV, according to the principle Chinese goods and services where competitive. of exclusive exploration and mining rights Ownership of data is vested with CUCBM. outlined in Chinese law. PSCs enjoy more preferential treatment than In China, if there are more than two kinds conventional oil and gas PSCs in terms of of mineral resources available for mining in extended contract time, reservation time, return the same region, the resources are defined as of blocks and the various fees and expenses paid either main mineral or associated mineral in by foreign parties; this is reasonable as there is accordance with their principal and subordinate a longer period from exploration to development roles during exploration and development. and the build-up to peak production is generally CBM resources are regarded as the principal slower than with oil and gas production. mineral where CBM exploration and The general principles embedded in CBM PSCs development is conducted on a commercial are summarized in Annex V. CUCBM applies scale outside the active mining areas. 27 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA The projects of this kind belong to the coal bed coal mine methane, waste coal, slime, low methane exploration and development category quality coal and peat. included in the Guidance Catalog of Industries for Foreign Investment, which can be managed The third session of the State Council Work according to the modes of oil and gas exploration Safety Commission (SCWSC) (2002) and development. confirmed that safety in coal mines should focus on gas control stating that coal mines CMM can be regarded as the associated should adhere to the principle of predrainage mineral for CMM utilization projects in active of gas, gas monitoring and testing in the course mining areas where the mining license has of production and deciding on coal production been obtained by a coal enterprise according rate according to secured ventilation. to law. This type of project falls into the category of comprehensive development and China’s mining laws and regulations are utilization of low heating value fuels and coal highly prescriptive. Conditions are specified mine associated resources included in the for classifying a mine as gassy, for the Guidance Catalog of Industries for Foreign introduction of gas drainage and for safe Investment, which is managed in accordance operations within the mine. The current with the comprehensive utilization policies philosophy seems to be that if a mine is in China. The two types of projects are classified as gassy or outburst-prone, then it encouraged industries for foreign investment. should install and operate a CH4 drainage However, they are different in terms of system irrespective of technical feasibility and management method and policy. alternative CH4 control options. If a foreign company wanted to invest in CMM In February 2005, the State Council decided to exploitation projects and the comprehensive establish an interministerial coordination and utilization projects of coal mine gas in active guidance group for CMM control to combine coal mines, or coal mines which are being built various efforts and take comprehensive in China, these projects would be examined and measures to arrest the too frequent occurrence approved according to general provisions for of major gas explosions in coal mines. The group the investment of foreign businesses. Projects is led by the NDRC, assisted by SAWS, State with estimated costs above the investment Administration of Coal Mine Safety (SACMS) and threshold of US$30 million should be reported the Ministry of Science and Technology (MOST), to NDRC for examination and approval. Projects with the Ministry of Finance, the Ministry of Labor with a cost less than the investment threshold and Social Security, the Ministry of National can be examined and approved by development Land Resources, People’s Bank of China, the and reform commissions from the province and State Resources Commission, the General municipality directly. Administration of Environmental Protection, the Chinese Academy of Engineering, National Policy and regulations on CMM Development Bank, China Coal Industry drainage in China’s coal mines Association (CCIA) and other departments and agencies as members. Its day to day work is Government support for mine gas extraction and carried out by the Energy Bureau of NDRC. utilization is given in Article 35 of the Coal Law of the People’s Republic of China which states The group’s main responsibilities are to: that coal mine enterprises are encouraged to develop coal washing, coal preparation, • Organize and lead the national effort to comprehensive development and utilization of control and utilize CMM; 28 ADMINISTRATIVE, REGULATORY AND POLICY FRAMEWORK • Prepare an overall plan for coal mine gas one of the first national demonstrations. Whether control and utilization; good international practice will be exemplified is uncertain. • Organize the preparation of coal mine safety standards, technical standards, management International cooperation is to be strengthened standards and personnel qualification through international exchange and cooperation standards; and use made of advanced foreign technologies and management systems in order to improve • Guide scientific Research and Development gas control and utilization. (R&D) in gas control and utilization; Financial and fiscal incentives for • Develop policy measures for coal mine gas CBM/CMM control and utilization; Various financial and fiscal policies have been • Determine priorities and financing for coal introduced to encourage development and mine gas control and utilization; and utilization of CBM, and CMM but it is evident from the slow development of these industries • Coordinate the implementation of plans for that their impact has been limited. Details of coal mine gas control and utilization, the fiscal policy applicable to CBM/CMM extraction construction of key pilot projects and other and utilization are provided in Annex VI and the major issues. salient points are discussed below. The group’s main tasks are to coordinate major CBM policy incentives problem-solving initiatives related to resources, technologies, equipment and qualified CBM PSCs allow for the recovery of exploration personnel for coal mine gas control, effectively and development costs by the foreign participant prevent major coal mine gas accidents and, for before sharing of the proceeds commences. the moment, focus mainly on CMM control and CBM price is a matter for buyers and sellers to utilization. This grouping ensures policy efforts agree and is, therefore, largely market- are closely coordinated and establishes NDRC determined. The foreign investor also enjoys tax as the lead decision maker but dilutes the advantages, but these and other concessions authority of SACMS, the organization responsible (Table 3.1) have not provided a sufficient incentive for implementing and enforcing coal mine safety to kick-start major investment. More effective and overseeing technical mining matters relating promotion of CBM development among to CMM extraction and use. The august steering domestic and foreign investors therefore, group recognizes China’s technology limitations requires, stronger incentives or the removal of and has introduced policies aimed at redressing barriers, or a combination of both. this deficiency. CBM production is treated similarly to petroleum A National Engineering Research Center on Gas and natural gas in terms of fiscal rules which is Control will be formed by Huainan Coal Group rational, but in terms of planning and promotion and China University of Mining Technology. it is attached to the coal mining sector in which Nearly 150 M Yuan will be invested in the center it receives no special policy consideration other over a three-year period. R&D will be undertaken than ad hoc initiatives. and a number of pilot projects will be carried out to promote comprehensive gas control and The SACMS which was formed from the former utilization. Huainan Mining Group’s gas Ministry of Coal Industry has, in recent years, extraction and utilization projects will provide been charged with examining regional CBM 29 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Table 3.1: Summary of Preferential Policies for CBM Projects Category Item Enterprise Income Tax • 30 percent and 3 percent local tax, total income tax rate is 33 percent • Tax 0 percent from first to second year, 16.5 percent from third to fifth year • Other local preferential policies • Preferential policies on depreciation calculation Value Added Tax 5 percent Resource Tax 0 Royalty 0 to 3 percent varies with the location and gas production Tariffs 0 percent except those listed in the not exempted category Exploration Right Acquisition 100 yuanY/km/yr, but can be exempt Mining Right 100 Y/km/yr, but can be exempt Other Tax <1 percent vehicle and ship license tax and urban property tax Source: Based on Investment Guide for CBM/CMM, CCII. development prospects, for example, in mines. State subsidies for renovation of safety Chongqing, which is outside its current role but equipment, including gas extraction, will a default role in the absence of any central continue. Enforceable standards on gas authority responsible for coal mining issues. extraction before coal mining are to be formulated, but if these are too prescriptive, CMM policy incentives they will be counter productive. A combination of surface and underground gas extraction Preferential policies are to be formulated to has been identified as an important gas promote enhanced CMM extraction under the control strategy, but to be effective, this 11th Five-Year Plan which are likely to involve approach should include a methodology for tax reduction and exemption, product pricing ensuring selection of suitable technologies, measures and specifically encourage power performance specifications and guidance on generation for grid distribution. The details of how to achieve them. these new policies and how they will address current weaknesses are yet to be announced. CMM extraction in KSOCM currently receives financial support from the government and is a Key policy measures proposed by central legal requirement at gassy mines for obtaining government will result in wider use of gas drainage a mining license. Having extracted the gas, and, hence, new opportunities for CMM utilization there are fiscal policies to encourage foreign as small- and medium-sized mines upgrade investment (Table 3.2) but no policy incentives through merger and transformation into more to encourage large-scale development of efficient and environmentally responsible the resource or to maximize destruction of industrial-scale production units. Resource the CH4. protection policies which encourage all coal mines to use longwall coal mining methods to maximize The policies applicable to encouraging use of coal recovery will not only lead to greater gas CMM are weak and not fully implemented. emissions, but also new challenges on introducing Projects which qualify under the list for CMM capture and use at community-level coal comprehensive utilization of resources, pay no 30 ADMINISTRATIVE, REGULATORY AND POLICY FRAMEWORK Table 3.2: Summary of Preferential Policies for CMM Projects Category Item Enterprise Income Tax • 30 percent and 3 percent local tax, total income tax rate is 33 percent • Tax rate is 0 percent from 1st-5th year • Other local preferential policies Value added Tax 5 percent Resource Tax 0 Royalty 0 Tariffs 0 percent except those listed in the not exempted category Exploration Right Acquisition 0 Mining Right 0 Other Tax <1 percent vehicle and ship license tax and urban property tax Source: Based on Investment Guide for CBM/CMM, CCII. income tax for the first five years from inception mines due to lack of scale (to cover CDM project if an enterprise is exploiting a waste which it development and transaction costs) or produced in the first instance. A coal mine noncompliance with the stringent applicability implementing a CMM scheme should, therefore, conditions. Implementation of CDM projects at be entitled to this beneficial tax treatment. If the mines will initially be difficult due to the need waste produced by one company is used by for highly organized monitoring regimes which another, the tax relief only applies for one year. will take time to establish. Due to concerns that energy will be wasted, the government is The preferred use of CMM in China is for heat reluctant to encourage flaring of CMM at mines. supply and power generation. Where power Where there is no utilization, or where gas flows generation exceeds 500 kW, the scheme is at times exceed the requirements of an existing eligible for grid connection at no charge but, in utilization scheme, flaring could contribute practice, the connection has been resisted in significantly to emission reductions. Unless policy some areas. Where CMM power supplies the is developed which is more responsive to the grid, some mines are required to purchase urgent need to reduce GHG emissions, power from the grid rather than only supply the significant reductions in CMM emissions to the surplus electricity. The catalog of the industries, atmosphere will not be achieved. A policy is products and technologies currently encouraged needed to establish priorities and encourage the by the State for development include the use of most effective action including a positive climate low heating value fuels, such as CMM, and change response. investors are exempted from import tariffs and import-linked Value Added Tax (VAT). Tax concessions under Western Regional Development policies also apply to CBM and The CDM provides an incentive to use and CMM, but market access is problematic in some destroy CH4 but it will not be applicable at all of these areas. 31 4. Barriers to CBM/CMM Development and Scale-up The government has plans to increase CBM and CBM in China is attractive due to: CMM utilization, but implementation will require the removal of institutional, policy, regulatory, • Clear centralized, regulatory regime for financial, information, market and technological participation in exploration; barriers which are inhibiting investment • Strong willingness to attract foreign investment; and development. CBM regulatory regime • Standard PSC terms; The views of CBM project developers active in • Extensive coal basins; China were sought. Responses regarding PSC • Reasonable geological conditions – seam conditions among foreign CBM license holders thicknesses, gas content, permeability; and bidders were highly variable. A foreign partner with CUCBM can be faced with start-up • High growth gas market, albeit off a low and support costs in excess of US$1 million base; and together with a cumulative exploration commitment calculated from when an • Reasonably attractive gas prices. exploration block was first released to CUCBM by MoLaR. Major oil companies accept the Financial barriers to conditions and costs as a reasonable price to CMM development pay, but some companies found the conditions restrictive and the charges payable to CUCBM Although there are favorable policies to excessive relative to the benefits. Some expressed promote CMM projects in China, development disappointment at the level of reciprocal of the resource is slow. Lack of funds in assistance from the Chinese partner and felt that Chinese enterprises hinders local investment, the large investment in capacity-building was and bureaucratic processes, safety issues and ineffective, others were reasonably satisfied. market concerns deter foreign investors. Common concerns expressed by foreign Investment in CMM is limited because many operators were difficulties of locating and schemes are too small to interest Financial accessing good quality coalfield exploration Institutions (FIs), foreign investors or large data, and the lack of transparency in identifying international companies. Local financing and allocating exploration blocks with no facilities are needed to encourage development, advertising or bidding processes. and local banks need to develop the skills to understand and analyze the projects. The mining Not all responses were negative, some major enterprises themselves should be capable of foreign investors and operators perceiving that preparing clear, rational proposals including an 33 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA assessment of risk. Capacity-building for mines CDM has engendered considerable interest in is needed in project development, appraisal, China and the process is actively supported by monitoring, financial and risk analysis. the government. CDM represents a major financing opportunity for CMM utilization Those foreign companies actively seeking schemes. Many of the large coal mining groups projects sometimes find the amount of are developing CMM CDM projects (Table 4.1) information provided is inadequate and and the expected total annual emission reduction insufficiently detailed. Mining enterprises potential is over 7.7 Mt CO2. and other Chinese organizations seeking to promote their projects need to do more to However, application of CDM to CMM utilization increase the chances of attracting external schemes has suffered some setbacks. Delays in funding. Overseas investors will need a great implementation were experienced due to five deal of information before they will consider different methodologies, all relating to projects investing in a project in China. They need to in China being submitted for approval by the satisfy themselves that a project is both EB at around the same time. A new consolidated technically and financially feasible and will need methodology for CMM (ACM0008) was finally to conduct due diligence investigations to agreed at the end of November 2005. confirm the authenticity of information, its completeness and its interpretation. There could be many more CDM projects at coal mines, but difficulties in obtaining good quality There must be a potential to generate profit to data and information, safety issues relating to attract investment. Chinese engineers tend to use of low purity gas, a lack of understanding explore the technology and determine what can at mines on the requirements of CDM, shortage be technically achieved before considering of capital and insufficient technical capacity to financial viability. For this reason, many projects develop CDM projects is limiting progress. viewed as exciting and noteworthy by their Furthermore, the government’s refusal to accept Chinese proponents may attract little interest revenue-sharing from CERs has removed a from investors or FIs. key market driver and is deterring investment in CMM utilization. Nevertheless, the CDM Clean development mechanism process has been successful in stimulating an increase in gas utilization projects at CDM allows developed countries to achieve coal mines which previous government part of their binding Kyoto GHG emission instructions and incentives failed to achieve. targets by purchasing Certified Emission Reductions (CERs) from qualifying GHG Substantial investment in safety improvements, emission reduction projects in developing supported by central government funds, has led countries such as China. A prerequisite for a to widespread installation and use of continuous CDM project is that it should contribute to monitoring systems recording gas flow and purity, sustainable development as defined by the but there are reliability issues with these systems host country. The CDM Executive Board (EB), and reliance is placed on manual measurements appointed within the United Nations at many mines which will not satisfy the Framework Convention on Climate Change requirements of CDM. The CDM process will (UNFCCC), decides on the validity of the require project mines to strengthen their methodology for generating CERs as well as measurement capability and the spin-off benefits the acceptability of projects. Once a will ultimately be the availability of more reliable methodology has been accepted, this sets the monitoring equipment, efficient and professional standard for other similar projects worldwide. service companies and safer working conditions. 34 BARRIERS TO CBM/CMM DEVELOPMENT AND SCALE-UP Table 4.1: Coal Mining Groups with Current or Pending CDM for CMM Projects Company Province Projected Annual Emission Reduction ktCO2 Equivalent Fuxin Coal Mining Group Liaoning 610 Yangquan Coal Mining Group Shanxi 1,500 Jixi Mining Group Heilongjiang 350 Jiaozuo Coal Mining Group Henan 350 Huainan Coal Mining Group Anhui 178 Jincheng Coal Mining Group Shanxi 2,200 Hebi Coal Mining Group Heilongjiang 50 (estimated) Wanbei Coal and Electricity Group Qidong Coal Mine CMM Power Generation Plant (Suzhou) Anhui 56 (estimated) Tiefa Coal Industry(Group) Company Limited Liaoning 770 Songzao Coal & Electricity Company Limited Chongqing 630 Hegang Coal Mining Group Heilongjiang 62 Ningxia Coal Industry Group Co. Ltd. Ningxia 150 Shuicheng Mining Group Guizhou 750 Huaibei Mining Group Anhui 100 Source: CCII. Health, safety and Health, safety and environmental management environmental barriers are mentioned in CBM PSCs and foreign partners have placed considerable emphasis on Health, safety and environmental issues are important trying to achieve these standards: to foreign operators anxious to defend a responsible corporate image. Safety concerns have been • Operations to be conducted according to instrumental in tempering foreign investment in coal international practice; mining, and even CMM projects with some companies. However, as the risks associated with • Best efforts to protect the environment; surface CBM activity are relatively low and controllable, this issue has not arisen. Nevertheless, • Securing of health and safety of personnel; foreign consultees expressed concern about the large number of staff employed by contractors and the • JV partners to be liable for economic losses potential for economic imperatives to outweigh focus caused by pollution; on health, safety and environmental management. Drilling contractors require education in site • Regular auditing; and environmental controls including safe disposal of drilling fluids and lining of lagoons. • Rehabilitation. 35 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA It is reasonable to expect that existing coal mine China, for example, by Fuxin and Huianan operations should take precedence over the Mining Groups, although a sound technical exploration for surface CBM reserves. In the achievement, is inherently dangerous and would event of an incident or serious accident arising not be condoned by international engine due to conflict between surface CBM and manufacturers neither would it be accepted by underground mining activities, and resort to mine safety regulators in industrial countries. legal redress, the outcome would be uncertain. Transport of flammable CMM mixtures is highly Such uncertainty is unacceptable to most foreign undesirable and storage of large volumes of companies and constitutes an investment barrier. explosive mixtures, or near-explosive mixtures of CMM in gas holders at the surface is No significant improvement has been achieved unacceptable as a small leak and a spark in the underground coal mine safety in 2005, could cause a catastrophic explosion. CH4 despite all the efforts of government. The number concentrations in the range of 5-15 percent in of fatalities from 3,341 coal mine explosions, air are explosive and good mining practice is fires and floods was 5,986, nearly level with to design CH4 drainage systems to ensure the 6,027 people killed in 2004 (NDRC). gas is captured and drained at higher and The number killed in major coal mine accidents, safer concentrations. those involving more than 10 deaths, jumped 60 percent to 3,586. Coal output rose The former Ministry of Coal Industry introduced 7.9 percent in 2005 to 2.11 Billion Tons (Bt), a national regulation requiring the CMM for with the average number of deaths per Mt at utilization in China to have a CH4 concentration just over 2.7. The 0.7 percent decline in coal of at least 30 percent. This regulation is still mine deaths last year fell far short of the extant and is consistent with mine safety government’s goal to reduce coal mine fatalities regulations in other countries. The acceptance by at least 3 percent in 2005. Work safety and encouragement of CMM utilization officials recently announced their goal for cutting technology which can use low purity CMM coal mining deaths in 2006 was 3.5 percent, removes the incentive for a coal mine to improve but stated that the target would be difficult to its CH 4 drainage practices and safety attain. The petroleum industry is similarly performance. While yielding a short-term energy afflicted. Sixty people died in 161 accidents and environmental reduction, a better and more in petroleum and petrochemical operations, sustainable result would be obtained if gas 29 percent more than in 2004. drainage standards were improved. Gas drainage systems which carry mainly air are These poor results show that there are serious inefficient and ineffective. The fact that mining safety failings in the coal and petroleum/natural groups are prepared to ignore safety gas industries. Therefore, it is important that no regulations, with the support of local government new major risks are introduced in the pursuit of in some instances, sends warning signals to maximizing energy recovery and reducing GHG responsible investors and project developers. emissions from coal mines. This is a sound reason for making the safety ratings of the mines4 public so that the investor The use of low purity CMM (<30 percent CH4 will at least be aware of the risk, and it may by volume) which includes potentially explosive provide incentives for the mines with lower mixtures for power generation at coal mines in ratings to improve. 4 Assessed by the State Administration of Coal Mine Safety (SAMS)and provincial safety bureaus. 36 BARRIERS TO CBM/CMM DEVELOPMENT AND SCALE-UP Market barriers continuing exploration is raising this figure. Major gas transmission pipeline projects have Potential gas markets for both CBM and CMM been planned and some are under way. include a clean substitute for coal gas generated The first leg (1,250 km) of the West to East in town gas plants, industrial thermal and transmission pipeline linking Shanghai to the chemical use, power generation or major long Ordos Basin is operational and the 2,400 km distance pipelines. Market potential is extension linking Tarim and Qaidam Basins determined by energy demand, competition with should be operational by 2006. A transmission other fuels especially natural gas, transport costs pipeline (1,000 km) linking the Sichuan Basin and price. to the West to East pipeline between Ordos and Shanghai may be available some time after The principal market issues for CBM raised 2010. LNG import terminals in Guangdong and by foreign consultees were the low cost and Fujian will supply 5-7 Million Tons Per Annum abundance of coal, creditworthiness of (Mtpa) (270-370 Peta Joules [1015 Joules] [PJ] buyers, lack of confidence in the security of per annum) by 2008-09. Ex-field (compressed) supply given the immaturity of CBM industry prices vary from 0.6 to 1.0 yuan/m3 (US$2.05 and limited success to date, and the to 3.45/ Giga Joules (1012 Joules) [GJ]), with immaturity of the gas market. city gate prices ranging from 1.30 to 1.60 yuan/ m3 (US$4.50 to 5.50/GJ). These natural gas Coal in China is substantially cheaper than developments will still leave plenty of room for natural gas and, therefore, government CBM supply. intervention is needed to reduce coal burn in cities and introduce more clean energy to Establishing new city gas supplies involves improve air quality. This move is environmentally substantial investment in trunk pipelines and policy-driven with changes such as coal-to-gas- downstream by users. Once the gas arrives at switching enforced by administrative order in the city gate, a distribution system is required to some cities and encouragement for using carry it to the consumers, and the consumers market-based instruments in others. Benefits of need to purchase suitable equipment and these changes include improved health, less burners to use the gas. A high gas price is absenteeism from work becouse of illness and desirable to encourage construction of pipeline a reduced demand on health services. Increased infrastructure, but has to be weighed against use of gas is, therefore, playing a key role in the need to stimulate users to convert to gas. many cities striving for environmental At present, gas use and gas prices are largely improvement, including Beijing. Both CBM and determined by the government and fuel choices CMM can contribute to this process in coal are often limited. mining areas. VCBM can benefit from the evolving gas market An estimated annual gas consumption of but the CBM industry alone is too small to drive 800-900 PJ/year (around 25 Bm3) in China is infrastructure development. Commercial VCBM expected to grow at 10-12 percent per year, development may, therefore, not advance concentrated mainly in eastern and north-east rapidly until the natural gas industry has matured China. Some estimates indicate an annual and established a ready market which VCBM demand of 3,570 PJ by 2010. The gas supply is with its free pricing structure, can tap into with a all currently domestic, although natural gas small price differential. could be imported from east Siberia if political and financial issues can be resolved. The proven The East-West natural gas pipeline is being natural gas reserves in China are 55-60 Tcf but cited as the potential saviour of CBM/VCBM in 37 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Shanxi, but capacity limitations and the cost of predraining gas from low permeability seams, compression, metering, transport and marketing and from VCBM developers on how to increase may exclude access by CBM. gas flows in surface wells. No commercially feasible, large-scale, artificial permeability CMM is not a threat to CBM or natural gas usage enhancement techniques are yet available, as it is a lower quality product. In western although technologies are currently being countries, CMM would not be distributed for developed to increase (enhance) the volume of domestic use as it does not meet minimum gas recoverable from established coal seam quality standards. In China, there are various reservoirs. However, the immediate needs of standards for various gas qualities. Provided the conventional VCBM are for improved screening concentration is >30 percent, it can be used for techniques to identify geologically favorable sites domestic purposes. A high natural gas price will where advantage can be taken of natural encourage the use of CMM which, due to its permeability enhancements. lower purity, will be priced lower. CMM capture and quality improvements Electricity may be easier to distribute to consumers than gas, but the present regulatory SACMS believes that to ensure safe conditions, framework does not favor small-scale power gassy mines should drain gas both before and generation other than for use by the mines after mining (predrainage and postdrainage). consuming their own CMM. The acceptability Although this guiding rule is well meant, the of small-scale power outputs to the grid varies prescriptive requirement does not encourage from place to place. Some mines have no account to be taken of the gas emission problems negotiating a grid connection but are characteristics of the workings or the geological required to deliver their power to the grid and, and mining conditions when determining the then, buy-back what they need at a higher price. most appropriate CH4 drainage strategy. The overall situation is expected to improve in In China, many mines have multiple longwall 2006, with easier access to the grid for all as a production faces in various combinations of result of the new Renewable Energy Law, subject manual, semi-mechanized and fully mechanized. to its adequate enforcement. Gas drainage is only needed on the gassy Technology barriers coalfaces, so, not all production units are necessarily drained. The cumulative effect is, Technology barriers include difficulties of therefore, a low overall mine gas capture efficiency. extracting gas from low permeability coal seams in advance of mining and for VCBM production; Drained CH4 concentrations in Chinese coal gas drainage methods not suited to the mines tend to be highly variable and purities geological and mining conditions, unreliable of 10 percent and less are not unusual. monitoring equipment and inadequate Observations made during field visits indicate underground drilling equipment leading to poor CH4 concentrations typically in the range 25-35 gas drainage performance and reluctance by percent with concentrations above 50 percent some foreign technology providers to enter the being achieved at a few mines with well managed China market due to commercial risks. drainage systems matched to the geological and mining conditions. The problem of maintaining Extracting gas from low permeability CH4 purity is a significant factor in finding CMM coal seams markets and optimizing use. Poor CH4 quality is often traceable to use of drainage methods which The most common request from Chinese mining do not match the mining and geological conditions companies is for solutions to the problem of and poor housekeeping underground. 38 BARRIERS TO CBM/CMM DEVELOPMENT AND SCALE-UP Standardized designs tend to be imposed, which is mandatory in U.K. coal mines and its use are not always appropriate to the geology and should be urged in China as an important mining conditions, although it is conceded that safety precaution. for a gassy mine to have at least installed a gas drainage system is a step in the right direction. Coal seams with high gas contents need to be Individual KSOCM have little scope to make predrained either to reduce outburst risk or to technical changes and improvements – these reduce coalface gas emissions thus facilitating generally have to be approved by referring to safe working. Although not always successful in higher levels within the mining groups/bureaus terms of gas volume drained, many mines persist and, in some instances, to the provincial with in-seam drilling in China to comply with government. The fact that provincial vice the safety requirement to drain in advance of governors with safety responsibilities are now mining if practicable. Many mines believe the held accountable for serious mine accidents introduction of advanced guided drilling systems could further inhibit innovation due to the will solve many of their in-seam gas drainage extension of the decision tree. Initiative may be problems. While such techniques have a role, stifled but the risk of a bad decision is this technology will not necessarily be suited to reduced. The net result will be slower progress. the geological conditions in many of China’s coalfields. Furthermore, most mines do not have Gas monitoring systems are being widely the capability to operate and maintain complex installed but reliability is sometimes questionable drilling systems. due to the poor quality of equipment, and lack of calibration and maintenance facilities. Development of domestic technology Suitable, reliable, advanced monitoring systems and technology transfer are readily available in the international market, Manufacture of gas drainage drilling machines, but the protracted electrical safety approval gas extraction pumps and monitoring systems procedures are delaying their introduction. is dominated by the various branches of China The lack of harmonization between Chinese and Coal Research Institute (CCRI), the Chongqing international mining equipment electrical safety and Fushun branches providing most of the standards also precludes Chinese manufacturers specialist CMM-related services. This company from access to world markets – desirable as a has a virtual monopoly and is keen to extend its driver for improvement in product performance business further and introduce new technologies and quality which will ultimately benefit the from other countries. However, there is an Chinese miner. inherent limitation on technology transfer in that Drilling equipment for gas drainage the foreign Original Equipment Manufacturers (OEMs) are reluctant to risk loss of Intellectual Many of the current designs used in China are Property Rights (IPR). The coal mining sector in based on obsolete machines with the China is heavily reliant on both licensed and corresponding performance limitations. More illegally copied equipment designs with the efficient modern equivalents are needed. government taking no substantive action to Efficient and safe drilling requires attention not protect IPR. Low labor costs, cross-subsidies and only to the drilling machine but also to the drill near monopoly advantages make market entry bits, rods, water and hydraulic power supply and to foreign suppliers difficult. Government also safety control systems. Chinese mines do not complains publicly about the cost of imported drill boreholes through a safety device which equipment and mines are encouraged to buy allows any high pressure gas and water that local equipment. As a consequence, there is is encountered to be controlled. This equipment insufficient competition to drive Chinese OEMs 39 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA to increase R&D expenditure and develop more • The higher cost of imported equipment modern products, low pricing limits investment deters some Chinese buyers but many available for developing new products and many understand the benefits of using robust, mines do not have access to the latest imported equipment manufactured to high technology, which they desperately need to raise standards with high grade materials and performance levels. Without access to the latest with performance abilities in excess of technologies, China will not be able to achieve domestic equipment; improved CMM capture and utilization. • Imported coal mining electrical equipment The application of technology, whether domestic must be submitted to an assessment, or foreign, is inherently limited by the capacity inspection and approvals process before it of designers and operators, and also by the can be used in a mine in China. This process diffuse, inadequate communication between can be cumbersome, costly and time- actual users at the mine and designers, due to consuming. Unless exempted, explosion the intervening hierarchy of group and mine proof and intrinsically safe equipment cannot management. The design function usually be used in a Chinese coal mine until awarded resides with a dedicated Mine Design Institute. the MA (“Mei Anquan [coal safety mark of There is a need for capacity-building among approval�]) mark. The Chinese standards are technical staff and for more streamlined based on an outdated international standard management systems at mines. EN5004 (1968) which not only hinders import of modern, safe, efficient mining Introduction of new technology equipment, but also deters Chinese manufacturers from modernizing their China could benefit from a wide range of designs and participating fully in international imported gas control technology for its mines markets. This barrier prevents coal mines and CMM utilization schemes. However, sourcing the most effective equipment for foreign companies with key technologies, their needs; and reluctant to enter the China market, cite the following reasons: • Tendering procedures are not always transparent and are rarely performance- • IPR concerns. Patent law is being more based, thus leaving no incentive for strongly enforced but manufacturers still need innovation. Recently, tenders for a large CMM to exercise caution; project had to be reissued because there were no qualified bidders. The announced cost • Equipment being blamed for client failings thus range for the successful bids was too low and damaging the credibility of the manufacturer qualified bidders declined to bid. The tender in the international marketplace. For example, package had to be revised. inappropriate equipment selection, inadequate maintenance and lack of investment in training Reducing technology risk of operators. Suppliers should recognize the importance of providing “whole lifecycle� CBM and CMM technology development in support to consumers to ensure equipment China has been assisted by international donor, is properly selected, commissioned, used, bilateral aid and lending agencies for the past serviced and refurbished to ensure decade with efforts directed mainly at reducing maximum availability and performance. technical and financial barriers and providing Training should be included as part of capacity-building, but with mixed results equipment packages; (Annex VII). Internationally financed activities 40 BARRIERS TO CBM/CMM DEVELOPMENT AND SCALE-UP have helped to reduce technology risk through appropriate for Chinese conditions both in demonstration projects, which enable new terms of mining and culture; technologies to be introduced from other countries and technically evaluated. • Insufficient technical information and guidance Demonstration projects are designed to highlight available in Chinese to mining enterprises; technologies or processes which are relevant, • Underestimating research, effort and practicable, which will result in a marked investment needed underground to optimize improvement in performance and which can gas availability and quality; easily be replicated. Any equipment involved should be available from a supplier who can • Concern about work safety standards by provide technical support and guarantee spare foreign investors; part availability in China, rapidly and at reasonable cost. Some demonstration projects • Shortage of capital but any foreign interest in China have shown that an advanced technology in the project, however small, can increase can be made to work by foreign experts with the chances of obtaining finance from expensive foreign equipment – for example, the domestic government sources; drilling of guided long hole boreholes above a longwall goaf. While the technical result may be • Lack of transparency to foreigners; excellent, the impact can be negligible and too • Taxation (although ameliorated by tax few CBM/CMM projects in China have been relief incentives); widely replicated. A notable success has been a surface goaf drainage demonstration at Tiefa, • Inability to negotiate product price before which has seen active replication recently in formal approval of feasibility study by the response to government pressure to improve gas development and reform commission; and control within the coal mining sector. • Local energy policy and gas/electricity supply To ensure success, technological applications and distribution complexities. require support from experienced specialists. In areas where a technology is in widespread Ingredients of good CMM projects use, specialist service companies have developed to meet the needs of the industry. Foreign and domestic developers are fairly These service companies may not exist, or their clear about the ingredients of a good project. skill base may be too limited, in areas into which Nevertheless, they also recognize that no a new technology is implanted. This support base perfect projects exist. Project size is important, takes time to develop and government assistance if too small investors will not consider the would be helpful in its early stages. start-up and administrative costs worth the effort for a small gain. Attractive projects are Principal barriers to development of those where: CMM utilization schemes • The aims are clearly defined, understood and achievable; clearly presented factual There are a number of factors which hinder information is essential to attract external CMM development by coal mining enterprises. interest in a project; Some of these are domestic; others involve prospective foreign participants, and include: • There is a clear management structure and decision-making process; • Attempting to transplant gas drainage and utilization technologies which may not be • Local or central government approval has 41 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA been obtained and the applicability of any • Consumers have been identified and firm tax incentives confirmed, or at least in the supply contracts negotiated; case where the project is being proposed • Prices are firm and set to rise (a difficult one jointly by a foreign partner and a local entity, to forecast); the procedure should be transparent and a procedural list for the approval process • There are significant environmental and should be supplied so that it can be used as social benefits; a checklist; • The return on investment is commensurate • Technical risks are quantifiable and with the risk; controllable with provision for continuing technical support at project inception and • Payback of capital is possible in two or afterwards; three years; • There are long-term gas sales prospects; • The requisite technology is suitable and applicable to the location and within the skills • There are quantifiable environmental and base of the community; social benefits; and • Revenue can be generated at an early stage; • Success can be replicated elsewhere. 42 5. Comparative Experiences of Other Countries CBM and CMM Resource Management process for gaining rights to CMM would extend them to include VAM. Introduction Germany Internationally, distinctions are made between owners of the surface land, mineral rights and Leases have been awarded in the Ruhr and Saar gas rights. In many countries, gas rights basins and a number of CBM wells have been (CMM or natural gas) rest with the national drilled. Germany currently has a number of government, which, in turn, issues licenses for commercial CMM extraction schemes operating resource development according to its specific at working and abandoned mines. Abandoned laws. CMM use authorization typically carries Mine Methane (AMM) achieves a status and price with it requirements for payment of fees or advantages comparable with RE in Germany. royalties, although such payment may not be required for on-site uses. For example, the Under the current law, “mine gas� is a resource government in Australia waives fees for gas used which is not owned by the person who owns the on-site. In some cases, local (provincial) ground or land. In order to explore and/or administrations may impose licensing or other extract it, a two-tier licensing system is in place. requirements which are in addition to those An exploration license entitles the holder to levied by the federal government. Users also locate (explore), to use the resources extracted must perform a reasonable amount of during the exploration process and to build the exploration or development to retain a lease. structures and facilities to undertake exploration In some cases, the holder of coal exploitation for a certain prospect. There can be more than rights can also develop the CMM resource. one exploration license. An exploration license To do so, however, would require securing a is granted for a maximum of five years with the CH4 development license separate from that for possibility of a three-year extension if the coal development. resource, despite adherence to the planned and agreed exploration program, has not been CBM is generally treated under conventional explored sufficiently. An extraction license entitles oil and gas licensing regimes in European the holder to locate, extract the resource and countries, but in many countries the ownership any other resource in the same field and own it; status of CBM or CMM is inconclusive because it can be obtained for a maximum 50-year it has not been legally tested. The legal period and will be assessed on a case-specific ownership of VAM does not appear to have basis. Extensions are possible. Before any been defined anywhere since it has not yet exploration or extraction licenses are considered, been established as of commercial value, a program has to be submitted demonstrating but it is likely that countries with a definitive that the planned activities are sufficient and 43 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA within an acceptable time frame for the type, the Secretary of State for Trade and Industry to scope and purpose of the exploration/ grant Petroleum Exploration and Development extraction. A license can be refused if found to Licenses (PEDL). The operator must also obtain be inadequate with respect to any of the consent through the DTI to drill a well, submit following factors: plans showing precisely how the well is to be engineered and provide evidence that the • Exact identification of resource to be requisite planning permission has been given. explored/extracted; Likewise, consent is required to abandon a well • Appropriate person; and the operator must satisfy the Health and Safety Executive (HSE) on how this is to be • Sufficient funds; achieved safely. CBM developments also require permission from the coal owner (the Coal • Sharing of knowledge; Authority) before the seams can be accessed. • Public interests; Coal is under separate ownership to petroleum and CBM. Under the Coal Industry Act of 1994, • Field boundaries and records; and ownership of unworked coal was transferred • Feasibility for a proposed extraction from the British Coal Corporation (the former technology within a given time frame. State-owned coal mining company) to the Coal Authority. It is the Coal Authority’s policy not to A license can be withdrawn or surrendered. grant access to areas of the coalfields or to surface land in its ownership for the purpose of United Kingdom CBM extraction unless a petroleum license is held The offshore U.K. sector of the 36-year-old for the area in question. In addition, the area North Sea oilfield has established the country subject to the access agreement will not be as a center for international oil and gas greater than that defined in the relevant companies, some of which are developing petroleum license. onshore CBM/CMM interests as offshore CMM Ownership, licensing and regulation: resources decline. Following the May 2000 The U.K. PEDL license includes exploration and ninth round of onshore licensing, almost half development of AMM extraction projects, but of the 123 blocks licensed were for the CMM extraction from working mines is covered exploration of CBM and CMM, the latter from by a separate “Methane Drainage License abandoned coal mines. (NDL).� Some mines utilize or flare the gas The total CBM resource in the United Kingdom produced under their MDL for environmental is estimated as 105,000 PJ (3 Tm3) but only a reasons. The rights of MDL and PEDL holders small proportion of the resource is potentially do have some overlap but conflicts have not recoverable (3 percent at most) due to been sufficient to drive the parties to court to generally low seam permeability, surface obtain a legal opinion. development and local government planning approval constraints. The high costs and Coal Authority licensing arrangements: In uncertainty of planning applications and addition to the PEDL license, certain rights will planning enquiries is a major deterrent to be required from the Coal Authority to enable a investment in VCBM. CMM or CBM project to proceed. If a CMM proposal involves the occupation of surface The Petroleum Act of 1998 vests ownership of property or a mine entry owned by the authority, the petroleum resources in the Crown and allows a lease to occupy the property will be required. 44 COMPARATIVE EXPERIENCES OF OTHER COUNTRIES This takes a standard format and copies can be subject of a VCBM application falls within a supplied on request. Where entry into coal or “Category 1� area, the Authority will consider coal workings is required by drilling, an access the implications of the application for existing agreement will need to be entered into. A and future coal mining. Where rights to the coal standard form of agreement is available from have not already been granted, the Authority the Coal Authority. may be prepared, after seeking any expressions of interest for coal mining purposes through the Interaction with coal mining activities: In the publication of the application, to adopt a flexible United Kingdom, coal mining is likely to be given approach in the granting of access rights. priority over CBM exploration and development where overlap could occur in terms of timing. Where the area which is subject of a CBM However, the safety and environmental benefits application falls into “Category 2� (lying outside of removing gas from areas which might be defined areas of coal mining interest), the mined some time in the future, would be Authority will normally provide access to the recognized, provided that assurances could be applicant on standard terms with a minimum of given regarding safe sealing of boreholes on additional conditions, but reserves the right to abandonment and prevention of damage to seek expressions of interest in the area strata which could jeopardize mine roof control concerned through the publication of the in the future. As the coal mining industry is application; and to protect mining prospects shrinking rapidly, such interactions are rare which have been identified within these areas and the procedure is precautionary. The Coal before the application was received. Authority will require the developer of a CBM/CMM/AMM project to provide a Australia comprehensive risk assessment covering potential impacts of the proposed scheme The Queensland State government has also including interaction with mine operators and developed and implemented interaction surface safety considerations. Applicants are agreements to enable CBM to coexist safely and required to sign an “interaction agreement.� The without conflict with coal mining activities. The term “interaction� is used to describe the physical exercise in the United Kingdom has been largely effects, which activities connected with any coal theoretical as CBM development has stalled, but or coal mine may have on other such activities in Australia it has been proven in practice. (including their subsidence effects), or on other interests in coal. Those effects include water or United States gas migration and the results of a withdrawal of lateral or vertical support. Interaction can, Ownership of CBM is a contentious issue in some therefore, occur in situations where the activities of the coal mining states in the United States. are separated by considerable distances. Typical issues revolve around: 1) conventional The interaction agreement binds the signatories oil and gas leaseholder’s right to drill shallow to a process of notification, discussion, mutual CBM wells; 2) ownership of CBM separated from consent, and an obligation to act reasonably. coal during mining; and 3) whether to include CBM as a mineral intended to be granted in The Coal Authority has prepared a CBM map severance deeds. The apparent need for costly which indicates “Category 1� areas of the and delaying case-by-case litigation to establish coalfields in Great Britain where access for the ownership where conflicts are identified must be purposes of VCBM extraction is most likely to avoided by China in establishing property law be restricted due to coal mining operations. relating to CBM and CMM ownership, and rights Where an area (or any part of it) which is to extract and use the gas. 45 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Within the U.S., royalties for the use of CMM approaching extinction, but some of the closed are to be paid to the owner of the gas estate. mines continue to provide energy in the form Generally, royalties of 12.5 percent are owed of AMM which, for legal purposes, is also to the federal government for all mineral leases classified as CMM. Germany has elected to treat (including CMM) from federal lands. Royalties CMM as a special case with similar privileges for privately-owned gas estates are negotiated to RE resulting in a massive boost to on a case-by-case basis. Through the North development of CMM projects at working and American Free Trade Agreement (NAFTA), abandoned coal mines. enacted in 1994, the U.S. has removed all gas tariffs for gas exports/imports to or from Mexico A variety of support mechanisms have been and Canada. developed to encourage the use of CMM and CBM resources worldwide (Table 5.1). Promoting CMM extraction The mechanisms can be categorized as follows and utilization (DTI, 2004): National climate change policies are the main • Feed-in tariffs, which provide an incentive for drivers for CMM development whereas CBM electricity generation; tends to be favored as a clean energy for coal • Obligations, which provide incentives to substitution. CMM released from working mines specific market players to use specific is viewed as an issue requiring immediate resources by means of quotas/obligations action as significant GHG emissions from and fines for noncompliance; working coal mines will continue unabated unless action is taken. • Tax incentives, which provide investment and/or operational incentives; Australia and the United States, although failing to ratify Kyoto and, thus rejecting binding • Grants, which provide capital expenditure emission reduction quota, have, nevertheless, incentives; and implemented effective policy for reducing CMM emissions. The once major coal mining industries • Other initiatives including information of the United Kingdom and Germany are dissemination programs. Table 5.1: Policies Stimulating Utilization of CMM (Adapted from DTI, 2004) Policy Description Country Scheme Status Project Developer and Financing Benefit Feed-in Tariff Twenty-year Germany Appears successful Very attractive due guaranteed with c.70 MW of to high tariff, power offtake generating capacity guaranteed for a long contracts given to commissioned since period of time, the electricity inception. Applied greatly facilitating generator to CMM and AMM project finance schemes Obligation Obligation on Australia Reported to have Market-driven energy suppliers attracted interest incentive which, if or generators from CMM properly designed, to limit CO2 industry which can provide emissions aims to accredit economic impetus to (Gas Abatement CMM schemes developers and Scheme) access to project finance. 46 COMPARATIVE EXPERIENCES OF OTHER COUNTRIES Policy Description Country Scheme Status Project Developer and Financing Benefit Tax Incentives Production Tax U.S. Scheme not Effectively a feed-in Credit; a 10-year applicable anymore tariff in disguise guaranteed to CBM but increasing certainty tax-driven incentives perceived to have over level of income designed to contributed to the stream, thus facilitating encourage exploitation of project finance electricity more than 10,000 generation wells by the end of 2000 Grants 50 percent grant Australia Five CMM projects Grants can provide a toward have been funded. significant boost, project costs Once all funds have reduce project risk been allocated, no for the recipient and further schemes are reduce resistance to admitted. CMM introducing and projects compete scaling up equally with energy- technologies not saving and energy previously proven at efficiency projects large scale for support Source: Adapted from DTI (2004b). Some countries have additional support offtake tariff is granted to specific Renewable mechanisms to encourage destruction of CMM Energy Technologies (RETs). Whilst CMM is not surplus to utilization capacity. For instance, the considered by the Germans as a RE source, the U.K. carbon trading scheme allows credits to use of CMM for electricity generation is be earned by flaring gas which cannot be considered to present environmental benefits utilized. However, the same benefits are not yet and, as such, was included under the Act. China available to projects involving AMM, as this gas has mirrored the German approach in its source is not included in the U.K. national GHG Renewable Energy Law but has not included inventory. Neither is the government prepared CMM as a beneficiary of the financial incentives. to grant RE status to CMM/AMM extraction and use as it would place an obligation on electricity Electricity generated from AMM/CMM projects buyers which would be inconsistent with the benefit from a predetermined power offtake liberalization of the market. AMM is not price of US$96.9 Mega Watt (s) Per Hour (MWh) important in China at present but any specific for the first 0.5 MW and US$84.0/MWh policy for promoting CMM use, or reducing thereafter, given to renewable technologies. This emission, should include AMM to ensure is significantly higher than wholesale electricity consideration is given to the impact of the full prices (c. US$36.6/MWh) and consequently mining cycle. provides a strong incentive to CMM developers to exploit the full potential of this energy source. Feed-in tariffs – Germany The EEG also provides a legal framework aimed at facilitating the integration of such technologies AMM/CMM is supported in Germany by a to the national energy supply. This is achieved “feed-in tariff � (DTI/Pub URN 04/933). by way of an obligation placed on the grid The Erneuerbare Energien Gesetz (EEG) or operator to connect renewable (and AMM/ “Renewable Energy Sources Act� (2000) of the CMM) installations to their network and bear German federal government, sets out the terms the costs of the grid upgrade costs; and under which a 20-year guaranteed power granting priority of dispatch to electricity 47 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA generated from these sources. The extra costs power. Harnessing CMM is considered to be one are all passed onto the electricity consumer of the lowest cost forms of GHG mitigation by (and hence were determined not to be the New South Wales government. State- aid by the European Commission (RE)). The NGAC arrangement in New South Wales is The introduction of this incentive has been somewhat similar to that in Queensland in that a beneficial to the development of CMM/AMM demand is created by way of legislation, thus electricity generation projects – three CMM/AMM creating a market for certificates. The scheme electricity generating plants with a total capacity commenced on January 1, 2003, and remains in of 6.27 MW, previously regarded as being force until 2012. Mandatory GHG benchmarks uneconomic, were guaranteed continuing are imposed on the following parties to abate operation and just under 70 MW of new capacity emission of GHGs from electricity consumption: was added since its introduction in 2003. • New South Wales electricity retailers; Obligation on energy suppliers – Australia • Consumers with loads greater than 100 Whilst the Australian government can provide Giga Watt (s) Per Hour (GWh); and support to CBM/CMM projects by way of a 50 percent grant at federal level, State incentives • Parties carrying out significant State such as the Gas Electricity Certificates (GECs) development designated by the Minister program in the State of Queensland and New of Planning. South Wales Greenhouse Abatement Credits (NGACs) in the State of New South Wales can A State GHG benchmark of 8.65 t CO2e per provide additional market support to CBM/CMM capita was set for 2003 which progressively schemes by way of a market obligation placed drops to 7.27 t in 2007 and remains at this on energy suppliers. The State of Queensland level until 2012. Participants in the scheme has set an objective of increasing the proportion surrender New South Wales GACs to of electricity generation from gas to 13 percent demonstrate that they have reduced their of the total electricity generation as a move away GHG emissions. The GACs can be traded from coal generation. Electricity suppliers are between other benchmark participants. At the required to source GECs from generators of end of each year, participants submit a electricity using natural gas, coal seam, landfill, statement detailing their emissions and any or sewage gas to comply with their obligation abatement certificates held. Should there be (in the same way as the RE obligation in the a shortfall (that is, the benchmark is not United Kingdom). GECs appear to be traded at achieved), a penalty is due (excess emissions just under US$7.6/MWh, providing the currently attract a penalty of US$7.9/t CO2e. generator with extra income on top of wholesale Shortfalls of up to 10 percent can be carried electricity prices. forward to the next year, but must then be abated in that year, otherwise, the penalty is New South Wales Greenhouse Gas due. Accredited parties engaged in any of the Abatement Scheme: CH4 from coal mining following activities can create NGACs through accounts for 8 percent of New South Wales total various routes: annual GHG emissions, mostly from underground operations with two or three • Low emission generation of electricity (generation); in-ventilation air. In addition to conventional CMM uses, technologies are being developed • Activities which result in reduced consumption to remove CH4 from ventilation air and generate of electricity (demand-side abatement); 48 COMPARATIVE EXPERIENCES OF OTHER COUNTRIES • The capture of carbon (C) from the For example, Xstrata Coal in Australia has atmosphere in forests (C sequestration); and developed a comprehensive climate change strategy aimed at reducing GHG emissions per • Activities carried out by elective participants unit of production by 10 percent on 2003 data which reduce on-site emissions not directly over five years. This will be achieved by investing related to electricity consumption. AUS$9 million in clean coal technology, CH4 utilization and C sequestration research and One GAC represents the abatement of one implementation over five years; joining the ton of CO2e with a value in the region of Greenhouse Challenge Plus – a voluntary US$3.8-11.4. The New South Wales government program between industry and the Australian requires CMM/CBM projects to be associated with government to reduce GHG emissions; and current mining operations and also allows large addressing energy efficiency. users to obtain GACs for the flaring of emissions from active mines. Venting of drained CMM is Production Tax Credits – USA not permitted, the gas must be either used or flared. Mining legislation requires drained gas Until September 21, 2002, when the scheme to have a safe concentration to extract. These expired, U.S. owners of wells which produce regulations, combined with strong incentives CBM were eligible for special tax credit treatment (GAC and GEC) to avoid emissions and under Section 29(a) of the U.S. Internal Revenue generate electricity from CMM, provide an Code. The S29(a) Production Tax Credit (PTC) effective mechanism for both reducing GHG provided a dollar-for-dollar offset to CBM emissions and exploiting the energy potential. generators for taxes payable under the general income tax regime. The PTC was available to National certificate trading schemes can provide CBM projects drilled by December 31, 1992, a strong incentive to technology development and was available for a period of 10 years from in the situation of high-expected demand – thus the date of project commissioning. The PTC was high certificate prices – and the availability of originally worth around US$0.95/GJ and long-term power offtakes. Certificate contracts around US$0.47/GJ toward the end of the at suitable prices from creditworthy entities is, scheme. Whilst PTC may not be the only factor however, crucial to satisfying the requirements behind the rate of growth of CBM industry in of both equity providers and project lenders. the United States over the last decade, it certainly The key benefit of such support mechanism lies has been a contributor which has led to more in its ability to provide ongoing revenues, than 10,000 CBM wells being in production by contributing to project cash flow stability and the end of 2000. Some U.S. CBM industry debt repayment ability. experts believe that the tax credits allowed the developers to finance the pipeline infrastructure Company GHG strategies without which there would be no industry, others maintain that tax credits played little part and International coal mining companies invariably the existence of an extensive gas pipeline include GHG emission policies in their network was the chief motivating factor. environmental strategies. Demonstration of environmental responsibility is important for public Grants – Australia and shareholder image. More importantly, early action and a proactive approach to emissions Capital grants, granted either automatically or reductions maximize the chances of retaining by way of competitive tender, are a simple way competitive advantage in a world of increasingly of providing project support. This is the option strong response to climate change mitigation. which the Australian government has opted for 49 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA under the Commonwealth Greenhouse Gas • German Creek colliery, Central Abatement Programme (GGAP) to encourage Queensland (US$11.76 million) the mitigation of emissions from CMM from – Installation and operation of equipment to mines and the generation of electricity from this generate electricity from CMM. This will fuel. GGAP is designed to reduce Australia’s net achieve a projected abatement of 2.4 Mt of GHG emissions by supporting practical and carbon dioxide equivalent (Mt CO2e); effective activities which will deliver substantial GHG emission reductions. GGAP is a key • Envirogen, New South Wales and government initiative aimed at capping the Queensland (US$9.88 million) – To install country’s GHG emissions to 108 percent of generators to burn CMM to produce 1990 levels over the period 2008-12 under the electricity at several sites in New South Wales Kyoto Protocol. With US$304 million allocated and Queensland. This will result in around to the program, GGAP tends to support large- 2.25 Mt CO2e of abatement through cuts in scale activities by way of grant support (up to CH4 emissions and displacement of coal-fired 50 percent of the investment cost) through a electricity generation; competitive process which selects projects on the • Centennial Coal, Newcastle (US$11.40 basis of the following key criteria: million) – To link the air intake of Vales Point • Support is only given to activities which would power station to the mine ventilation system otherwise not be carried out without GGAP of collieries south of Newcastle to capture support (“additionality�); CH 4 gas previously released into the atmosphere and burn it to generate electricity. • Activities should lead to substantial emission This will result in abatement of 4.11 Mt CO2e; reductions in the first commitment period under the Kyoto Protocol (2008-12); priority • BHP Billiton, Illawarra (US$4.56 is given to projects which can deliver million) – To install a thermal oxidation unit reduction exceeding 250,000 t of CO 2 (“Vocsidiser�) at West Cliff colliery to burn equivalent per annum; air containing very low concentrations of CH4 and generate electricity using a steam • Activities with a low cost per-ton-of-CO2 turbine, resulting in abatement of 1.04 Mt saved are favored; and CO2e; and • Projects funded under GGAP are expected • Envirogen, NSW South Coast (US$6.84 to provide complementary benefits million) – To install equipment at Bellambi (for example, opportunities for rural and mine to capture and burn CMM to regional Australia, ecologically sustainable generate electricity, resulting in abatement development, employment growth, the use of 1.7 Mt CO2e. of new technologies and innovative processes, and nongovernment investment). Grant funding can be a significant contributor Grant payment is made upon achieving to project economics and is often allocated to preagreed milestones. projects/technologies at the demonstration stage. However, in contrast to guaranteed power Approximately, US$110 million was committed offtake contracts for instance, grants do not to support 15 projects with a total value of improve project cash flows or the certainty over US$550 million under both Rounds 1 and 2 of project cash flows, and, therefore, do not directly the program. CMM projects which have received contribute to satisfying lenders of project finance. funding are: Project finance providers therefore, often, assess 50 COMPARATIVE EXPERIENCES OF OTHER COUNTRIES the benefits of grant-assisted projects on a creating the M2M Partnership, a U.S. initiative. case-by-case basis. The founder-member countries include China (as well as Argentina, India, Russia, Australia, Multilateral and bilateral CMM Italy, South Korea, Brazil, Japan, Ukraine, United promotion initiatives Kingdom, Canada, Mexico, United States and Nigeria). In the summer of 2005, South Korea The United States has joined with Australia, and Canada joined the forum. There are four China, India, Japan and South Korea to technical subcommittees: coal, landfills, create an Asia-Pacific Partnership on Clean agriculture and oil and gas. At its meeting in Development and Climate. This new initiative April 2005, the M2M Coal Technical was announced on July 28, 2005, at the Subcommittee developed an action plan Association of South-East Asian Nations (ASEAN) comprising priority, short-term activities which Regional Forum in Vientiane, Laos. It aims to will foster CMM project development in M2M accelerate the development and deployment of Partner countries. This grouping provides access cleaner, more efficient technologies to meet to an international technical forum on CMM for national pollution reduction, energy security and China. While M2M lacks the impact of the climate change concerns in ways which promote flexible Kyoto mechanisms, it broadens economic development and reduce poverty. opportunities for CMM technology transfer and The leaders of the industrial world at the China will benefit from participation. Gleneagles Summit (July 6-8, 2005) reaffirmed CBM/CMM extraction, utilization their commitment to supporting the UNFCCC technology and infrastructure and to working in partnership with emerging economies to achieve sustainable reductions in Australia GHG emissions worldwide. Priorities included assisting developing countries to secure Gas is drained in advance of mining, generally private investment and benefiting from using in-seam boreholes, and postdrained technology transfer. Specific actions included from conventional cross-measure boreholes encouraging CH 4 capture and beneficial and surface goaf boreholes. Directional, utilization by supporting the Methane-to- underground long hole drilling is in routine use Markets (M2M) Partnership, a global type of in gassy coal mines, holes in excess of 1 km CMM clearinghouse. being placed regularly. Codes for outburst prevention have been established which are Of the range, the variety of options for CMM followed religiously. Methods of improving utilization, internationally, power generation predrainage in low permeability seams to remains the most extensively employed due to improve gas capture and reduce outburst risk its versatility. CMM power production projects are being developed using hydro-fraccing currently exist in Australia, China, Germany, techniques. Drained CMM is sold as pipeline Japan Poland, Russia, United Kingdom, Ukraine, gas or used for power generation to supply and the United States. Some 50 projects the mine or the regional power grid. operating at abandoned and active mines range In Queensland, 25 percent of gas marketed in output from 150 kW to 94 MW and total more is VCBM. Many existing and planned gas than 300 MW (Coalbed Methane Extra, Coalbed utilization projects involve use of combinations Methane Outreach Program [U.S.[CMOP]], of CMM and CBM. Australia’s CBM resource September 2005). is some 275,000 PJ. In November 2004, 14 countries entered into Advancement of CMM capture and use has been an agreement to reduce global CH4 emissions, underpinned by government grant support to 51 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA help Australia meet its internal targets for pipeline to transport the CMM to the pipeline emission reductions. Advanced CMM utilization from the well head or from the gas upgrading/ technology is being developed and demonstrated processing facility. Mines in the Western U.S. in Australia. The first full-scale demonstration of often have little, or no access, to pipelines and, Megtec’s Vocsidiser, a VAM oxidation device, will thus, the option for pipeline sales is limited there, take place at BHP Billiton’s Westcliffe colliery. since building feeder pipelines would be The energy will be used to generate electricity cost-prohibitive. Unlike in Europe or China, with a steam turbine. Commonwealth Scientific typically in the U.S., large population centers Industrial Research Organisation (Australia) are not located in close proximity to coal mines. (CSIRO) is experimenting with a catalytic turbine Thus, in the absence of reasonably accessible and gas engine capable of burning 1 percent long-distance pipelines, there are not readily CH4 in air. Research is also being directed at accessible CH4 markets near most mines. ways of extracting CBM economically without sterilizing valuable coal resources. There have been a limited number of onsite uses for CMM in the United States, including power United States generation, thermal coal drying and mine heating. The low rate of onsite usage is primarily Gas drainage in the United States is achieved due to the fact that natural gas prices have been mainly using surface and underground relatively high and electricity prices have been predrainage, supplemented where necessary by relatively low. As a result, many mines find it surface goaf drainage. Cross-measures drainage more profitable to sell their gas to pipelines and is little used due to the relatively shallow depth of buy the electricity they require. To meet the most workings. Substantial improvements have high quality gas required by pipelines (usually been made in drainage efficiency, most drained 95 percent or greater CH 4 with minimal gas is utilized and significant reductions have been contaminants), generally, only gas from wells made in GHG emissions (Table 5.2) helped by drilled into virgin seams, in advance of mining, some gassy mine closures. is suitable. If necessary, lower quality CMM (for example, goaf well gas) can be processed Most CMM usage in the United States, to date, to remove contaminants. Both cryogenic gas has been offsite sales to pipeline. The existing processing and pressure swing adsorption are gas pipeline infrastructure in the U.S. plays an used to upgrade gas quality. Another technique important role in determining if and where used in the United States is blending goaf gas pipeline sales are feasible. In the Eastern United with VCBM. There are a few power projects States, the natural gas pipeline system is more currently in existence and planned at U.S. mines. extensive and is located closer to gassy coal mines than in the Western United States. In some In the United States, flaring has been used at instances, mines may need to construct a feeder a closed mine but has not been implemented Table 5.2: Improvement in U.S. CMM Drainage and Emissions Reductions Year Underground Longwall Coal Net CMM % CMM Drainage Coal Production Production (Mt) Emissions (Mt Efficiency (Mt) CO2 equivalent) 1990 385 154 82.2 32 2003 320 166 53.7 42 Source: U.S. Energy Information Administration, http://tonto.eia.doe.gov/FTPROOT/coal/tr0588.pdf; USEPA et al. (2005). 52 COMPARATIVE EXPERIENCES OF OTHER COUNTRIES at active mines. The coal industry has full capacity. Pipelines operate on the basis expressed concerns about the safety of flaring of either contract carriage or common due to the potential for the flame to propagate carriage. The former involves a consumer back down to the mine and cause an purchasing firm capacity, which is paid underground explosion, but have not for whether used or not. When no further attempted to address the issue, whereas in space is available, a consumer must wait the United Kingdom, C trading incentives have in line until an existing user relinquishes created sufficient drive for the industry to space, the capacity is expanded or a new pursue a safe flaring solution. CMM is also pipeline built having signed up sufficient flared in Australia where safety concerns have capacity commitments by consumers. For been fully addressed and venting of drained common carriage pipelines, there is no gas is prohibited. contracted allocation of capacity and consumers pay a composite fee with a fixed Optimization of pipeline infrastructure and a variable element. New capacity is use in China constructed on the basis of anticipated Mechanisms are needed which encourage demand and many distribution companies construction of pipelines and use of their operate this way. 53 6. Conclusions and Recommendations Conclusions the design and implementation of high efficiency capture systems; and China has large resources of CBM and CMM and the government has plans to increase their • Use of safe, high technology flaring to destroy extraction and utilization. However, these gas which is surplus to requirements, of ambitions will not be achieved unless the barriers inadequate quality for utilization or where which are impeding current development are utilization is not viable or yet to be constructed. removed and effective policies introduced to promote investment. A large government budget for improving gas control in KSOCM, the emergence of new STIS Government targets for increased CMM (drilling) technology and stimulation by potential extraction and utilization will not be approached CDM financing has raised interest in both CBM unless CMM capture efficiency is increased, the and CMM extraction and utilization activities. quality of drained gas improved and more of China government financial support for the drained gas utilized. Having captured gas improvements in gas control in KSOCM has by drainage, every effort should be made to noticeably accelerated implementation and use or destroy the gas rather than simply vent expansion of CMM extraction systems, but it to atmosphere as this will invariably utilization has not kept pace. In the absence of represent a lower cost GHG emission a firm climate strategy, there is no policy which mitigation option than either a VAM solution encourages utilization and destruction of CMM. or use of RE. Projected annual increases in coal production, Attaining significant improvements in CMM a greater proportion of production from longwall capture, utilization and destruction will require operations and an expectation of increasing gas a raft of measures to be implemented involving: drainage capacities and performance will lead • Use of integrated surface and underground to increasing volumes of CMM availability. pre- and post-gas drainage methods, By 2010, some 3.6 Bm3 drained CH4 could be where geological and mining conditions available for utilization in China, if action is taken are appropriate; as recommended in this report compared with the more ambitious government target of 5 Bm3; • Application of VAM technology (subject to emissions reduction of up to 54 Mt CO 2 successful full-scale demonstration) at gassy equivalent should, therefore, be possible. Failure mines for supplementing gas utilization to act will limit the potentially usable CMM to and destruction and, in particular, where only 1.2 Bm3. Further reductions in CMM geological conditions are not favorable for emissions will be out of reach unless, in addition 55 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA to necessary improvements at the major gassy CBM/CMM in three years and, at the same time, mines, radical action is taken to deal with the developing new resources in some areas such many small sources by subsidizing construction as Yunan and Heilongjiang provinces. of new drainage plants, improving existing The ultimate aim is to improve coal mine safety, plants, raising capture efficiency and installing but how this will be achieved is uncertain due to flare systems at a large number of nonKSOCMs. conflicting regulations and activities. A lack of At present, the NDRC will not approve the use pipeline infrastructure, the immature gas of flares solely or in conjunction with CMM market and the underdeveloped economy of utilization projects at coal mines under the CDM. methane-intensive areas are three major factors Consequently, large volumes of drained but which need to be addressed in developing unused CH4 are vented to atmosphere rather China’s CBM and CMM industry and to attract than destroyed at low cost. Low CH 4 the necessary investment in CBM development. concentrations in drained gas at many mines However, these objectives will not be achievable are limiting the potential for legal CMM without policy incentives. utilization and are a manifestation of inappropriate gas drainage design and Recommendations management. More than 18 Bm3 of VAM, equivalent to 271 Mt CO2, could be exhausted Effective action to reduce CH4 emissions from to the atmosphere in 2010, but only a small coal mines and to better exploit the naturally proportion is likely to be used. occurring gases in coal seams will require a combination of measures from formulation of The advent of new STIS-guided drilling climate change strategy, through policy technologies which have the potential to facilitate development, continuing institutional reform, commercial VCBM production from coalfields, introduction of market-based incentives and hitherto considered uneconomic, seems to be capacity-building. Successful GHG emission driving a renaissance. Provided this new reduction drivers in other countries, Australia for technology can be demonstrated to deliver example, operate in a market environment which promised results, a strong CBM industry is China aspires to develop, but is still some way off assured in China. Startling achievements will not from achieving. More rapid development of CBM be achieved immediately and there will be a and CMM resources can be achieved if the period of mixed results while the technology is Government of China continues regulatory evolved to suit geological conditions in China, reforms and further liberalizing of energy markets. and the necessary skills and experience are gained by the service companies. There will still The key areas requiring further attention and be a role for properly designed and completed actions by the Government of China in which vertical, hydro-fractured wells in some coalfield the international community, including the World areas. CBM production from surface wells could Bank, could assist, are summarized below: reach 1.8 Bm3 by 2010 although success with STIS could increase the yield substantially. Most Government policy, legal and of this production is likely to be concentrated in regulatory framework Shanxi province. CMM priorities and strategy should be redefined The Government of China’s strategy plan for with reduction of CMM emissions being the promoting CBM & CMM extraction and highest priority focus. utilization involves attracting more investment, guiding the selection of CBM/CMM development China will continue to rely heavily on coal as a areas, building a commercial base of primary energy source for the foreseeable future 56 CONCLUSIONS AND RECOMMENDATIONS and CMM emissions will represent a significant • Policy incentives which encourage surplus proportion of the country’s GHG emissions. drained gas to be flared, as is done in Under its Kyoto commitment, China is obliged Australia and the United Kingdom, rather to develop a climate change response and than vented to the atmosphere; reduction of coal-related emissions will be a key element. • A higher government levy on CERs generated by flaring to offset the lower mitigation cost Policies aimed at reducing GHG emissions from of flaring compared with utilization; coal mines will automatically result in • Fiscal incentives against equipment and improvements in safety and greater use of CMM construction costs for all GHG mitigation for energy purposes provided international safety schemes; and standards are a prerequisite for compliance. The CDM has proved the most successful driver • Strongly enforced mine safety standards of CMM exploitation to date in China, but there requiring drained gas to be of a specified are government-imposed barriers preventing minimum purity (>30 percent) for utilization more effective implementation. In particular, to encourage mines to improve gas drainage Chinese enterprises are not permitted to enter standards and performance, capture more into CER-sharing agreements. This has removed usable gas and become safer workplaces. a powerful means of securing project investment and has alarmed investors, reawakening In order to formulate and implement effective concerns about lack of sanctity in agreements strategy, the full scale of the problem must be made by State-Owned Enterprises (SOEs). The determined by preparing a reliable and complete incentive for project investors to provide CMM emissions inventory. continuing assistance throughout a project to ensure delivery of CERs is removed. Reluctance The quantities of CH4 emitted from China’s coal to accept flaring of surplus and unusable CMM mines are not known to any degree of accuracy also narrows the applicability of CDM. The (IPCC Tier 1 method) and the data are government is concerned that as flaring is the incomplete as they are based on the KSOCM lowest cost destruction option, gas would be which represent only about half of China’s coal indiscriminately flared and wasted as an energy production. Without these data, the full potential source. However, such effects can be countered for scale-up cannot be properly assessed and using fiscal and regulatory measures. The effective management of China’s CMM current philosophy which accepts venting as the resources and emissions established. For only alternative to utilization is inconsistent with example, a survey of county, village and the aims of the UNFCCC. Unless these privately-owned mines in the highly gassy impediments are removed, CMM emission Jincheng mining area revealed that in producing reduction and energy recovery targets will not 9.6 Mt of coal, some 332 Mm3 of CH4 was be achieved. drained, of which about 20 percent was utilized. The potentially drainable CMM resource in The following measures would ensure that CMM China achievable using tried and tested is utilized, wherever practical and feasible, and technology is currently so large that treatment the surplus destroyed: of mine ventilation air, which carries an even larger CH4 resource, has not yet attracted much • Government strategy to minimize GHG attention. However, this situation could change emissions from its mines implemented rapidly in the light of technological developments through policies which encourage optimum and the availability of CDM financing for VAM use and maximum destruction of CH4; utilization projects. 57 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA It is, therefore, recommended that: CBM resource management to ensure this clean energy is to be more effectively exploited. • An IPCC Tier 3 methodology is developed and applied to all the KSOCM and a survey CBM resource management in China involves undertaken to establish reliable Tier 1 a carve-up of potential prospective areas estimators for the remainder of the coal between the State-owned petroleum and mining sector; and CUCBM monopolies. Resource is managed by those with vested interests in the proceeds of • An inventory should include CH4 flows and development rather than by an independent concentrations in exhaust ventilation government body serving the national interest. shafts (VAM). Foreign CBM developers are required to sign an agreement, or PSC, with CUCBM which sets Safety legislation should be extended to pave out the rules, a minimum exploration the way for utilization and destruction of VAM. expenditure and other conditions. However, PSCs are not sacrosanct and there is evidence VAM represents a significant emission and that state-owned oil and gas companies have potential energy source as more than 70 percent disregarded the “license� boundaries in their of the CH4 released from coal mines is exhausted exploration programs. The PSCs have no formal at low concentrations. Technologies for removing legislative standing but are intended to provide and using low concentrations of CH 4 in an internationally recognized form of cooperative ventilation air are being developed but these agreement and a basis for negotiation. will be costly requiring CDM support for viability and new mine safety legislation to allow for safe At present, CUCBM and other SOEs with CBM use or destruction of CH4 at concentrations exploration interests (for example, Petrochina) below the lower explosive limit at a designated apply to MoLaR for CBM exploration and factor of safety. China will become a major development licenses which are issued on a target for CDM-financed VAM schemes once first come, first served basis, unless the area a suitable technology is proven and this will is reserved for other purposes. CUCBM can lead to major reductions in emissions. decide whether to explore alone or to form a cooperative venture with a foreign company It is recommended that: under a PSC. The current licensing system • Safety legislation should be revised to allow does not allow for any market competition, the use and destruction of low concentration licenses can be easily extended and there is VAM subject to stringent safety precautions no incentive to expedite exploration and and a maximum permissible CH 4 development. As a result, exploration is concentration which must not be exceeded inefficient and development slow. Substantial to ensure a high factor of safety. CBM license areas have been let but not explored due to lack of resource, or ranked CBM remains in coal seams until extracted at a as of low interest by the holder. Some production borehole or disturbed by mining. Gas developers have sought to build large removed from coal seams ahead of mining, or portfolios of license areas for which they have in areas which are unlikely to be mined for some neither the intention nor the resources to time, reduce the future threat to the environment explore and develop merely to try and impress but, more importantly, provide a valuable source investors. Access to both coal and large of energy comparable to conventional natural gas. associated CH4 resources are also sterilized Institutional and regulatory reforms are needed to by coal mine leases of 70 years or more which establish fairer, competitive and more effective hinder and slow development. 58 CONCLUSIONS AND RECOMMENDATIONS The formation of CUCBM as a regulator to • Any qualified Chinese company should be protect the interests of China was an essential free to enter into a PSC agreement with a first step in establishing a CBM industry in China foreign company, but the terms should be and CUCBM has played an important role in subject to oversight by an independent managing foreign involvement and investment regulatory commission; and in CBM exploration. However, administrative and regulatory needs have now changed and it • Licensing of coal should be separated from is recommended that: the licensing of CBM rights. Mines currently with CBM interests should be required to • CUCBM should be divested of its monopoly make exploration and development privileges and allowed to operate as a commitments similar to those expected of commercial exploration and development entity; PSC holders or relinquish title to the gas. To prevent loss of coal reserves, a legally binding • The role of CBM regulator should be passed interaction agreement should be introduced. to MoLaR or a new Energy Ministry – and CBM expertise built within the appointed department; The institutional and legal framework should be rationalized and strengthened. • A more open, competitive and transparent bidding process for CBM blocks is introduced; Both coal and mineral resources laws are currently being revised, but independent of each • The CBM industry should be integrated into other. The revisions should be examined in detail the natural gas and petroleum industry due before promulgation and any conflicts resolved. to overlapping interests, but leaving CMM In reviewing the coal law, efforts should be made firmly in the coal mining sector; to identify the reasons for its inadequacy in addressing safety issues, in particular gas • An effective regulatory system should be drainage in coal mines, and also ensure there devised for managing the interaction is no conflict with the government aims of between CBM and coal mining interests. Both promoting increased CMM extraction and Australia and the United Kingdom have utilization. Mine safety laws are all too often established robust schemes which could be flouted and revisions will only have an impact if adapted for China; enforcement is strengthened. Now would be an opportune time to strengthen the legal • PSCs should be underpinned by legislation, framework of the coal mining sector and, in and exploration and development license particular, address CBM/CMM safety and boundaries enforced. Licensing terms should interactive issues. be more stringent and strictly enforced. CBM license areas which do not receive the CBM extracted independent of mining is a requisite exploration attention within a natural gas production operation. CBM defined time period, not exceeding three reservoirs are difficult and costly to develop in years, should be relinquished and bids invited relation to their production potential compared from qualified companies; with conventional natural gas reservoirs, and government policy should be aimed at • The costs of holding license blocks should encouraging the natural gas industry to develop be increased to speed relinquishing of areas those marginal resources most likely to be of which the developer has discarded or has maximum future commercial and strategic insufficient resources to explore; benefit. It is difficult for the fledgling CBM 59 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA industry to compete with the petroleum industry mining operations. Major technical issues which for investment due to its high risk and current need to be addressed include poor sealing of lack of scale. The situation is exacerbated by its underground gas drainage boreholes, inadequate separation from the petroleum sector and design, monitoring and management of gas alignment with the coal industry. The State’s drainage systems and use of drainage methods investment in CBM exploration is only 0.02 of unsuited to the geological and mining that spent on oil and natural gas exploration conditions. Coal mine management in KSOCM despite its official ranking as a potential major has too little scope to make technical changes energy resource. In contrast, CMM is an and improvements on the basis of their firsthand unavoidable by-product of mining with serious experience where mining groups dictate gas environmental and safety impacts to be control and gas drainage methods to be considered in addition to its energy potential. employed at their mines. The designs must be approved by qualified design institutes and It is, therefore, recommended that: these, and any other changes, invariably have to be approved by referring to higher levels • The revisions of the Coal and Mineral within the mining group and, in some instances, Resources Laws are examined and compared to provincial government as safety liability in detail and any conflicts resolved before extends to vice governor level. promulgation. In reviewing the Coal Law, efforts should be made to identify the reasons In order to improve CMM capture and quality, for its inadequacy in addressing safety issues, coal mine staff need direct access to more in particular underground gas drainage, and detailed information, knowledge and technology also ensure there is no conflict with the relating to gas emission prediction, ventilation government aims of promoting increased planning, gas drainage methods, equipment, CMM extraction and utilization; monitoring and CMM utilization and destruction options. Coal mining companies need such • CBM should be grouped and managed improved capabilities if they are to be able to along with other difficult natural gas sources assist local CMM project developers to analyze such as tight sands, which should be subject project risk and present properly detailed to similar incentives; and financial arguments to attract external investment. Foreign companies actively seeking • CMM should remain firmly in the mining CMM investment projects invariably find the sector under provincial control with central amount of information provided by Chinese coal government oversight. mining companies is inadequate and Improving CMM availability and quality insufficiently detailed. Mining enterprises seeking to promote their projects need to prepare Capacity-building is needed to fill serious detailed plans and studies and provide the knowledge and technology gaps at coal mines. necessary supporting data. Investment in CH4 drainage equipment and Implementation of an effective emissions technology without an understanding of its reduction strategy for coal mines will require applicability is leading to wastage, and expected application of combinations of surface CBM, reductions in numbers and severity of accidents underground CMM and emerging VAM and increased gas availability for utilization are utilization technologies, the choice depending not being achieved. The variable, and often low on site-specific characteristics and the necessary quality of drained gas, is a limitation to efficient capacity-building, and technology transfer can utilization, which must be tackled within the be achieved with the help of a carefully designed 60 CONCLUSIONS AND RECOMMENDATIONS and managed demonstration project. Analysis – To professional service support companies so of the range of gas use options should also be that they can help coal mines with CDM examined in a demonstration project to show projects to deliver CERs; and cost-effective exploitation of the gas having considered the quantity and value of high purity – Through a CMM demonstration project at CBM available relative to the generally larger a selected coal mine of optimization of quantities of variable low to medium quality energy recovery and maximization of CH4 CMM, domestic and industrial thermal demand, destruction to international safety standards. power generation, chemical and vehicle use and The CDM or the United Nations Economic transport infrastructure (pipeline) requirements Commission for Europe (UNECE), through and costs. the GEF program for financing energy efficiency and renewable investments for Coal mining companies are also in need of climate change, should be investigated as support with CDM projects to deliver CERs, but financing sources. the needed professional service support industry capabilities do not presently exist. Without Strong incentives are needed to this support, CDM projects at mines will vigorously drive change underperform substantially, the C assets market The government should further stimulate will lose confidence in the sector and government investment in CMM utilization and destruction. CMM utilization targets will be unachievable. Existing tax benefits in China have not been New, fully mechanized private and locally- effective by themselves and CDM alone will not owned mines in gassy areas are starting to be sufficient to stimulate the level of investment recognize the potential benefits of CMM required to achieve the government’s goals. utilization, but this sector of the coal mining Additional incentives are needed which will industry, which is likely to grow in importance, encourage greater levels of both domestic and does not presently receive the attention it needs. international investment in CMM utilization and destruction. It, is, therefore recommended that: A possible route is exemplified by China’s • New fully mechanized private and locally- Renewable Energy Law which took effect on owned mines be included in any new CMM January 1, 2006, introducing a pricing promotional initiative; and mechanism which ensures a premium over the lowest cost clean coal option and includes a • Capacity-building be provided: government subsidy. This incentive would be – To government advisers and planners, mine particularly cost-effective if applied to CMM as designers, technical staff and mine the incremental cost of power generation using management to help them better CMM is substantially lower than that of wind understand the current state-of-the-art, its generated power. Surface CBM extraction, limitations and the fundamental principles connected with active mining, which results in of gas drainage and control; avoidance of CH4 emissions, should be treated as CMM insofar as incentives are concerned. – To coal mining companies so that they are able to assist local CMM project developers Gas abatement certificates modeled on the New to analyze project risk and present properly South Wales scheme have attractions as part of detailed financial arguments to attract an in-country GHG trading system but could not external investment; be introduced until a national trading scheme 61 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA was established. Nevertheless, as China’s GHG mine safety by improving the effectiveness of emissions will continue to grow, such an both pre- and post-gas drainage methods. approach has merit as part of a long-term Wider application of advanced gas extraction strategy. A more rapid response could be and capture technologies are essential if China achieved with grant schemes similar to those is to scale up its CBM/CMM industry. developed in Australia which have successfully encouraged demonstration of new and China would benefit from easier access to innovative CMM utilization technologies. Projects imported gas control technology for its mines should be selected on merit and grants only and CMM utilization schemes. However, some made available for properly designed, peer foreign companies with key technologies are reviewed projects with a high chance of success reluctant to enter the China market due to lack and not used to subsidize ill-conceived, of protection of IPR, cost and risk of market entry, replicated projects by coal mining SOEs as has protracted approvals procedures for happened too often in the past. The government underground equipment (but now being could partner with GEF to foster such a scheme. improved), competition with low-cost Chinese equipment and lack of transparency in bidding Domestic mining companies can benefit from for tenders. exercising greater corporate environmental responsibility as well as assisting the government It is recommended that: achieve its strategic aims. Domestic coal mining • CMM is treated similarly to RE in China and companies can reduce GHG emissions without enjoys a similar level of subsidy, as is the case detriment to their business, especially if in Germany; encouraged by market-based and grant incentives as can be demonstrated in Australia • Grant schemes similar to those used where innovation, R&D in CMM extraction and successfully in Australia should be introduced use are enabling increasingly effective results to to encourage demonstration of new and be achieved thus reducing long-term business innovative CMM utilization technologies; and reputation risk to major companies. Spin- off benefits which directly benefit financial • Incentives to stimulate investment in CMM performance include improved gas control at extraction and utilization and CH4 emission the coalface, safer working conditions, a local reductions should be aimed at coal mines of low-cost energy supply and reduced mine all types. In particular, financing operating costs. The organizational structures arrangements and loan facilities should be of China’s large mining groups (former KSOCM) made available through local, commercial mean that action will require the sanction of banks to facilitate development of small-scale provincial governments but that should not deter CMM utilization schemes by local enterprises; a bottom-up initiative. • Key State-owned mines, in particular the R&D is needed to enhance understanding of the large coal mining enterprises with characteristics of coal seam gas reservoirs in international expansion aspirations, should Chinese geological conditions and to explore be aware of the importance of protecting the use of STIS (drilling) technologies developed reputation with regard to environmental in Australia and the United States for extracting protection and should develop corporate gas from virgin coal seams with marginal policies which seek to maximize benefits from permeability. These advanced STIS drilling available GHG emission reduction incentives techniques could also have a role for enhancing and set emission reduction targets; 62 CONCLUSIONS AND RECOMMENDATIONS • Targeted R&D of CBM and CMM extraction Shanxi merits special attention as a model technology should be expanded; province for developing, implementing and evaluating policy and action programs to • Government should create policy incentives optimize the economic and environmental to encourage foreign service companies and benefits of CBM and CMM exploitation. JVs with the skills and experience to introduce, The choice of Shanxi as a special case is justified adapt and exploit new and advanced CBM by it being a major coal-producing province with CMM technologies in China; and arguably the largest potential CMM reserves, the most promising CBM prospect areas • Barriers to importation of key technologies (E. Ordos and S. Qinshui coal basins), a strong should be removed by recognizing demand for clean energy to facilitate air quality international safety testing standards for improvements in its industrial cities crossed by certification of underground equipment, major natural gas pipelines and committed to rigorous enforcement of patent and IPR constructing a provincial gas pipeline protection and ensuring transparent and infrastructure and increasing the gas component competitive bidding for tenders. in the energy mix. Regional development strategies Construction of an accessible pipeline infrastructure by the government in selected areas An effective emissions reduction strategy must will stimulate exploration and development of recognize regional differences. For example, CBM and CMM (by analogy with road construction development of CMM utilization projects in the as an economic development stimulant to isolated coal-rich Shanxi province should be a priority communities). For example, in the Raton Basin in and would be much more cost-effective the United States, the lack of pipeline connections than RE. Where such conditions exist, CBM/ stalled CBM development for more than 20 years. CMM development should be afforded A system of contract carriage, which allows an special status. operator to contract a fixed transmission capacity, CH4 extraction and utilization from coal seams whether used or not, would reduce construction in economically underdeveloped coalfield areas risk, allow multiple party access and ensure will benefit local communities and provide maximum use of available capacity. Such an energy for displacing use of polluting coal in approach has been adopted in most countries local, small-scale enterprises. with newly developing gas industries and it is also applied by gas transmission companies in the Rational development of CBM requires United States. However, usual practice in China is juxtaposition of market, gas transport to adopt common carriage5 and it is not unusual infrastructure and geologically favorable for CMM pipelines to be operated well below conditions for commercial extraction, all of which design capacities. are present to some extent in Shanxi province. However, in Shanxi, as in other coal-rich It is recommended that: provinces, there is insufficient cohesion between the planning of CBM, CMM and natural gas • The Shanxi provincial government should transport and utilization projects. develop an integrated development plan and 5 For common carriage pipelines, there is no contracted allocation of capacity and consumer pay a composite fee with a fixed and a variable element. 63 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA policy framework to help it meet its should be avoided as this will lead to aspirations of a commercial and sustainable market inefficiencies; and CBM/CMM industry; • All parties should be able to compete • Grant assistance is given to constructing gas openly for access to gas pipelines and distribution infrastructure in special status enter into contracts for transmission areas and coal-to-gas switching incentives capacity to reduce the exploration and offered to consumers; but price subsidy development risk. 64 Annex I CMM Extraction from KSOCM in China (1980-2002) Mining Group Province Annual CH4 recovery, Mm3 1980 1985 1990 1995 1998 2000 2002 Fushun Liaoning 100 102 108 122 127 129 128 Yangquan Shanxi 86 90 77 93 115 117 200 Songzao Chongqing 11 34 59 56 70 76 93 Tianfu Chongqing 5 13 23 27 26 77 17 Nantong Chongqing 2 7 22 21 28 23 15 Zhongliangshan Chongqing 19 19 22 21 24 24 24 Furong Sichuan 1 1 12 27 29 25 38 Liuzhi Guizhou 12 5 11 20 19 8 7 Jiaozuo Henan 2 4 10 14 12 10 11 Tiefa Liaoning 3 2 10 22 36 44 64 Kailuan Hebei 3 4 8 9 16 9 9 Fengcheng Jiangxi 10 5 8 9 6 10 3 Fengfeng Hebei 5 6 8 14 14 11 15 Hebi Henan 5 7 7 10 11 12 12 Beipaio Liaoning 4 2 6 4 5 3 – Panjiang Guizhou – – 6 21 36 102 71 Jixi Heilongjiang 2 7 5 2 – – 0.7 Shuicheng Guizhou 2 2 5 19 12 26 59 Baotou Inner Mongolia 18 4 5 - 2 5 4 Huainan Anhui 2 5 4 5 23 49 112 Hegang Heilongjiang 3 1 4 6 4 10 12 65 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Mining Group Province Annual CH4 recovery, Mm3 1980 1985 1990 1995 1998 2000 2002 Guzhuang Shanxi – 1 4 3 – – – Yingying Shanxi 3 1 4 4 1 – – Huaibei Anhui 2 4 3 5 8 18 43 Xishan Shanxi 1 – 1 6 3 3 9 Lianshao Hunan – 2 1 2 3 3 3 Pingxiang Jiangxi – 1 – 1 4 3 2 Liaoyuan Jilin 2 1 – 4 8 12 5 Shenyang Liaoning – – – 2 5 9 26 Shitanjing Ningxia – – – 15 28 44 – Yinggangling Jiangxi – – – – 1 1 1 Baisha Hunan – – – – 1 1 1 Guangwang Sichuan – – – 1 2 3 1 Yongrong Sichuan – – – 2 3 3 5 Shizuishan Ningxia – – – 1 2 6 – Tongchuan Shaanxi – – – 6 7 4 7 Hancheng Shaanxi – – – 1 3 4 3 Jingyuan Gansu – – – 4 5 5 7 Yaojie Gansu – – – – – 1 1 Pingdingshan Henan – – – 3 25 26 28 Nanzhuang Shanxi – – – 12 1 – – Meitian Guangdong – – – 2 – – – Total1 293 330 434 600 742 918 1146 Source: CCII, 2003 published in DTI (2004). 1. Using nonrounded data. 66 Annex II Comparative Investment Costs US$/t CO2 Equivalent Annual Emission Destruction or Avoidance Capacity Data Used in Calculations 1 MWh (3.6 GJ) is generated using (3,600/34.6)/0.37 = 281.2m3 CMM (pure) Basis for comparison 1 MWyear (electricity) Annual consumption = 7,500 x 281.2 = 2.11 Heating value of CMM = 34.6 MJ/m 3 Mm3 CMM (pure) (pure basis) Heating value of coal = 29.3 GJ/t The investment cost per ton annual capacity CO2 avoided = (0.94M/2.11M) x 66.4 x (1/0.869) Combined grid emission factor = 0.98 t = US$34.0/t CO2 equivalent (net) CO2/MWh CMM destruction by flaring CO2 emission factor for gas combustion 0.869 An imported, high efficiency, low emission Coal power plant electricity conversion efficiency ground flare adapted for safe use at coal of 35 percent mines with a capacity of 2,000m 3/h gas CMM power plant electricity conversion mixture costs US$0.18 million. efficiency of 37 percent (net) Over a year, the flare can destroy 7,500 x 2,000 Annual CMM power plant availability of 7,500 x 0.3m3 = 4.5 Mm3 CMM (pure basis) h (85 percent) The investment cost per ton annual capacity CO2 Flare availability of 7,500 h (85 percent) avoided = (0.18M/4.5M) x 66.4 x (1/0.869) = US$3.06/t CO2 (net) CH4 concentration of flared gas = 30 percent Adjusted to a common comparison basis Wind turbine availability of 3,500 h (40 percent with the CMM power plant of 2.11 Mm3 CMM used and average is around 30 percent) (pure), the capital cost of the flare unit Methane destruction in a CMM would be unchanged (accommodated within Power plant the downturn of the same specification equipment) and the investment cost per ton A medium-scale CMM power plant in China costs CO2 annual destruction capacity = US$6.5/t about US$0.94 million/MW generating capacity. CO2 equivalent (net) 67 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Note that the capital cost would reduce Assuming an average relative emission at the substantially with the introduction of locally coal mine of 10 m3/t (typical of many Chinese manufactured flare units. mines) 0.35 t coal can release 3.5 m3 CH4 which is equivalent to 0.053 t CO2 CMM and CO2 emissions displaced by wind energy The displaced CO2 from coal combustion is 0.98 t and, therefore, the total CO2 offset = 1 MW grid-connected wind power generation 0.98 + 0.053 = 1.03 t/MWh capacity costs from US$1.00 million-US$1.26 million in China depending on scale The annual emission avoidance = 3,500 x 1.03 (IT Power, CNE) = 3,605 t CO2 equivalent 1 MWh wind generation capacity displaces (3.6/ The investment cost per ton annual capacity CO2 29.3)/0.35 = 0.35 t coal combustion avoided = US$277-US$350/t CO2 68 Annex III CBM/CMM Extraction and Utilization Technology CBM Technology Issues a larger area of contact between the production borehole and the coal seam than can be Vertical CBM production wells achieved in a fracced (hydraulically fractured) vertical borehole. Thus, commercial flows can CBM often does not flow readily from a coal be obtained from lower permeability coals than seam into a vertical borehole until the coal could be achieved previously. The need for has been stimulated using hydraulic fraccing is obviated and the chance of damaging fracturing. This method involves inducing a coal permeability is reduced. vertical fracture (ideally) in the strata by the injection of liquid under pressure, typically The advantages of draining gas from the surface water. Sand, or some other material include ease of access to any part of the working (proppant), is used to keep the fractures open area, reduced interference with mining activities, to allow free passage of gas and water once fewer men underground and less underground the injection pressure is released. The fracture drainage infrastructure to install, maintain forms a path of high conductivity along which and monitor. By using STIS, any surface gas can flow freely into the well bore. The environmental restrictions can generally be flow through the natural fracture network in avoided and there is no risk of damage to roof the coal becomes the limiting production strata as is the case with fraccing. The factor. The ability of coal seams to transmit disadvantages of surface drilling are high cost CH4 is determined by natural factors, the cleat and the possible risk of water inrush through or fracture density, cleat transmissivity, the failure to seal off aquifers or seal boreholes degree of water saturation and the fluid on abandonment. pressure in the cleat. The preservation of fracture permeability depends on the Effective application of STIS will require specialist structural history of the coal basin. contractors and equipment in addition to development trials to adapt the technology to Alternative methods of completing vertical Chinese geological conditions. Underground boreholes have been developed but are of little long hole in-seam drilling has proved difficult general relevance to China. in some coalfields and similar problems could Surface to In-seam Boreholes beset STIS (drilling) in some coalfield areas. However, this technology has shown promise STIS (drilling) methods involve drilling surface when applied to the south Qinshui basin in to horizontal in-seam boreholes, with clean southern Shanxi, an area which has also proved underbalanced fluids. This technology provides favorable for underground long hole drilling. 69 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Surface to in-seam guided drilling offers the are encouraging although some experts believe following benefits: that the full potential has yet to be realized as the necessary radius drilling and steering skills • A borehole can be steered to intersect the will take time to learn. dominant fracture system of the coal, thus commercial production may be achievable Enhanced CBM (ECBM) from marginal permeability coals if sufficient fractures are intercepted; Methods of enhancing the recovery of methane from virgin coal seams are being studied and • Large surface area contact with the coal developed in the United States, Canada and the production zone and clean drilling obviates European Union (EU). the need for fraccing; The basic approach involves injecting CO2, • Multiple branched holes can be drilled from Nitrogen (N2) or a combination of these gases a single, convenient surface location; into a deep coal seam. CO2 is preferentially adsorbed onto coal, freeing CG4 for transport • Multiple wells can be drilled from a single to the production well. An important advantage pad, thus reducing the costs of access, drilling of this mechanism is that it also results in and gas gathering; and sequestration of CO2, desirable because CO2 is the largest anthropogenic contributor to • Improved mine safety when used for global warming. However, CO2 sequestration predrainage of coal seams ahead of mining. would sterilize coal resources as any future mining would rerelease the gas back into Guided drilling technologies have been used the atmosphere. successfully for many years within the oil and gas industry. Advancements in down-hole Injection of N2 into a productive coal seam lowers measurement and communications technology the partial pressure of CH4 allowing CH4 to desorb coupled with ability to locate guidance sensors from the coal matrix. In practice, the recovery gains directly behind the drill bit, has resulted in the may be due more to flushing of the CBM into the development of a new generation of guided production wells rather than as a result of drilling equipment capable of providing greater desorption effects. Preparing and injecting pure accuracy, increased drilling speeds and cleaner gases is costly. Flue gas from a power plant, hole completions. Elaborate drilling patterns consisting of a mixture of N2 and CO2 with some have been evolved for CBM development but impurities, could provide a low-cost alternative. they are not always designed to exploit the coal However, the problems of low permeability which seam reservoir characteristics to maximum hinder CBM production from surface wells would advantage. Australian experience of developing similarly inhibit rates of CO2 or N2 injection. The relatively low permeability CBM projects is benefits of enhanced recovery will, therefore, be particularly relevant to China. Australian largely gained in relatively permeable seams by companies are taking an increasing interest in extending the life of production fields. In China, a China’s CBM industry and their involvement, high proportion of these seams are mining targets, experience and pragmatism should help to so, there will be no net sequestration benefit. accelerate CBM activity in the most promising coalfield areas. CMM drainage technology status STIS wells have been drilled in the Shouyang A survey of perceived underground gas drainage block near Taiyuan, eastern Ordos and south problems was undertaken in 2003 by sending Qinshui, all in Shanxi province. Initial reports questionnaires to coal mining groups (Creedy 70 ANNEX III: CBM/CMM EXTRACTION AND UTILIZATION TECHNOLOGY and Garner, 2004). Detailed replies were outburst-prone. Predrainage offers a means of obtained from 16 of the groups, largely reducing the gas content of the seam and representing the areas with the gassiest mines reducing the potential gas hazard prior to (Table A3.1). The study revealed that gas working, but is often difficult to implement. drainage performance is often hampered by Of particular interest in this respect is long hole inadequate drilling equipment. Lack of drilling technology. The Asian American monitoring and control facilities also hinders CH4 Company Inc. (AACI) successfully drills long in- control in the mine environment and results in seam degassing boreholes at Daning mine near quality variations in drained gas. Analysis shows Jincheng. Jincheng Coal Mining Group has also inadequate and ineffective management lies at reported success with in-seam drilling at Sihe the root of many problems with difficulties mine. Daning and Sihe mines are working a compounded by poor equipment, insufficient thick coal seam in the South Qinshui coalfield measurement and monitoring facilities and a which has a well-developed fracture system lack of technical knowledge of emission and gas which lends itself to predrainage. However, control processes among some practitioners. similar geological conditions and coal characteristics are not found elsewhere in China Key statistics on gas control and gas drainage and, therefore, the advanced drilling technology practice in China from the year 2000 imply low may not be transferable to other coalfields. Table A3.1: Survey of Gas Drainage Problems Perceived problem Survey Result % Drilling Difficulties 14 Inadequate Monitoring 19 Poor Performance 33 Low Use of Gas 12 Lack of Funds 21 serviceability of equipment and poor drainage Effective predrainage is difficult to achieve in performance: the low permeability coals found in many parts of China, and, in the absence of an outburst • Seven hundred and Ninety three drill rigs risk, it is of little benefit as a safety measure. reported although only 452 in use; Both U.S. and Australian contractors experienced difficulties in trying to drill a • Six hundred and forty seven CH4 drainage long in-seam borehole at Songzao. Long pumps reported although only 383 in use; hole in- seam drilling using imported • 0.4 m of drainage borehole drilled per ton drilling equipment also failed at Fushun, of coal; Pingdingshan and Huainan due to problems with soft coal and high stresses. There is a • 32 percent average drained gas clear need to examine the drilling systems and concentration; and technology in use in China and to question whether predrainage gas control solutions • 22.5 percent average gas drainage efficiency. currently being considered are appropriate Predrainage to the geological and mining conditions. Difficulties in underground drilling indicate Many mines in China work thick seams some the challenges to application of STIS of which have high content and others are (drilling) methods. 71 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Heavy investment by the central government and Sealing gas drainage boreholes to mining groups over the last two years in gas prevent air leakage control should have resulted in some improvements, but there are no recent statistical CH4 drainage systems should exert suction on data available to confirm this. the surrounding strata to draw gas into the pipework. An effective seal is needed between Gas flow monitoring the borehole and its collar to prevent air being drawn in. The conventional approach is to SAWS are keen to encourage use of advanced cement a steel or GRP standpipe into place foreign equipment, but foreign mining through which drilling is continued. electrical equipment safety approvals are not The standpipe length must pass through the recognized which leads to delays while imported highly fractured zone adjoining the roadway. equipment undergoes the testing and Generally, gas drainage boreholes are acceptance procedures. inadequately sealed in Chinese mines. Once suction is applied, air leakage is inevitable Safety equipment and systems are often leading to poor capture performance and low installed underground with limited provision purity gas. being made for preventative maintenance. Too little use is made of monitoring data for There is considerable scope for increasing the forestalling and preventing gas problems and availability and quality of gas drained from coal optimizing flow and purity. Recorded mines but more investment is needed in training, monitoring data attract most interest after an exploiting monitoring data, refining drainage incident when it can be used to assist an methods, modern underground drilling investigation into cause and blame. equipment and the building of management capacity to exploit these systems to maximum Gas monitoring systems at CH4 extraction benefit. The problem of maintaining CH4 purity stations are not always reliable which could is a significant factor limiting gas use and this compromise utilization operations as well as issue requires further examination. safety. Typical problems include failed detectors, inappropriate placement of gas A possible new postdrainage detectors and inaccurate volume flow technology (CMM) calculation methods. Attention has been focused on applying STIS Floor gas drainage for commercial CBM production and for predrainage to reduce gas emission risks in coal Cross-measures drilling in the roof for gas mines. However, there is another application that drainage is accepted technology, but mine has yet to be demonstrated in China. Gas engineers in China often consider the drilling drainage galleries driven in the roof of a of floor gas drainage boreholes as longwall panel have proved effective for problematic due to difficulties in clearing capturing gas released by mining. A potential cuttings. This implies the drilling equipment low-cost alternative of drilling guided long holes or drilling systems are ineffective. There are from underground above a longwall panel was significant coal seam sources in the floor of demonstrated by specialist contractors but has many Chinese longwalls and technology is not been replicated. A further option is to use needed to enable this gas to be tapped more STIS to install postdrainage long holes above effectively, especially where there is a risk of longwall panels. Postdrainage activity could be sudden emissions from the floor. moved outside the mine, but the costs need close 72 ANNEX III: CBM/CMM EXTRACTION AND UTILIZATION TECHNOLOGY examination to determine the depths at which system expressed as a percentage. The gas application may be appropriate. Potentially released from the coalface, from uncut coal left additional benefits to the mine could be in situ and from coal cut by the coalface machine consistently higher gas capture and more gas is not capturable (unless pre-drained for a very for utilization. Super-adjacent STIS drainage is long period of time). The capture efficiency is, likely to be more cost-effective than surface goaf therefore, always less than 100 percent. Due to drainage as fewer vertical drilled sections will mining, geotechnical and engineering be required and gas flows and quality should limitations, a gas drainage system would also be higher. be unlikely to capture all of the gas released from adjacent coal seams. Depending on mining Variability of CMM Flow conditions, geology, coal permeability, and method of methane drainage capture The design of a suitable utilization scheme using efficiencies can range from 30 percent to in CMM depends on the supply and quality of the excess of 90 percent. Capture performance is gas and the variability of these parameters. site specific and even on a particular longwall The flow of usable CMM depends on: can vary over its length depending on geological and mining conditions. • Geology and seam gas contents; Capturing More Gas • Method of mining; Better design, planning, and drainage system • Effects of previous mining; management will lead to higher gas captures, higher and more consistent gas purities. The • Current and future rates of coal extraction; benefits of capturing more gas are lower • Gas capture performance; and methane concentrations in the mine airways, higher coal production achievable and more gas • Capacity of the CH4 drainage system. for utilization. The most effective postdrainage methods of those used in China are drainage Factors Affecting CMM Quality galleries in the roof and surface goaf boreholes. For example, goaf wells at Tiefa can produce CMM is diluted with air that is drawn into 30,000 m 3 /d of gas with a methane broken strata by the gas extraction process, concentration of 80 percent. However, these through inadequately sealed standpipes (a methods only work well when the major sources widespread problem in China’s coal mines) of gas occur in the roof strata. and through leaking flanges and valves within the pipe network. Air is also admitted In mines where gas is drained ahead of mining as new boreholes are connected into the from medium length boreholes drilled in network. Methane concentrations (purities) developments and across projected longwall in drained gas can range from a few panels, ability to deliver gas is largely dependent percent to in excess of 90 percent in on roadway development rates and the number exceptional circumstances. of active developments areas. More gas can be drained by increasing the number of Capture Efficiency predrainage sites, provided they are not close enough to interact, and adding further gas The performance of a methane drainage system extraction capacity. is usually assessed in terms of methane capture efficiency which is defined as the ratio of drained However, where gas extraction pump capacity gas to total gas in the airway and drainage is increased without expanding the underground 73 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA sources, the result is usually higher gas mixture • Possible utilization options; flows and lower purity gas, often too low for utilization. This effect is exacerbated where gas • Availability of finance; is being drained from boreholes with inadequate standpipe seals – a common problem in Chinese • Social, environmental and safety benefits; and coal mines and solutions are needed to ensure the concentration of the methane can be safely • Ownership of resources, land and maintained at a usable level. permitting issues. Utilization Some remote small- and medium-sized mines suffer interrupted power supplies due to A gas utilization scheme can be considered for capacity limitations on the local grid and any mine with a history of gas production, but others have lost coal production due to the scale of the scheme will depend on current intermittent supply shortages. On-site power and future gas availability and, ultimately, on generation using CMM is therefore of interest the market for gas sales. Reliability of gas supply to mining companies seeking to reduce their can be increased by obtaining gas from more costs and ensure continuity of supply. than one mine, or from different sources. The feasibility of CMM use depends on: CBM/CMM projects at some coal mines offer ready market opportunities. A majority of coal • The mining and geological setting; districts are situated in the middle and east of China where industries are well established. • Gas drainage methods, gas quantities and Many coal districts themselves are small- or qualities at the mine; medium-sized cities that house the mine workers and support industry workers. Some • Future gas availability based on the large coal mines are near large commercially mining plan; advanced cities, providing a potential market • Potential to improve drainage performance; for CMM/CBM. Further, many mining districts have set up local CMM/CBM transportation • The local market for medium heat value gas systems and have substantial experience of and electricity; energy prices; gas distribution and utilization. 74 Annex IV An Overview of Some Major CMM Extraction and Utilization Schemes CMM schemes have been developed by many and a price of 0.25 yuan RBM/kWh agreed. coal mining enterprises including Yangquan, Jincheng Coal Mining Group has identified Jincheng, Huaibei, Huainan, Kailuan, Hegang, other local sources of gas that may be and Tiefa. Brief reviews of a selection of major required to ensure sufficient gas is available schemes are given below to illustrate current for power generation. These include the approaches to CMM use in China. existing VCBM wells drilled at Panzhuang, any further wells drilled in the future and also gas Jincheng Coal Mining Group from the adjacent Chengzhuang mine. (Shanxi province) The existing CMM utilization scheme supplies Jincheng Coal Mining Group is operating three gas to generate power from gas turbines (GTs) nongassy coal mines and two gassy mines (Sihe and steam turbines with a combined output and Chengzhuang). A CMM gas drainage and of 11 MWe. The first stage was completed in utilization is operational at Sihe mine and gas is September 2000 and involved 2 x 2 MWe GT also drained from the adjacent Chengzhuang plus 1 x 3 MWe steam turbine, the second mine. Gas contents range from 9 to 16 m3/t stage was completed in January 2002 and with coal permeability reported as 0.05 to 3 mD. consisted of the other 2 x 2 MWe GT. All the Gas is drained mainly in advance of mining from equipment is manufactured in China and the boreholes (70-80 percent). Over 1,000 in-seam GTs have reportedly proven reliable since boreholes have been drilled which are about installation, operating about 11 months per 500 m in length. year. The electrical efficiency is poor (low 20 percents) although the use of the heat for the The Sihe gas drainage system was started in steam turbine increases efficiency to about 28 May 2000 and currently drains more than 60 percent. The current CMM scheme includes a Mm3 (planned to increase to 200 Mm 3). The 10,000 m3 gas storage holder adjacent to the former State Development and Planning surface extraction station with a further Committee, now the NDRC, has approved a 50,000 m3 of storage capacity planned. 120 MWe power generation scheme at Sihe which will be developed with the assistance Fushun (Liaoning province) of an ADB loan. Mine gas will be supplied to the new 120 MW e scheme generating Fushun Mining Group Co. Ltd. is a large power for supply to the local grid and State-owned coal enterprise in China. Currently, any surplus gas fed to the existing coal production in the Fushun mining area is 11 MW e gas turbine utilization scheme. about 6 Mtpa. Fushun is mainly producing An agreement for electricity export is in place blending coking coal and steam coal. 75 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Fushun Mining Group Co. Ltd. is also rich in 1,800 extraction boreholes have been drilled. CBM resources that total around 8.9 Bm3. Coal Gas contents of the principal mined coal seams; in this mining area is low in sulfur and ash No.15 (average thickness 14 m) and No.18 content, and has well-developed fissures. (average thickness 16 m) are 12 m3t-1 and 15 Porosity of the coal is up to 10 percent. Fushun m3t-1 respectively. Coal permeability is reported coal also has very good permeability which to be 0.8 to 1.6 mD. averages at 0.5- 38 md. Since coal seams in the Fushun mining area have high permeability, Total gas extraction in 2001 was 1.3 Mm3 with high gas content, good gas reservoir conditions gas purity typically between 40 and 60 percent. and high methane content, conditions are Gas is supplied to 28,000 residential houses favorable for the commercialization of CBM (started 1992) through some 12 km of main development and utilization. Since 1971, distribution pipework supplying 25,000 to methane drainage from the Fushun mining area 30,000 m3 gas per day. The system includes a has been consistently high, generally above 100 10,000 m3 and 20,000 m3 gas storage holder Mm3/a. In 2004, 110 Mm3 was drained. adjacent to the mine plus a 10,000 m3 and 5,000 m3 gas storage holder located within the Coal mine methane extracted from Laohutai distribution system. mine at Fushun is utilized in the city and also transported to nearby Shenyang. Both pre- and Key issues identified by the mine in developing post-drainage methods are used although gas CMM utilization are: quality from predrainage can be poor due to • Drilling technology to drill in-seam inadequate borehole sealing. The annual gas for predrainage; extraction has remained over 100 Mm3 since 1983. Figures for 2001 record gas extracted as • Lack of performance of current drilling 120 Mm3. The CMM schemes include 188,000 equipment; m3 of gas storage capacity. • Monitoring technology to manage gas Gas is supplied for residential use in Fushun and drainage system; and also via a 33 km pipeline to Shenyang city as part of a joint venture between Fushun CMA, • Insufficient finance available to modernize Liaoning Coal Industry Management Bureau and extend the scheme. and Shenyang Coal Gas Co. The supply scheme to Shenyang has involved some 226 M yuan Songzao (Chongqing province) investment (EU sources state 58 M yuan). The gas supply capacity is 104 Mm3/a but lesser The Songzao enterprise operates six mines with quantities of gas are being transmitted due to an annual production of 4 Mt. All the mines are purity problems. A further phase of development classified as outburst prone with gas contents will involve drilling VCBM wells to provide high range from 17 to 21 m3t-1. Gas drainage has purity gas to enrich the mine gas and also been practiced for many years and the group increase the total volume of gas available. has considerable experience at the use of pre- and post-drainage methods. Hegang (Helongjiang province) Total gas extraction for 2002 was 93 Mm3 Nanshan coal mine has an annual design (44 percent capture efficiency) with gas supplied capacity of 2.5 Mt/a. The mine is classified as to 222,000 residential users consuming just an outburst prone mine. Both pre- and post- under 100,000 m3 per day and other public gas drainage methods are used and more than bodies. Gas use is generally about 50 percent. 76 ANNEX IV: AN OVERVIEW OF SOME MAJOR CMM EXTRACTION AND UTILIZATION SCHEMES Gas storage capacity in the CMM scheme is anthracite production base in China with a coal 60,000 m3. The Group is currently installing a production capacity of 16 Mtpa, planned to 2 MWe power generating facility (designed to increase to reach 22.5 Mt by 2015. operate at 6 MkWh). The coal resources are 14.1 Giga Ton (109 Tons) Huaibei (Anhui province) (Gt) and the CBM 687 billion m3. The annual methane emission in Yangquan mining area is Huaibei coal mining area is located in the central over 4 billion m3. At present, there are eight part of east China and the northern part of Anhui methane drainage stations in operation and 120 province. With its size of 100 km from north to Mm3 methane is recovered annually. south and the same length from east to west, Huaibei coal mining area covers the total areas The group operates 11 coal mines. Gas contents of Huaibei city, Fuyang city and Suzhou city. range from 7 to 22 m3t-1 with the average Huaibei coal mining area is about 9,600 km2 17 m3t-1. Gas drainage involves a combination of which the coal bearing area occupies 6,812 of cross measures drainage, surface goaf km 2. The entire Huaibei coal mining area boreholes and super adjacent headings. Gas is includes Zhahe mining area, Suxian mining collected underground from 120 km of area, Linhuan mining area and Woyang mining pipework. The feasibility of using CBM area with a total proven coal reserve of technology to pre-drain the gas by drilling from 6.7 billion tons. Coal in Huaibei coal mining the surface has been examined. area is mainly high quality bituminous coal with low sulfur, low phosphorous and medium-low Total gas extraction for 2001 was 151 Mm3 but it ash contents. Its calorific value is 5,000 = 8,000 is anticipated future annual gas capture will be kcal/kg. In addition to coal reserves, Huaibei around 130 Mm3. Typical capture efficiency is coal mining area also has 150 Mt of natural about 40 percent. About one-third of the gas coke, more than 300 billion m3 of CBM and drained is used for residential use but this may be some other mineral resources. extended. Currently, some 134,000 residential users are supplied by a system which incorporates Currently, the enterprise operates four mines. Gas 210,000 m3 of gas storage facilities. Other end contents range from 8 to 25 m3t-1 with coal seam use options being considered are methanol permeability reported to be 1.5 to 3.2 mD. Both synthesis and power generation. pre- and post-gas drainage methods are used. Panjiang CMA (Guizhou province) Total gas extraction in 2000 was 13 Mm3 (21 percent capture efficiency). Gas is supplied to Panjiang Coal & Electric Power Group Co. some 5,000 residential users and public welfare (PCEPG) is the largest coal mining company in units and the scheme includes a 15,000 m3 gas southern China. Coal resources in the Panjiang storage holder. There are plans to upgrade the mining area are estimated at nearly 48 Gt and current CMM scheme to 40 Mm3 per annum CBM at 124 billion m3. Panjiang’s six coal mines with the option to increase this further to 70-80 produce about 6 Mtpa. According to PCEPG’s Mm3 per annum. A number of other gas uses development plan, total annual coal output of have been identified including power generation the company will reach 21 Mtpa by 2010. and industrial process. Seam gas contents range from 10-20 m3/t. Total Yangquan (Shanxi province) methane emissions from the six mines are around 200 Mm3 per year. Expansion of coal Yangquan Coal Group Co. Ltd. (YCG) is a large production and the commissioning of new mines State-owned enterprise and the largest will further increase the availability of CMM. 77 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA CH 4 drainage could be increased to was 108 Mm3 (30 percent capture efficiency) over 500 Mm3/a if underground drainage and it is anticipated this will be rising from 130 and surface drainage were carried Mm3 in 2003 to 300 Mm3 in 2010 of which out simultaneously. 100 Mm3 will be used. The group operates six mines with gas contents The Huainan CMM gas utilization project has reported to be up to 20 m3t-1. Currently, gas been approved at State level. The total cost of control is achieved primarily by goaf drainage. the project is 240 million yuan. Gas use options are residential use, power generation and use Total gas extraction for 2000 was 43 Mm3 (about in boilers to replace coal burning. A total of 25 percent capture efficiency). The gas capture 70 Mm3 of gas will be used (about 50 percent capacity of existing equipment is 150 Mm3 per utilization) from six of the mines. annum, studies suggest that gas capture will increase to 500 Mm3 per annum. Gas is supplied Both pre- and post-gas drainage methods are to 3,500 residential users and also used by the used. Predrainage is undertaken up to five years mines. Gas use in 2000 was 2 Mm3 (<5 percent in advance of mining allowing gas contents to of the gas captured). There is a 20,000 m3 gas be reduced by 26 percent before mining takes storage facility. New projects being considered place. Typically, 10-20 percent of gas is are an extension of residential use and for recovered using predrainage methods and 80- power generation. 90 percent using postdrainage methods. Huainan Coal Mining Group Pingdingshan (Anhui province) Pingdingshan Coal Group Co. Ltd.(PCG) The Huainan Mining Group Co. Ltd. is a produces 19 Mtpa of coal. According to the large State-owned coal production base. development plan of the company, annual coal Total planned coal production capacity is 37.6 production will be maintained at around 23.50 Mtpa; coal production in 2004 was 30 Mt. Mt during the next 10 years. The proven coal Total CBM resources belonging to the Huainan reserves are around 7.6 billion tons while the Mining Group Co., Ltd. are estimated at 593 recoverable CBM resources are estimated at Bm3. Strong potential for the development of 65.2 billion m3. All 14 of the active coal mines these resources exists, and there is a broad are gassy with gas contents in the major market for utilization of the recovered gas. The recoverable coal seams of 6-15 m3/t. CBM field covers about 2,242 km2, average In 2000, the annual total CH 4 emissions CBM resource density reaches 264.4 Mm3/km2. in this mining area were recorded at over Current emission of coal mine gas is 600 m3/ 200 Mm3. Along with the increase of mining min, and annual methane emissions are 311 depth and increasing coal production capacity, Mm3, ranking Huainan third highest methane methane emission also has been increasing over emitter among Chinese mines. In 2004, CMM the past years. So far, nine out of the total of recovery from the Huainan mining area was 14 coal mines of PCG have been equipped with nearly 150 Mm3. underground gas drainage facilities. Three of them are using surface pump stations. The year Huainan operates nine mines. Gas contents are 2000 witnessed the total extraction of 25.88 reported to range from 10 to 20 m3t-1. All the Mm3. With more pump stations completed and mines are classified as gassy with total emissions commissioned, CMM drainage would 300-350 Mm3 per year. Gas recovery in 2002 experience further marked growth. 78 Annex V General Principles of CBM Production-sharing Contracts The general principles of the CBM PSCs are: • All the materials and data obtained from the operation in the contracted area shall be • CBM resources in the contracted areas for owned by the Chinese party; foreign cooperation shall be owned by the People’s Republic of China; • After the development investment is recovered by the foreign party or the contract • The investment interest of the foreign party is terminated, the assets in the contract area shall be protected by Chinese laws, and the shall be owned by the Chinese party; foreign party shall be subject to Chinese laws; • The contract effectiveness, right transfer, and • The foreign party should provide exploration overall development plan for the CBM field investment and undertake the exploration shall be approved by the Chinese risk. After a commercial CBM field is found, government department concerned; the two parties shall input certain investments • The foreign party shall give priority to and jointly carry out development and employing Chinese personnel, Chinese production; contractors, and services; • The foreign party has the right to withdraw • The foreign party shall provide training for during exploration from the CBM contract and technology transfer to Chinese after it has completed the minimum personnel; work commitment; • The foreign party can receive a return on • During the exploration period, the contract investment and expenses from the CBM areas (except the development area and production, and obtain profit in accordance production area) should be relinquished with the contract stipulations; in increments; • The foreign party shall pay various taxes and • Under the management of the Joint royalties according to the Chinese laws; and Management Committee with the Chinese • The Chinese party shall help operators solve party acting as the Chairman, a Joint operational CBM problems. Operating Agreement is formulated which controls the operations; the Chinese party Financial Sharing Model of the may elect to have zero equity interest or it Standard Contract could be around 50 percent. The foreign party recovers the exploration and • The foreign company undertakes the development investment costs as priority; exploration risk solely, namely the foreign 79 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA company undertakes all the exploration terminated, it can be treated as a loss of the investment, and the foreign company should two parties, and will not be returned; and agree to the minimum compulsory exploration work and the minimum • The surplus gas, namely the annual total exploration expenditure. The amount of the production minus that paid for value-added compulsory work is an important condition tax, royalty, operating costs, and norm of of bidding competition among foreign investment return, is shared by the two companies. If no commercial CBM field is parties. The surplus gas can be divided found, the Chinese party does not have the into two parts: “reserved gas of the Chinese obligation to compensate the exploration party� and “Sharing gas� allocated to the expenditure of the foreign company; two parties according to their commitment to the development investment. The relative • After a commercial CBM field is found, the proportion of the two parts is also an Chinese party will participate in the important condition in bidding competition development with an investment share not among foreign petroleum companies, and greater than 51 percent; the investment share is determined by contract negotiation. of the foreign party is 49 percent. If the investment share of the Chinese party is less Further Details of the Standard than 51 percent, the foreign party can Contract Finance Sharing Model increase its investment share accordingly, but • VAT shall be 5 percent in kind for CBM the investment share of the Chinese party cooperative projects. VAT shall be 13 percent shall be not less than 30 percent; for CBM projects self-financed by Chinese at the beginning with 8 percent returned • CBM recovered (sales revenue) shall be later, resulting in an actual VAT of allocated in proper order. That is to say, a 5 percent; certain proportion of the total CBM production is taken to pay the value-added • Royalties shall be imposed and calculated tax at a rate of 5 percent to the Chinese on the basis of gross CBM production in Government, pay the royalty according to the each calendar year for each CBM field annual CBM production, and then reimburse (Tables A5.1 and A5.2); the operation costs of the two parties, in the end reimburse the exploration and • Seventy percent of the annual gross development expenditure. If the total production of CBM shall be deemed as “cost investment and the interest of the two parties recovery CBM.� The sequence of its payment cannot be returned fully when the contract is or recovery is as follows: when the price is Table A5.1: Royalty Rates for CBM Cooperation Projects in Three Provinces and Regions of Qinghai, Xizang, Xinjiang and Shallow Sea Region Annual Gross CBM Production (x 108m3) Rates (%) Equal to or less than 20 0 20 to 35 1 35 to 50 2 Over 50 3 80 ANNEX V: GENERAL PRINCIPLES OF CBM PRODUCTION-SHARING CONTRACTS Table A5.2: Royalty Rates for CBM Cooperation Projects in Other Provinces, Autonomous Regions and Cities Annual Gross CBM Production (x 108m3) Rates (%) Equal to or Less than 10 0 10 to 25 1 25 to 50 2 Over 50 3 determined, payment for operating costs Standard Contract Terms actually incurred by both parties shall be recovered first; • Contract Area: surface area with geographic coordinates for the cooperative exploitation – The remainder shall be deemed as of CBM resources designated by the “investment recovery CBM.� Exploration host government; costs shall be recovered first, then the development costs and interest; • Contract Term: exploration, development, and production phases; – After the recovery of the investment, the remainder shall be deemed as “remainder • Minimum Exploration Work Commitment: CBM� to be shared by both parties; and minimum exploration work or other work commitments that shall be performed or • The remainder of the CBM shall be divided financed by the foreign company; into two parts: one part as “share CBM,� the other part as “allocable remainder CBM.� • Economic Benefit: measure of obtaining The parties in proportion to their actual benefits through cooperation by the State respective participating interests adjusted by company and foreign company; a factor, X, shall allocate the “allocable remainder CBM.� The method for calculating • Investment Recovery: generally a certain percentage to be recovered in the annual X is the same as that of calculating royalty, gross CBM production; but the rate differs. Factor X is determined by negotiations. • CBM Price, including quality, quantity. The For example: Suppose the remaining CBM is price is in term of FOB; 1×108 m3, X is 90 percent, participating interest • Taxation; of the Chinese party is 51 percent, the participating interest of the foreign party is • Preference for the employment of Chinese 49 percent, then: personnel, goods, and services; Remaining CBM by the State = (100%-90%) • Training of Chinese personnel and transfer 1 = 0.1 (x 108 m3) of technology; Allocated CBM by Chinese Party = 51% × • Ownership of assets and data; (100%-90%) = 0.459 (× 108 m3) • Solutions to the disputes; and Allocated CBM by Foreign Party = 49% × (100%-90%) = 0.441 (× 108 m3) • Other content. 81 Annex VI Preferential Finance and Tax Policies for CMM/CBM Adapted from China Coalbed Methane All production and construction projects included Clearinghouse, Investment Guide for China in the List can enjoy the comprehensive utilization CMM/CBM, April 2004. preferential policies stipulated in five documents issued by the State Council, the Ministry of Policies Encouraging CMM/CBM Finance, and the State Administration Development in China of Taxation. Since the 90s, the Chinese Government has Besides the above advantages, comprehensive provided the CBM/CMM industry with a variety utilization projects with CBM development also of economic incentives. To guide and promote enjoy the advantages of reduced income tax the national economy, China’s Government according to the No. [1996] 36 Document enacted three important documents: issued by the State Council. The document states: “The enterprises using the wastes in ‘The Catalog • List of Comprehensive Utilization of Resources; of Comprehensive Utilization of Resources’ as raw materials are duty-free or can reduce the • Catalog of the Industries, Products and amount of income tax to be paid. Projects that Technologies Currently Encouraged by the use wastes generated during the production of State for Development; and their own enterprises are duty-free for five years • Guidance Catalog of Industries for from the time the projects begins. Those which Foreign Investment. use the wastes of other enterprises can be duty-free for one year according to the approval In addition, to promote development in the of the director of tax authorities.� poorer western regions, the government introduced a suite of preferential policies which The preferred use of CMM is to generate power. complement the above. The projects that generate electricity fueled by CMM and included in the List enjoy the List of Comprehensive Utilization following advantages: of Resources • For an enterprise that uses CMM to generate In 1996, the State Economic and Trade electricity and heat, if its installed capacity Commission, the Ministry of Finance, and the exceeds 500 kW, and it is eligible for State Administration of Taxation officially placed connecting to power grid, the power sector the items “coal mine gas recovered and its should admit its access, and sign a contract. processed products� and “utilization of CBM for Thus, the fee for a small thermal power plant power and heat generation� in the revised List to enter connect to the grid will be exempted of Comprehensive Utilization of Resources. and the electricity will be given priority for 83 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA sale within the rated electricity amount as encouraged can enjoy preferential treatment permitted to enter into the grid; and in accordance with the stipulations in the relevant laws and administrative regulations. CMM/CBM • The comprehensive utilization power plant projects are listed in as encouraged in the whose installed capacity is at or below Guidance Catalog. 1.2 MW does not take part in the electric network peak adjustment. The comprehensive Preferential Policies for Western utilization power plant whose installed capacity China Development is over 1.2 MW plan certain peaking capacity and permit peak full output, but the power At the beginning of 2000, the Chinese generation load cannot be less than 85 Government began to enact the strategy to percent of the rated power of the generating develop its western resource reserves and had a equipment while in a valley. clear mandate. The State Council established a working group that held a conference on Catalog of the Industries, Products and developing western China. The working group Technologies Currently Encouraged developed a plan for constructing the infrastructure by the State for Development and environment-friendly policies required for western China’s resource development. In 1997, the State Planning Commission published the Catalog of the Industries, Products In order to advance the development strategy, and Technologies Currently Encouraged by the the central and local governments established State for Development, in which, “CBM a series of preferential policies and rules. Starting exploration, development and utilization� and from January 1, 2000, the internal revenue “Development and utilization of low heating service began to provide tax incentives to foreign value fuels and associated resources in coal investment enterprises in midwest China mines� were formally listed. The investors enjoy including Shaanxi, Gansu and Guizhou CMM exemption of import tariffs and import link areas with a reduced tax rate of 15 percent for VATs if they invest in any projects, such as three years. On June 16, 2000, the China CMM/CBM projects, as they are included in Government established and enacted the Catalog. “The Contents of Prior Industry Invested by Foreign Businesses in the Midwest.� The policies Guidance Catalog of Industries for are more attractive to foreign capital and set up Foreign Investment the conditions for foreign investment enterprises. The projects that adhere to the guidelines In 2002, the State Planning Commission, the State presented in the “Contents� document enjoy Economic and Trade Commission, and the Ministry the policies in the “Provisional Rule of of Foreign Trade and Economic Cooperation Instructing Foreign Investment Aspects� and jointly issued the Guidance Catalog of Industries “Notice for Further Encouraging Foreign for Foreign Investment, in which two types of Investment Opinion Transmitting by the State investment projects, “CBM exploration and Council General Office from the Ministry of development� and “Development and utilization Foreign Trade� (No. [1999] 73). of low heating value fuels and coal mine associated resources� were included. Taxation Policies for CBM Exploration and Development Projects According to the Guidance Catalog, foreign investment projects are put into four categories: In order to encourage foreign investors to invest encouraged, allowed, restricted, and forbidden in CBM exploration and development in China, terms. The foreign investment projects classified the Chinese government issued the “Notice on 84 ANNEX VI: PREFERENTIAL FINANCE AND TAX POLICIES FOR CMM/CBM Taxation Policies Concerning Foreign Petroleum and ship license tax varies according to Companies’ Participation in Coalbed Methane the type, these taxes should be paid when Development in China� by the Ministry of the purchase happens. Finance and the State Administration of Taxation. In the document, applicable taxation policies are Enterprises engaged in onshore CBM stipulated as follows: development shall pay urban real estate tax according to the “Provisional Regulations • Operation income and other incomes Governing Urban Real Estate Tax�; pay vehicle obtained by the enterprises that develop and ship license tax according to the “Provisional onshore CBM resources in China shall be Regulations Governing Vehicle and Ship License taxed in accordance with the stipulates in the Tax�; and pay stamp duty according to the “Income Tax Law of the People’s Republic of “Provisional Regulations Governing Stamp Duty China for Enterprises with Foreign Investment of the People’s Republic of China.� and Foreign Enterprises� and Rules for the Implementation; In accordance with the above regulations, foreign investors shall pay the taxes and enjoy • The stipulations in the “Rules for the preferential treatment as described below. Implementation of the Income Tax Law of the People’s Republic of China for Enterprises Enterprises Income Tax with Foreign Investment and Foreign Enterprises� regarding “enterprises engaged According to Item 5 of “Income Tax Laws of in petroleum production� are also applicable the People’s Republic of China for Enterprises to enterprises engaged in development of with Foreign Investment and Foreign onshore CBM resources; Enterprises� (hereafter referred to as the Tax Law) enforced on April 9, 1991, “The income • Unless otherwise specified, the stipulations tax on the foreign investment enterprises and formulated by the Ministry of Finance, the the income tax on earnings the foreign State Administration of Taxation, and the enterprises received from the production and Offshore Petroleum Taxation Bureau operation of institutions set up in China shall concerning income tax for the enterprises be calculated in accordance with the amount engaged in cooperative development of oil of income that shall be paid, whereas the tax resources are also applicable to the is 30 percent, and the local income tax shall enterprises engaged in the development of be calculated in accordance with the amount onshore CBM resources; of income that should be paid, whereas the tax is 3 percent.� • For the revenues obtained by developing onshore CBM, the VAT and royalty of According to Article 8, “To the productive developing onshore CBM shall be paid in foreign-investment enterprises whose accordance with the “Notice of the State operation period is more than 10 year, the Administration of Taxation on Value-added Tax business income tax is free in the first and of Petroleum Production in Foreign second year, and the business tax is reduced Cooperation Projects� (issued by the State by half from the third year through the fifth Administration of Taxation in 1994) and the years. But to those enterprises which engaged “Provisional Regulations Governing Royalty in such development projects as petroleum, Payment for Onshore Petroleum Development natural gas, rare metals and noble metals will in Foreign Cooperation Projects� (issued by the be regulated by the State Council. If the actual Ministry of Finance in 1990). Urban real operation period of the foreign investment estate tax is about 1.2 percent and vehicle enterprise is less than 10 years, the enterprises 85 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA should pay the business income tax that was (gas) field as a unit, add up entirely and payout originally tax free and/or reduced.� as capital payout, then calculate the depreciation from the next month of when the oil (gas) field According to Article 9, “To the industries and starts commercial production.� projects which we encourage the foreign businessman to invest, the government of the According to Article 36, “For the enterprises province, municipality and the municipality engaged in developing oil resources, the fixed directly under the central government can decide assets formed by the investment during the to exempt and reduce the local income tax development stage and the period following can according to the practical situation.� be synthetically calculated as depreciation, without salvage value, and the depreciation time According to Article 10, “The foreign investors limit should not be less than six years.� If the of the foreign investment enterprises can directly economic benefit of the oil (gas) field is poor or put the profits obtained from the enterprise into its productive life is less than six years, then the the investment for the enterprise, increasing the enterprise can apply to calculate the depreciation registered capital, or they can launch other in accordance with the production method. foreign investment enterprises using these profit as capital. If the operation period is not less than According to Article 48, “The rational five years, 40 percent of the income taxes of exploration fee of the enterprises engaged in the reinvestment that were paid will be developing oil resources, can amortize the returned, following the application of the income by stages among the oil (gas) fields investor and the approval of the tax that have started commercial production; and authorities. For those who have the special the amortization time limit should not be less preferential policy from the State Council, will than one year. In the case where a contract is transact according to the regulations of the terminated because no commercial oil or gas State Council; for those who leave less than field is found in the contract area of a foreign five years after the investment, they should company, if the company does not continue return the taxes that were handed back.� to hold contract for exploitation of oil or gas resources and does not keep its business According to Article 11, “If the production organization or office in China. Reasonable operation institutions and sites set up by foreign exploration expenses of the company in the investment enterprises and foreign enterprises terminated area, after reviewed and in China have losses in a year, they can recoup confirmed by the tax authorities with the losses from the earnings of the next tax year; certificate, could be amortized in the if the earnings of the next tax year are not production revenue from its new contracted enough, they can continue to make up year by area, provided that the new contract is year, but not to exceed five years.� signed within ten years after the contract According to Article 29 in the Tax Law, the State is terminated.� Council issued “Rules for Implementation of the Income Tax Laws of the People’s Republic of Article 2 in “The Notice of Tax Issues on Transfer China for Enterprises with Foreign Investment and Receiving Petroleum Contract Between and Foreign Enterprises� (hereafter Rules) on Foreign Companies� states that the receiving June 30, 1991. payout to the foreign company receiving petroleum contract equity can be looked upon According to Article 32, “The development-stage as the exploration fee and the development investment of the enterprises engaged in investment spending, and will be amortized and developing oil resources should look at the oil depreciated in accordance with the Rules. 86 ANNEX VI: PREFERENTIAL FINANCE AND TAX POLICIES FOR CMM/CBM Value Added Tax, Resource Tax Oil Resources Onshore by Sino-foreign and Royalty Cooperation’ � in 1995. As is the case for regulations for developing Tariffs and Other Taxes petroleum and natural gas reserves, the value-added tax and resource tax for CBM In order to further increase the utilization of development projects invested by international foreign investment, introduce foreign advanced partnerships should be managed in accordance technology and equipment, as well as to with the following regulations: promote industry structural readjustment and technological progress, the State Council Item 1 in “The Decision of the Interim Regulations decided that any foreign investment project Concerning the Value Added Tax, Consumption belonging to the Encouraged and Restricted B Tax and Sales Tax Applied to Foreign investment of the Guidance Catalog of Industries for Foreign Enterprise and Foreign Enterprise� issued on Investment can enjoy exemption of import tariffs December 29, 1993, specifies that, “The Value and to import link value-added tax, except those Added Tax is collected in accordance with the listed in the imported equipment category which practicality when developing offshore oil and are not allowed to enjoy exemption. The specific natural gas by Sino-foreign cooperation, the tax measures are executed in accordance with rate and collection method are regulated by the No.1602 Document issued by the State State Council.� Administration of Customs in 1997. At the same time, the State Council issued “The In order to encourage foreign investment in Notice of the Interim Regulations Concerning the different regions, the local governments at Value Added Tax, Consumption Tax and Sales Tax various levels have worked out a series of Applied to Foreign investment Enterprise and preferential policies regarding auxiliary taxes Foreign Enterprise� (February 22, 1994). including local income tax, vehicle and ship Item 3 concerning the tax for developing oil license tax, and urban real estate tax, and others. resources by Sino-foreign cooperation, requires that the Value Added Tax of crude oil and natural The “Mineral Resources Law of the People’s gas is collected in product, a tax rate of 5 Republic of China� stipulates that the acquisition percent, a mining royalty in accordance with of exploration and development rights will be standing regulations, and deferred resource tax. executed in China. The user charge for the There is no tax rebate for export of raw oil and exploration right is 100 yuan/km/yr within first natural gas. three years. The user charge for the development right is 1,000 yuan/km/yr. For those that can The royalty is collected in accordance with be exempted, the user charge may be reduced, “The Notice of Amended ‘The Interim Provision exempted, or allowed to be paid after of the Mining Royalty Paid when Developing the being approved. 87 Annex VII Internationally Financed CBM and CMM Projects In the 90s, UNDP/GEF funded CBM and CMM Notable successes were the demonstration of extraction technology transfer and effective of surface goaf borehole drainage at demonstration projects involving vertical CBM Tiefa which has been replicated subsequently, wells, underground long hole drilling and capacity-building and the subsequent surface goaf boreholes. Technical assistance, development of CCRI Xi’an as a major CBM training and equipment was supplied to China, service provider in China and raising the mainly from the United States, through the awareness of government of the potential of following United Nations Development CMM and CBM as energy resources that China Programme (UNDP) projects: should and could develop. Thus, there was a positive policy impact. UNDP-GEF contributed • CPR92G31:Development of CBM resources US$10 million and the China Government in China (from April 1992); 40 million yuan. • CPR92G32: China CBM resource Initiated in August 1993 and completed in development (from June 1992, including December 1996, the exploration for deep CBM underground long hole drilling and surface project was carried out in three phases: geological goaf wells at Tiefa); evaluation and selection of target areas, gas production experiments from a group of pilot wells • CPR91214: Exploration for deep CBM (from and assessment of development potential and Feb 1993 for 3.5 years); and economics. A pilot site at Liulin in the Hedong • CPR91S14: Exploration for deep CBM. coalfield of Shanxi province was selected following a geological appraisal of Liulin, Chenge, Taidong, The five-year UNDP-GEF technical assistance Huainan, Pingdingshan, Jiaozuo, Binchang, and project CPR92G31 involved four subprojects at: Qinshui coalfield areas. The anthracite areas of Tiefa, Liaoning (underground long hole drilling the Jiaozuo, Qinshui, and Taidong coalfields were and surface goaf wells), Kailuan, Hebei (drilling initially (and in the case of South Qinshui, of three surface wells, maximum production mistakenly) thought to be of high risk and sites 2,000 m3/d from one well, others poor), Shaanxi were initially selected which had coals with ranks (exploration and resource assessment), similar to those of the Black Warrior and San Juan Songzao, Sichuan (underground long hole basins in the United States. The project was a drilling in which limited success was achieved in technical success, the seven gas wells at Liulin very difficult geological conditions). Some having produced from 1,000 m3/day to over problems were encountered due to lack of 7,000 m3/day. Although pilot production of VCBM understanding of Chinese conditions by was successfully demonstrated for the first time in consultants and use of inappropriate equipment. China at Liulin, the relatively small prospect still 89 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA has not been developed into a commercial high stresses. The expected benefits of project by subsequent foreign invested joint venture introducing new CBM technologies have license holders. therefore not always been realized. There is a clear need to examine the drilling systems and The Liulin project, was undertaken jointly by the technology in use in China and to better match China Government (represented by CICETE) and gas control solutions to the geological and the United Nations (UNDP) at a total cost of mining conditions . US$1.7 million (UNDP provided a grant of US$1.3 million and the Government of China Japan Coal Energy Center (JCAO) carried out contributed US$0.4 million). The North China a comprehensive CMM recovery and Bureau of Petroleum (NCBP), under the auspices utilization project at Tiefa which was of the Ministry of Geology and Mineral completed in October 2002. The project Resources, acquired training and new skills in included demonstration of a state-of the-art geology, drilling, well completion, laboratory gas control safety management system which techniques, well testing, fracturing and design, is soon to be replicated in another mine. This production reservoir evaluation and financial scheme, involving major investment in appraisal methods. Equipment and software underground drilling equipment, gas were also purchased under the project. The collection, gas storage and gas transmission technology transferred to NCBP by specialists was assisted by a contribution of US$7.4 from the United States provided the organization million from the Japanese New Industrial and with a capability to undertake all aspects of virgin Development Agency. CBM exploration and development. NCBP subsequently signed exploration contracts with The U.S. Environmental Protection Agency Enron (U.S.), Amoco (U.S.) and Lowell (Australia) (USEPA)-sponsored research in 1999 to identify but none of these projects led to commercial and develop prospectuses for the most production. Nevertheless, domestic companies promising coal mining areas for CBM/CMM gained practical knowledge and expanded development. The work was undertaken by the their capabilities. China Coalbed Methane Clearinghouse which was established by the USEPA at CCII more than These aid projects were aimed principally at eight years ago to promote CMM/CBM achieving technology transfer and for some development. Jincheng, Huainan, Fushun, Tiefa, years Chinese VCBM activities focused almost Panjiang, and Pingdingshan mining areas were wholly on spot drilling at locations with no identified as good prospects for CMM/CBM thought as to long-term development needs and development. Further details of these key areas potential commercial feasibility issues. are provided in Annex IV. Over the last several years, CBMC, sponsored by USEPA, has been Attempts were made to introduce advanced working in concert with Chinese coal mining underground drilling equipment from Australia companies to introduce interested investors and and the United States to enhance methane developers to CMM project opportunities in the drainage but it has either been unsuited to main gassy coalfield area of China. CBMC has geological conditions in China or too costly to published and released seven brochures maintain. Both the United States and Australian outlining potential projects but the aim of contractors experienced difficulties in trying to stimulating external investment has not been drill a long in-seam borehole at Songzao. Long fulfilled as the information is too general and hole in-seam drilling using imported drilling the project analysis superficial. However, equipment also failed at Fushun, Pingdingshan, dissemination of the documents has proved and Huainan due to problems with soft coal and useful in highlighting key coal mines for CDM 90 ANNEX VII INTERNATIONALLY FINANCED CBM AND CMM PROJECTS project development. The profile of CCII as a These projects are aimed at introducing U.K. prime source of information, contacts and technology providers to China and providing a services in respect of CBM/CMM has, however, shop window for the U.K. expertise. Although been raised to an international level and it is in modest in scale, the projects have enabled a these respects that a valuable contribution to wide spectrum of the U.K. consultants, service CMM development in China has been achieved. providers and manufacturers to establish sustainable links with counterpart Chinese Since early 2002, CBMC has turned its attention organizations and enterprises, and there is a toward a broader goal of promoting and strong U.K. involvement in developing and supporting commercialization of CMM projects financing CDM for CMM utilization projects in China. The strategy undertaken by CBMC in China. includes a variety of activities designed to disseminate information to investors and The ADB has carried out various technical studies organizations worldwide, and to strengthen the and approved loans of US$233 million for capabilities of CMM and CBM professionals projects totaling US$372 million for a 120 MWe within China. International workshops organized CMM power plant at Sihe mine, a CMM pipeline by CBMC have been particularly effective in collection and distribution in the area of Jincheng encouraging the sharing of international and municipality and a CBM/CMM development domestic experience and the introduction of project at Fuxin in Liaoning province.6 foreign technology suppliers, practicing engineers, innovators, research organizations, Demonstration projects have not always been academics and trade officials to CMM and CBM widely replicated even when technically hailed potential in China. Failure by China to tackle as a success. Reasons include equipment the barriers and develop a market within which unsuited to Chinese conditions, high cost of open and fair competition can drive change has spares, equipment complexity, lack of resulted in the stagnation of most initiatives. follow-up support and insufficient training. 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January 14, 2005. 95 List of Formal Reports Region/Country Activity/Report Title Date Number SUB-SAHARAN AFRICA (AFR) Africa Regional Anglophone Africa Household Energy Workshop (English) 07/88 085/88 Regional Power Seminar on Reducing Electric Power System Losses in Africa (English) 08/88 087/88 Institutional Evaluation of EGL (English) 02/89 098/89 Biomass Mapping Regional Workshops (English) 05/89 -- Francophone Household Energy Workshop (French) 08/89 -- Interafrican Electrical Engineering College: Proposals for Short- and Long-Term Development (English) 03/90 112/90 Biomass Assessment and Mapping (English) 03/90 -- Symposium on Power Sector Reform and Efficiency Improvement in Sub-Saharan Africa (English) 06/96 182/96 Commercialization of Marginal Gas Fields (English) 12/97 201/97 Commercializing Natural Gas: Lessons from the Seminar in Nairobi for Sub-Saharan Africa and Beyond 01/00 225/00 Africa Gas Initiative — Main Report: Volume I 02/01 240/01 First World Bank Workshop on the Petroleum Products Sector in Sub-Saharan Africa 09/01 245/01 Ministerial Workshop on Women in Energy 10/01 250/01 and Poverty Reduction: Proceedings from a Multi-Sector 03/03 266/03 and Multi-Stakeholder Workshop Addis Ababa, Ethiopia, October 23-25, 2002 Opportunities for Power Trade in the Nile Basin: Final Scoping Study 01/04 277/04 Energies modernes et réduction de la pauvreté: Un atelier multi-sectoriel. Actes de l'atelier régional. Dakar, Sénégal, du 4 au 6 février 2003 (French Only) 01/04 278/04 Énergies modernes et réduction de la pauvreté: Un atelier multi-sectoriel. Actes de l'atelier régional. Douala, Cameroun 09/04 286/04 du 16-18 juillet 2003. (French Only) Energy and Poverty Reduction: Proceedings from the Global Village Energy Partnership (GVEP) Workshops held in Africa 01/05 298/05 Power Sector Reform in Africa: Assessing the Impact on Poor People 08/05 306/05 The Vulnerability of African Countries to Oil Price Shocks: Major 08/05 308/05 Factors and Policy Options. The Case of Oil Importing Countries Angola Energy Assessment (English and Portuguese) 05/89 4708-ANG Power Rehabilitation and Technical Assistance (English) 10/91 142/91 Africa Gas Initiative - Angola: Volume II 02/01 240/01 97 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Region/Country Activity/Report Title Date Number Benin Energy Assessment (English and French) 06/85 5222-BEN Botswana Energy Assessment (English) 09/84 4998-BT Pump Electrification Prefeasibility Study (English) 01/86 047/86 Review of Electricity Service Connection Policy (English) 07/87 071/87 Tuli Block Farms Electrification Study (English) 07/87 072/87 Household Energy Issues Study (English) 02/88 -- Urban Household Energy Strategy Study (English) 05/91 132/91 Burkina Faso Energy Assessment (English and French) 01/86 5730-BUR Technical Assistance Program (English) 03/86 052/86 Urban Household Energy Strategy Study (English and French) 06/91 134/91 Burundi Energy Assessment (English) 06/82 3778-BU Petroleum Supply Management (English) 01/84 012/84 Burundi Status Report (English and French) 02/84 011/84 Presentation of Energy Projects for the Fourth Five Year Plan (1983-1987) (English and French) 05/85 036/85 Improved Charcoal Cookstove Strategy (English and French) 09/85 042/85 Peat Utilization Project (English) 11/85 046/85 Energy Assessment (English and French) 01/92 9215-BU Cameroon Africa Gas Initiative – Cameroon: Volume III 02/01 240/01 Cape Verde Energy Assessment (English and Portuguese) 08/84 5073-CV Household Energy Strategy Study (English) 02/90 110/90 Central African Republic Energy Assessment (French) 08/92 9898-CAR Chad Elements of Strategy for Urban Household Energy The Case of N'djamena (French) 12/93 160/94 Comoros Energy Assessment (English and French) 01/88 7104-COM In Search of Better Ways to Develop Solar Markets: The Case of Comoros 05/00 230/00 Congo Energy Assessment (English) 01/88 6420-COB Power Development Plan (English and French) 03/90 106/90 Africa Gas Initiative – Congo: Volume IV 02/01 240/01 Côte d'Ivoire Energy Assessment (English and French) 04/85 5250-IVC Improved Biomass Utilization (English and French) 04/87 069/87 Power System Efficiency Study (English) 12/87 Power Sector Efficiency Study (French) 02/92 140/91 Project of Energy Efficiency in Buildings (English) 09/95 175/95 Africa Gas Initiative – Côte d'Ivoire: Volume V 02/01 240/01 Ethiopia Energy Assessment (English) 07/84 4741-ET Power System Efficiency Study (English) 10/85 045/85 Agricultural Residue Briquetting Pilot Project (English) 12/86 062/86 Bagasse Study (English) 12/86 063/86 Cooking Efficiency Project (English) 12/87 Energy Assessment (English) 02/96 179/96 Gabon Energy Assessment (English) 07/88 6915-GA Africa Gas Initiative – Gabon: Volume VI 02/01 240/01 The Gambia Energy Assessment (English) 11/83 4743-GM Solar Water Heating Retrofit Project (English) 02/85 030/85 Solar Photovoltaic Applications (English) 03/85 032/85 Petroleum Supply Management Assistance (English) 04/85 035/85 98 LIST OF FORMAL REPORTS Region/Country Activity/Report Title Date Number Ghana Energy Assessment (English) 11/86 6234-GH Energy Rationalization in the Industrial Sector (English) 06/88 084/88 Sawmill Residues Utilization Study (English) 11/88 074/87 Industrial Energy Efficiency (English) 11/92 148/92 Corporatization of Distribution Concessions through Capitalization 12/03 272/03 Guinea Energy Assessment (English) 11/86 6137-GUI Household Energy Strategy (English and French) 01/94 163/94 Guinea Bissau Energy Assessment (English and Portuguese) 08/84 5083-GUB Recommended Technical Assistance Projects (English & Portuguese) 04/85 033/85 Management Options for the Electric Power and Water Supply Subsectors (English) 02/90 100/90 Power and Water Institutional Restructuring (French) 04/91 118/91 Kenya Energy Assessment (English) 05/82 3800 KE Power System Efficiency Study (English) 03/84 014/84 Status Report (English) 05/84 016/84 Coal Conversion Action Plan (English) 02/87 -- Kenya Solar Water Heating Study (English) 02/87 066/87 Peri-Urban Woodfuel Development (English) 10/87 076/87 Power Master Plan (English) 11/87 -- Power Loss Reduction Study (English) 09/96 186/96 Implementation Manual: Financing Mechanisms for Solar Electric Equipment 07/00 231/00 Lesotho Energy Assessment (English) 01/84 4676-LSO Liberia Energy Assessment (English) 12/84 5279-LBR Recommended Technical Assistance Projects (English) 06/85 038/85 Power System Efficiency Study (English) 12/87 081/87 Madagascar Energy Assessment (English) 01/87 5700-MAG Power System Efficiency Study (English and French) 12/87 075/87 Environmental Impact of Woodfuels (French) 10/95 176/95 Malawi Energy Assessment (English) 08/82 3903-MAL Technical Assistance to Improve the Efficiency of Fuelwood Use in the Tobacco Industry (English) 11/83 009/83 Status Report (English) 01/84 013/84 Mali Energy Assessment (English and French) 11/91 8423-MLI Household Energy Strategy (English and French) 03/92 147/92 Islamic Republic of Mauritania Energy Assessment (English and French) 04/85 5224-MAU Household Energy Strategy Study (English and French) 07/90 123/90 Mauritius Energy Assessment (English) 12/81 3510-MAS Status Report (English) 10/83 008/83 Power System Efficiency Audit (English) 05/87 070/87 Bagasse Power Potential (English) 10/87 077/87 Energy Sector Review (English) 12/94 3643-MAS Mozambique Energy Assessment (English) 01/87 6128-MOZ Household Electricity Utilization Study (English) 03/90 113/90 Electricity Tariffs Study (English) 06/96 181/96 Sample Survey of Low Voltage Electricity Customers 06/97 195/97 Namibia Energy Assessment (English) 03/93 11320-NAM 99 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Region/Country Activity/Report Title Date Number Niger Energy Assessment (French) 05/84 4642-NIR Status Report (English and French) 02/86 051/86 Improved Stoves Project (English and French) 12/87 080/87 Household Energy Conservation and Substitution (English and French) 01/88 082/88 Nigeria Energy Assessment (English) 08/83 4440-UNI Energy Assessment (English) 07/93 11672-UNI Strategic Gas Plan 02/04 279/04 Rwanda Energy Assessment (English) 06/82 3779-RW Status Report (English and French) 05/84 017/84 Improved Charcoal Cookstove Strategy (English and French) 08/86 059/86 Improved Charcoal Production Techniques (English and French) 02/87 065/87 Energy Assessment (English and French) 07/91 8017-RW Commercialization of Improved Charcoal Stoves and Carbonization Techniques Mid-Term Progress Report (English and French) 12/91 141/91 SADC SADC Regional Power Interconnection Study, Vols. I-IV (English) 12/93 - SADCC SADCC Regional Sector: Regional Capacity-Building Program for Energy Surveys and Policy Analysis (English) 11/91 - Sao Tome and Principe Energy Assessment (English) 10/85 5803-STP Senegal Energy Assessment (English) 07/83 4182-SE Status Report (English and French) 10/84 025/84 Senegal Industrial Energy Conservation Study (English) 05/85 037/85 Preparatory Assistance for Donor Meeting (English and French) 04/86 056/86 Urban Household Energy Strategy (English) 02/89 096/89 Industrial Energy Conservation Program (English) 05/94 165/94 Seychelles Energy Assessment (English) 01/84 4693-SEY Electric Power System Efficiency Study (English) 08/84 021/84 Sierra Leone Energy Assessment (English) 10/87 6597-SL Somalia Energy Assessment (English) 12/85 5796-SO Republic of South Africa Options for the Structure and Regulation of Natural Gas Industry (English) 05/95 172/95 Sudan Management Assistance to the Ministry of Energy and Mining 05/83 003/83 Energy Assessment (English) 07/83 4511-SU Power System Efficiency Study (English) 06/84 018/84 Status Report (English) 11/84 026/84 Wood Energy/Forestry Feasibility (English) 07/87 073/87 Swaziland Energy Assessment (English) 02/87 6262-SW Household Energy Strategy Study 10/97 198/97 Tanzania Energy Assessment (English) 11/84 4969-TA Peri-Urban Woodfuels Feasibility Study (English) 08/88 086/88 Tobacco Curing Efficiency Study (English) 05/89 102/89 Remote Sensing and Mapping of Woodlands (English) 06/90 -- Industrial Energy Efficiency Technical Assistance (English) 08/90 122/90 Power Loss Reduction Volume 1: Transmission and Distribution System Technical Loss Reduction and Network Development (English) 06/98 204A/98 Power Loss Reduction Volume 2: Reduction of Non-Technical Losses (English) 06/98 204B/98 100 LIST OF FORMAL REPORTS Region/Country Activity/Report Title Date Number Togo Energy Assessment (English) 06/85 5221-TO Wood Recovery in the Nangbeto Lake (English and French) 04/86 055/86 Power Efficiency Improvement (English and French) 12/87 078/87 Uganda Energy Assessment (English) 07/83 4453-UG Status Report (English) 08/84 020/84 Institutional Review of the Energy Sector (English) 01/85 029/85 Energy Efficiency in Tobacco Curing Industry (English) 02/86 049/86 Fuelwood/Forestry Feasibility Study (English) 03/86 053/86 Power System Efficiency Study (English) 12/88 092/88 Energy Efficiency Improvement in the Brick and Tile Industry (English) 02/89 097/89 Tobacco Curing Pilot Project (English) 03/89 UNDP Terminal Report Energy Assessment (English) 12/96 193/96 Rural Electrification Strategy Study 09/99 221/99 Zaire Energy Assessment (English) 05/86 5837-ZR Zambia Energy Assessment (English) 01/83 4110-ZA Status Report (English) 08/85 039/85 Energy Sector Institutional Review (English) 11/86 060/86 Power Subsector Efficiency Study (English) 02/89 093/88 Energy Strategy Study (English) 02/89 094/88 Urban Household Energy Strategy Study (English) 08/90 121/90 Zimbabwe Energy Assessment (English) 06/82 3765-ZIM Power System Efficiency Study (English) 06/83 005/83 Status Report (English) 08/84 019/84 Power Sector Management Assistance Project (English) 04/85 034/85 Zimbabwe Power Sector Management Institution Building (English) 09/89 -- Petroleum Management Assistance (English) 12/89 109/89 Charcoal Utilization Pre-feasibility Study (English) 06/90 119/90 Integrated Energy Strategy Evaluation (English) 01/92 8768-ZIM Energy Efficiency Technical Assistance Project: Strategic Framework for a National Energy Efficiency Improvement Program (English) 04/94 -- Capacity Building for the National Energy Efficiency Improvement Programme (NEEIP) (English) 12/94 -- Rural Electrification Study 03/00 228/00 Les réformes du secteur de l’électricite en Afrique: Evaluation de leurs conséquences pour les populations pauvres 11/06 306/06 EAST ASIA AND PACIFIC (EAP) Asia Regional Pacific Household and Rural Energy Seminar (English) 11/90 -- China County-Level Rural Energy Assessments (English) 05/89 101/89 Fuelwood Forestry Preinvestment Study (English) 12/89 105/89 Strategic Options for Power Sector Reform in China (English) 07/93 156/93 Energy Efficiency and Pollution Control in Township and Village Enterprises (TVE) Industry (English) 11/94 168/94 Energy for Rural Development in China: An Assessment Based on a Joint Chinese/ESMAP Study in Six Counties (English) 06/96 183/96 Improving the Technical Efficiency of Decentralized Power Companies 09/99 222/99 101 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Region/Country Activity/Report Title Date Number Air Pollution and Acid Rain Control: The Case of Shijiazhuang City 10/03 267/03 and the Changsha Triangle Area Toward a Sustainable Coal Sector In China 07/04 287/04 Demand Side Management in a Restructured Industry: How Regulation and Policy Can Deliver Demand-Side Management Benefits to a Growing Economy and a Changing Power System 12/05 314/05 A Strategy for CBM and CMM Development and Utilization in China 07/07 326/07 Fiji Energy Assessment (English) 06/83 4462-FIJ Indonesia Energy Assessment (English) 11/81 3543-IND Status Report (English) 09/84 022/84 Power Generation Efficiency Study (English) 02/86 050/86 Energy Efficiency in the Brick, Tile and Lime Industries (English) 04/87 067/87 Diesel Generating Plant Efficiency Study (English) 12/88 095/88 Urban Household Energy Strategy Study (English) 02/90 107/90 Biomass Gasifier Preinvestment Study Vols. I & II (English) 12/90 124/90 Prospects for Biomass Power Generation with Emphasis on Palm Oil, Sugar, Rubberwood and Plywood Residues (English) 11/94 167/94 Lao PDR Urban Electricity Demand Assessment Study (English) 03/93 154/93 Institutional Development for Off-Grid Electrification 06/99 215/99 Malaysia Sabah Power System Efficiency Study (English) 03/87 068/87 Gas Utilization Study (English) 09/91 9645-MA Mongolia Energy Efficiency in the Electricity and District Heating Sectors 10/01 247/01 Improved Space Heating Stoves for Ulaanbaatar 03/02 254/02 Impact of Improved Stoves on Indoor Air Quality in Ulaanbaatar, Mongolia 11/05 313/05 Myanmar Energy Assessment (English) 06/85 5416-BA Papua New Guinea Energy Assessment (English) 06/82 3882-PNG Papua New Guinea Status Report (English) 07/83 006/83 Institutional Review in the Energy Sector (English) 10/84 023/84 Power Tariff Study (English) 10/84 024/84 Philippines Commercial Potential for Power Production from Agricultural Residues (English) 12/93 157/93 Energy Conservation Study (English) 08/94 -- Strengthening the Non-Conventional and Rural Energy Development Program in the Philippines: A Policy Framework and Action Plan 08/01 243/01 Rural Electrification and Development in the Philippines: Measuring the Social and Economic Benefits 05/02 255/02 Solomon Islands Energy Assessment (English) 06/83 4404-SOL Energy Assessment (English) 01/92 979-SOL South Pacific Petroleum Transport in the South Pacific (English) 05/86 -- Thailand Energy Assessment (English) 09/85 5793-TH Rural Energy Issues and Options (English) 09/85 044/85 Accelerated Dissemination of Improved Stoves and Charcoal Kilns (English) 09/87 079/87 Northeast Region Village Forestry and Woodfuels Preinvestment Study (English) 02/88 083/88 102 LIST OF FORMAL REPORTS Region/Country Activity/Report Title Date Number Impact of Lower Oil Prices (English) 08/88 -- Coal Development and Utilization Study (English) 10/89 -- Why Liberalization May Stall in a Mature Power Market: A Review 12/03 270/03 of the Technical and Political Economy Factors that Constrained the Electricity Sector Reform in Thailand 1998-2002 Reducing Emissions from Motorcycles in Bangkok 10/03 275/03 Tonga Energy Assessment (English) 06/85 5498-TON Vanuatu Energy Assessment (English) 06/85 5577-VA Vietnam Rural and Household Energy-Issues and Options (English) 01/94 161/94 Power Sector Reform and Restructuring in Vietnam: Final Report to the Steering Committee (English and Vietnamese) 09/95 174/95 Household Energy Technical Assistance: Improved Coal Briquetting and Commercialized Dissemination of Higher Efficiency Biomass and Coal Stoves (English) 01/96 178/96 Petroleum Fiscal Issues and Policies for Fluctuating Oil Prices In Vietnam 02/01 236/01 An Overnight Success: Vietnam's Switch to Unleaded Gasoline 08/02 257/02 The Electricity Law for Vietnam — Status and Policy Issues — The Socialist Republic of Vietnam 08/02 259/02 Petroleum Sector Technical Assistance for the Revision of the 12/03 269/03 Existing Legal and Regulatory Framework Western Samoa Energy Assessment (English) 06/85 5497-WSO SOUTH ASIA (SAS) Bangladesh Energy Assessment (English) 10/82 3873-BD Priority Investment Program (English) 05/83 002/83 Status Report (English) 04/84 015/84 Power System Efficiency Study (English) 02/85 031/85 Small Scale Uses of Gas Pre-feasibility Study (English) 12/88 -- Reducing Emissions from Baby-Taxis in Dhaka 01/02 253/02 India Opportunities for Commercialization of Non-conventional Energy Systems (English) 11/88 091/88 Maharashtra Bagasse Energy Efficiency Project (English) 07/90 120/90 Mini-Hydro Development on Irrigation Dams and Canal Drops Vols. I, II and III (English) 07/91 139/91 WindFarm Pre-Investment Study (English) 12/92 150/92 Power Sector Reform Seminar (English) 04/94 166/94 Environmental Issues in the Power Sector (English) 06/98 205/98 Environmental Issues in the Power Sector: Manual for Environmental Decision Making (English) 06/99 213/99 Household Energy Strategies for Urban India: The Case of Hyderabad 06/99 214/99 Greenhouse Gas Mitigation In the Power Sector: Case Studies From India 02/01 237/01 Energy Strategies for Rural India: Evidence from Six States 08/02 258/02 Household Energy, Indoor Air Pollution, and Health 11/02 261/02 Access of the Poor to Clean Household Fuels 07/03 263/03 The Impact of Energy on Women's Lives in Rural India 01/04 276/04 Environmental Issues in the Power Sector: Long-Term Impacts And Policy Options for Rajasthan 10/04 292/04 103 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Region/Country Activity/Report Title Date Number Environmental Issues in the Power Sector: Long-Term Impacts 10/04 293/04 And Policy Options for Karnataka Nepal Energy Assessment (English) 08/83 4474-NEP Status Report (English) 01/85 028/84 Energy Efficiency & Fuel Substitution in Industries (English) 06/93 158/93 Pakistan Household Energy Assessment (English) 05/88 -- Assessment of Photovoltaic Programs, Applications, and Markets (English) 10/89 103/89 National Household Energy Survey and Strategy Formulation Study: Project Terminal Report (English) 03/94 -- Managing the Energy Transition (English) 10/94 -- Lighting Efficiency Improvement Program Phase 1: Commercial Buildings Five Year Plan (English) 10/94 -- Clean Fuels 10/01 246/01 Household Use of Commercial Energy 05/06 320/06 Regional Toward Cleaner Urban Air in South Asia: Tackling Transport 03/04 281/04 Pollution, Understanding Sources. Sri Lanka Energy Assessment (English) 05/82 3792-CE Power System Loss Reduction Study (English) 07/83 007/83 Status Report (English) 01/84 010/84 Industrial Energy Conservation Study (English) 03/86 054/86 Sustainable Transport Options for Sri Lanka: Vol. I 02/03 262/03 Greenhouse Gas Mitigation Options in the Sri Lanka Power Sector: Vol. II 02/03 262/03 Sri Lanka Electric Power Technology Assessment (SLEPTA): Vol. III 02/03 262/03 Energy and Poverty Reduction: Proceedings from South Asia 11/03 268/03 Practitioners Workshop How Can Modern Energy Services Contribute to Poverty Reduction? Colombo, Sri Lanka, June 2-4, 2003 EUROPE AND CENTRAL ASIA (ECA) Armenia Development of Heat Strategies for Urban Areas of Low-income 04/04 282/04 Transition Economies. Urban Heating Strategy for the Republic Of Armenia. Including a Summary of a Heating Strategy for the Kyrgyz Republic Bulgaria Natural Gas Policies and Issues (English) 10/96 188/96 Energy Environment Review 10/02 260/02 Central Asia and The Caucasus Cleaner Transport Fuels in Central Asia and the Caucasus 08/01 242/01 Central and Eastern Europe Power Sector Reform in Selected Countries 07/97 196/97 Increasing the Efficiency of Heating Systems in Central and Eastern Europe and the Former Soviet Union (English and Russian) 08/00 234/00 The Future of Natural Gas in Eastern Europe (English) 08/92 149/92 Kazakhstan Natural Gas Investment Study, Volumes 1, 2 & 3 12/97 199/97 Kazakhstan & Kyrgyzstan Opportunities for Renewable Energy Development 11/97 16855-KAZ Poland Energy Sector Restructuring Program Vols. I-V (English) 01/93 153/93 Natural Gas Upstream Policy (English and Polish) 08/98 206/98 Energy Sector Restructuring Program: Establishing the Energy 104 LIST OF FORMAL REPORTS Region/Country Activity/Report Title Date Number Regulation Authority 10/98 208/98 Portugal Energy Assessment (English) 04/84 4824-PO Romania Natural Gas Development Strategy (English) 12/96 192/96 Private Sector Participation in Market-Based Energy-Efficiency 11/03 274/03 Financing Schemes: Lessons Learned from Romania and International Experiences. Slovenia Workshop on Private Participation in the Power Sector (English) 02/99 211/99 Turkey Energy Assessment (English) 03/83 3877-TU Energy and the Environment: Issues and Options Paper 04/00 229/00 Energy and Environment Review: Synthesis Report 12/03 273/03 Turkey’s Experience with Greenfield Gas Distribution since 2003 03/07 325/05 MIDDLE EAST AND NORTH AFRICA (MENA) Turkey Turkey’s Experience with Greenfield Gas Distribution since 2003 05/07 325/07 Arab Republic of Egypt Energy Assessment (English) 10/96 189/96 Energy Assessment (English and French) 03/84 4157-MOR Status Report (English and French) 01/86 048/86 Morocco Energy Sector Institutional Development Study (English and French) 07/95 173/95 Natural Gas Pricing Study (French) 10/98 209/98 Gas Development Plan Phase II (French) 02/99 210/99 Syria Energy Assessment (English) 05/86 5822-SYR Electric Power Efficiency Study (English) 09/88 089/88 Energy Efficiency Improvement in the Cement Sector (English) 04/89 099/89 Energy Efficiency Improvement in the Fertilizer Sector (English) 06/90 115/90 Tunisia Fuel Substitution (English and French) 03/90 -- Power Efficiency Study (English and French) 02/92 136/91 Energy Management Strategy in the Residential and Tertiary Sectors (English) 04/92 146/92 Renewable Energy Strategy Study, Volume I (French) 11/96 190A/96 Renewable Energy Strategy Study, Volume II (French) 11/96 190B/96 Rural Electrification in Tunisia: National Commitment, Efficient Implementation and Sound Finances 08/05 307/05 Yemen Energy Assessment (English) 12/84 4892-YAR Energy Investment Priorities (English) 02/87 6376-YAR Household Energy Strategy Study Phase I (English) 03/91 126/91 Household Energy Supply and Use in Yemen. Volume I: Main Report and Volume II: Annexes 12/05 315/05 LATIN AMERICA AND THE CARIBBEAN REGION (LCR) LCR Regional Regional Seminar on Electric Power System Loss Reduction in the Caribbean (English) 07/89 -- Elimination of Lead in Gasoline in Latin America and the Caribbean (English and Spanish) 04/97 194/97 Elimination of Lead in Gasoline in Latin America and the Caribbean - Status Report (English and Spanish) 12/97 200/97 Harmonization of Fuels Specifications in Latin America and the Caribbean (English and Spanish) 06/98 203/98 Energy and Poverty Reduction: Proceedings from the Global Village 105 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Region/Country Activity/Report Title Date Number Energy Partnership (GVEP) Workshop held in Bolivia 06/05 202/05 Power Sector Reform and the Rural Poor in Central America 12/04 297/04 Estudio Comparativo Sobre la Distribución de la Renta Petrolera en Bolivia, Colombia, Ecuador y Perú 08/05 304/05 OECS Energy Sector Reform and Renewable Energy/Energy 02/06 317/06 Efficiency Options The Landfill Gas-to-Energy Initiative for Latin America and the Caribbean 02/06 318/06 Bolivia Energy Assessment (English) 04/83 4213-BO National Energy Plan (English) 12/87 -- La Paz Private Power Technical Assistance (English) 11/90 111/90 Pre-feasibility Evaluation Rural Electrification and Demand Assessment (English and Spanish) 04/91 129/91 National Energy Plan (Spanish) 08/91 131/91 Private Power Generation and Transmission (English) 01/92 137/91 Natural Gas Distribution: Economics and Regulation (English) 03/92 125/92 Natural Gas Sector Policies and Issues (English and Spanish) 12/93 164/93 Household Rural Energy Strategy (English and Spanish) 01/94 162/94 Preparation of Capitalization of the Hydrocarbon Sector 12/96 191/96 Introducing Competition into the Electricity Supply Industry in Developing Countries: Lessons from Bolivia 08/00 233/00 Final Report on Operational Activities Rural Energy and Energy Efficiency 08/00 235/00 Oil Industry Training for Indigenous People: The Bolivian Experience (English and Spanish) 09/01 244/01 Capacitación de Pueblos Indígenas en la Actividad Petrolera. Fase II 07/04 290/04 Boliva-Brazil Best Practices in Mainstreaming Environmental & Social Safeguards Into Gas Pipeline Projects 07/06 322/06 Estudio Sobre Aplicaciones en Pequeña Escala de Gas Natural 07/04 291/04 Brazil Energy Efficiency & Conservation: Strategic Partnership for Energy Efficiency in Brazil (English) 01/95 170/95 Hydro and Thermal Power Sector Study 09/97 197/97 Rural Electrification with Renewable Energy Systems in the Northeast: A Preinvestment Study 07/00 232/00 Reducing Energy Costs in Municipal Water Supply Operations 07/03 265/03 "Learning-while-doing" Energy M&T on the Brazilian Frontlines Chile Energy Sector Review (English) 08/88 7129-CH Colombia Energy Strategy Paper (English) 12/86 -- Power Sector Restructuring (English) 11/94 169/94 Energy Efficiency Report for the Commercial and Public Sector (English) 06/96 184/96 Costa Rica Energy Assessment (English and Spanish) 01/84 4655-CR Recommended Technical Assistance Projects (English) 11/84 027/84 Forest Residues Utilization Study (English and Spanish) 02/90 108/90 Dominican Republic Energy Assessment (English) 05/91 8234-DO Ecuador Energy Assessment (Spanish) 12/85 5865-EC Energy Strategy Phase I (Spanish) 07/88 -- Energy Strategy (English) 04/91 -- Private Mini-hydropower Development Study (English) 11/92 -- 106 LIST OF FORMAL REPORTS Region/Country Activity/Report Title Date Number Energy Pricing Subsidies and Interfuel Substitution (English) 08/94 11798-EC Energy Pricing, Poverty and Social Mitigation (English) 08/94 12831-EC Guatemala Issues and Options in the Energy Sector (English) 09/93 12160-GU Health Impacts of Traditional Fuel Use 08/04 284/04 Haiti Energy Assessment (English and French) 06/82 3672-HA Status Report (English and French) 08/85 041/85 Household Energy Strategy (English and French) 12/91 143/91 Honduras Energy Assessment (English) 08/87 6476-HO Petroleum Supply Management (English) 03/91 128/91 Jamaica Energy Assessment (English) 04/85 5466-JM Petroleum Procurement, Refining, and Distribution Study (English) 11/86 061/86 Energy Efficiency Building Code Phase I (English) 03/88 -- Energy Efficiency Standards and Labels Phase I (English) 03/88 -- Management Information System Phase I (English) 03/88 -- Charcoal Production Project (English) 09/88 090/88 FIDCO Sawmill Residues Utilization Study (English) 09/88 088/88 Energy Sector Strategy and Investment Planning Study (English) 07/92 135/92 Mexico Improved Charcoal Production Within Forest Management for the State of Veracruz (English and Spanish) 08/91 138/91 Energy Efficiency Management Technical Assistance to the Comisión Nacional para el Ahorro de Energía (CONAE) (English) 04/96 180/96 Energy Environment Review 05/01 241/01 Proceedings of the International Grid-Connected Renewable Energy Policy Forum (with CD) 08/06 324/06 Nicaragua Modernizing the Fuelwood Sector in Managua and León 12/01 252/01 Policy & Strategy for the Promotion of RE Policies in Nicaragua. (Contains CD with 3 complementary reports) 01/06 316/06 Panama Power System Efficiency Study (English) 06/83 004/83 Paraguay Energy Assessment (English) 10/84 5145-PA Recommended Technical Assistance Projects (English) 09/85 Status Report (English and Spanish) 09/85 043/85 Reforma del Sector Hidrocarburos (Spanish Only) 03/06 319/06 Peru Energy Assessment (English) 01/84 4677-PE Status Report (English) 08/85 040/85 Proposal for a Stove Dissemination Program in the Sierra (English and Spanish) 02/87 064/87 Energy Strategy (English and Spanish) 12/90 -- Study of Energy Taxation and Liberalization Peru of the Hydrocarbons Sector (English and Spanish) 120/93 159/93 Reform and Privatization in the Hydrocarbon Sector (English and Spanish) 07/99 216/99 Rural Electrification 02/01 238/01 Saint Lucia Energy Assessment (English) 09/84 5111-SLU St. Vincent and the Grenadines Energy Assessment (English) 09/84 5103-STV Sub Andean Environmental and Social Regulation of Oil and Gas 107 A STRATEGY FOR CBM AND CMM DEVELOPMENT AND UTILIZATION IN CHINA Region/Country Activity/Report Title Date Number Operations in Sensitive Areas of the Sub-Andean Basin (English and Spanish) 07/99 217/99 Trinidad and Tobago Energy Assessment (English) 12/85 5930-TR GLOBAL Energy End Use Efficiency: Research and Strategy (English) 11/89 -- Women and Energy -A Resource Guide The International Network: Policies and Experience (English) 04/90 -- Guidelines for Utility Customer Management and Metering (English and Spanish) 07/91 -- Assessment of Personal Computer Models for Energy Planning in Developing Countries (English) 10/91 -- Long-Term Gas Contracts Principles and Applications (English) 02/93 152/93 Comparative Behavior of Firms Under Public and Private Ownership (English) 05/93 155/93 Development of Regional Electric Power Networks (English) 10/94 -- Round-table on Energy Efficiency (English) 02/95 171/95 Assessing Pollution Abatement Policies with a Case Study of Ankara (English) 11/95 177/95 A Synopsis of the Third Annual Round-table on Independent Power Projects: Rhetoric and Reality (English) 08/96 187/96 Rural Energy and Development Round-table (English) 05/98 202/98 A Synopsis of the Second Round-table on Energy Efficiency: Institutional and Financial Delivery Mechanisms (English) 09/98 207/98 The Effect of a Shadow Price on Carbon Emission in the Energy Portfolio of the World Bank: A Carbon Backcasting Exercise (English) 02/99 212/99 Increasing the Efficiency of Gas Distribution Phase 1: Case Studies and Thematic Data Sheets 07/99 218/99 Global Energy Sector Reform in Developing Countries: A Scorecard 07/99 219/99 Global Lighting Services for the Poor Phase II: Text Marketing of Small "Solar" Batteries for Rural Electrification Purposes 08/99 220/99 A Review of the Renewable Energy Activities of the UNDP/ World Bank Energy Sector Management Assistance Program 1993 to 1998 11/99 223/99 Energy, Transportation and Environment: Policy Options for Environmental Improvement 12/99 224/99 Privatization, Competition and Regulation in the British Electricity Industry, With Implications for Developing Countries 02/00 226/00 Reducing the Cost of Grid Extension for Rural Electrification 02/00 227/00 Undeveloped Oil and Gas Fields in the Industrializing World 02/01 239/01 Best Practice Manual: Promoting Decentralized Electrification Investment 10/01 248/01 Peri-Urban Electricity Consumers — A Forgotten but Important Group: What Can We Do to Electrify Them? 10/01 249/01 108 LIST OF FORMAL REPORTS Region/Country Activity/Report Title Date Number Village Power 2000: Empowering People and Transforming Markets 10/01 251/01 Private Financing for Community Infrastructure 05/02 256/02 Stakeholder Involvement in Options Assessment: 07/03 264/03 Promoting Dialogue in Meeting Water and Energy Needs: A Sourcebook A Review of ESMAP's Energy Efficiency Portfolio 11/03 271/03 A Review of ESMAP's Rural Energy and Renewable Energy 04/04 280/04 Portfolio ESMAP Renewable Energy and Energy Efficiency Reports 05/04 283/04 1998-2004 (CD Only) Regulation of Associated Gas Flaring and Venting: A Global 08/04 285/04 Overview and Lessons Learned from International Experience ESMAP Gender in Energy Reports and Other related Information 11/04 288/04 (CD Only) ESMAP Indoor Air Pollution Reports and Other related Information 11/04 289/04 (CD Only) Energy and Poverty Reduction: Proceedings from the Global Village Energy Partnership (GVEP) Workshop on the Pre-Investment Funding. Berlin, Germany, April 23-24, 2003. 11/04 294/04 Global Village Energy Partnership (GVEP) Annual Report 2003 12/04 295/04 Energy and Poverty Reduction: Proceedings from the Global Village Energy Partnership (GVEP) Workshop on Consumer Lending and Microfinance to Expand Access to Energy Services, Manila, Philippines, May 19-21, 2004 12/04 296/04 The Impact of Higher Oil Prices on Low Income Countries 03/05 299/05 And on the Poor Advancing Bioenergy for Sustainable Development: Guideline 04/05 300/05 For Policymakers and Investors ESMAP Rural Energy Reports 1999-2005 03/05 301/05 Renewable Energy and Energy Efficiency Financing and Policy Network: Options Study and Proceedings of the International Forum 07/05 303/05 Implementing Power Rationing in a Sensible Way: Lessons 08/05 305/05 Learned and International Best Practices The Urban Household Energy Transition. Joint Report with 08/05 309/05 . RFF Press/ESMAP ISBN 1-933115-07-6 Pioneering New Approaches in Support of Sustainable Development In the Extractive Sector: Community Development Toolkit, also Includes a CD containing Supporting Reports 10/05 310/05 Analysis of Power Projects with Private Participation Under Stress 10/05 311/05 Potential for Biofuels for Transport in Developing Countries 10/05 312/05 Experiences with Oil Funds: Institutional and Financial Aspects 06/06 321/06 Coping with Higher Oil Prices 06/06 323/06 109 Energy Sector Management Assistance Program 1818 H Street, NW Washington, DC 20433 USA Tel: 1.202.458.2321 Fax: 1.202.522.3018 Internet: www.esmap.org Email: esmap@worldbank.org