Natural Gas from coal

Natural gas from coal (NGC), also known as coalbed methane (CBM), is simply the natural gas formed and trapped in coalbeds.  NGC is generated during the coalification process that transforms organic material such as peat bogs into coal.

In coal seams, the methane can occur as "dry" gas or be associated with saltwater or freshwater.  The most common production method uses wells drilled into the naturally fractured coal seams.  Dry gas can be produced like conventional natural gas.  If the gas is associated with water, the wells initially remove water from the coal, but eventually methane is freed from the coal as the pressure and surface tension are lowered.  The disadvantage is the long time period before significant gas production begins and the need to dispose of the water, usually by injection into deep wells beneath existing groundwater aquifiers.  Researchers are investigating other means of freeing the methane from the coal, including the injection of carbon dioxide (ECBM), which could also provide a way to reduce greenhouse gas emissions.

Versatility is the hallmark of natural gas.  It is the leading source of heat for homes and business around the world.  Generating electricity from natural gas is one of the fastest-growing uses of this clean-burning fuel.  Natural gas is widely used for manufacturing.  It is vitally important in making cement, processing forest products and manufacturing steel.  Natural gas is a key raw material in the fertilizer and petrochemical industries and provides energy and hydrogen for the production of synthetic crude oil from oil sands bitumen.

Natural gas liquids - ethane, propane, butane and condensates (pentanes and heavier hydrocarbons) produces along with natural gas - are used as fuels for heating and motor vehicles, and are a primary source of methane and feedstocks for petrochemicals and oil refining.

China Coalbed Methane

According to Merrill Lynch, China targets to produce 10bcm of CBM by 2010.  CBM deposits are found in various parts of China, with 25% in the west, 64% in the central region and 11% in the east.  Shanxi, Shaanxi and Inner Mongolia, are the largest sources.  For the development of the CBM industry, China had set a target production of 1.4bcm pa until 2006, increasing to 10bcm by 2010 and to 20bcm by 2015.  Currently, more than 1.3bcm of CBM is emitted each year without being used and is thereby wasted.

China's state-owned firms dominate the CBM sector and CBM resources are largely controlled by China United Coal Bed Methane Corporation (CUCBM), although local governments and oil companies are involved in these activities too.  By 2010, the industry plans to achieve the following four goals:

1.  Nationwide production of 10bcm, including 5bcm from the ground and 5bcm from mine wells
2.  Nationwide utilization of 8bcm, including 5bcm from the ground and 3bcm from mine wells
3.  Proven reserves to increase to 300bcm
4.  Building an industrial system for CBM development

The Chinese government attaches importance to CBM development and use.  Coal mining enterprises are encouraged to develop CBM resources.  CBM     development is also seen as a priority by five provinces in western China where there is a strategy to accelerate economic growth.

Petromin Resources' CBM projects enjoy preferential policies such as:
-13% VAT rebate, no income tax for the first five years and 50% income tax for the following three years
-Imported goods and materials are exempt from customs duties and import tax
-CBM gas price is not fixed by the state
-Royalties apply as for foreign cooperative natural gas ventures, i.e. no royalty for gas production of less than 1x109m3 pa ensuring that the royalty will not be greater than 3% of the annual revenue