By Wu Qi, China Features

    BEIJING, Sept.2 (Xinhua) -- Having his car filled with compressed coal-bed methane in a bustling gas station at a coal production base of north China's Shanxi Province, a 23 year-old taxi driver says he is excited about the savings.

    "I can save on half my expenses for fuel each day because my car started to have a new 'drink' early this year," says Li Gang, with a broad smile on the face.

    Li does the maths -- one cubic meter of coal-bed methane is equivalent to 1.13 liters of gasoline, but retails at a less than half the price of gasoline. About 90 percent of Jincheng City's 1,300 taxis have been refit to burn compressed coal-bed methane and gasoline.

    Day and night, coal-bed methane wells are operating in full gear in Qinshui Basin, the country's largest coal-bed methane exploitation base, some 50 kilometers from downtown Jincheng City. Tankers haul compressed coal-bed methane in an endless stream to gas stations, factories and local resident families across the province.

    As China speeds up exploitation of coal mines to satisfy increasingly thirsty demand for energy, the country's gas emissions keep growing. In 2004, China's coal mines pumped out 14 billion cubic meters of gas and experts say that will increase to 17 billion by 2020.

    Coal-bed methane, more commonly known as "coalmine gas", can be deadly. China has the highest number of coalmine accident fatalities in the world, with about 80 percent of casualties attributable to gas explosions, causing direct losses of 93 million U.S. dollars a year, said Sun Maoyuan, general manager of China United Coal-bed Methane Corp.

    However, the No.1 "coalmine killer" is also a sort of clean energy. Industry experts believe coal-bed methane will become a practical and reliable substitute energy resource for natural gas as the global shortage of energy resources worsens and conventional natural gas supply falls short of market demand.

    China boasts 37 trillion cubic-meter reserves of coal-bed methane, the third-largest in the world, next only to Russia and Canada, according to the latest statistics from the China Coal Information Research Institute. They are equivalent to 45 billion tons of standard coal. Sixty percent of the gas is stored in coal beds over 1,500 meters deep, easily mined and developed.

    China's methane resources are distributed in 24 provinces, with Shanxi Province and Xinjiang Uygur Autonomous Region accounting for more than half of the country's total reserves.

    "Coal-bed methane is not only an effective alternative energy source for China, the mining and use of it could also be helpful in avoiding coal mine accidents as well as reducing methane emissions, a major type of greenhouse gas," said Liu Wenge, deputy director of the coal-bed methane information center at the China Coal Information Research Institute.

    Encouraging policies

    China started to explore and utilize coal-bed methane in the 1990s. Although over 46 percent of China's coalmines are rich in gas, China's coal-bed methane still remains underdeveloped, due to factors such as a lack of technology and inadequate investment.

    China utilized 1 billion cubic meters of coal-bed methane in 2005 and expects to make use of 1.4 billion cubic meters this year. In sharp contrast, more than 1.3 billion cubic meters of such gas is being emitted each year without getting effective use.     

    So far, more than 600 coal-bed methane wells have been sunk across the country, most of which are still in the prospecting and experimental stage and far away from commercial operation, with the daily methane output record being 16,000 cubic meters.

    In the face of tightening pressures on promoting coalmine safety, alleviating air pollution and supplying more clean energy, the Chinese government is attaching more attention to the development of coal-bed gas.

    In February 2005, the State Council, China's cabinet, put forward seven measures to harness gas, prevent gas accidents in coalmines and to develop coal-bed methane.

    On May 31, 2006, the National Development and Reform Commission, China's industrial watchdog, approved a five-year plan on the exploitation of coal-bed methane. Under the four-point blueprint, China is to increase annual coal-bed gas output to 10 billion cubic meters in 2010, utilizing 80 percent. China will investigate and confirm that the country has an additional 300 billion cubic meters of coal-bed methane reserves availably by 2010. And China will gradually set up an industrial system to develop and utilize coal-bed methane.

    On June 19, 2006, the State Council promulgated a 16-clause guideline on accelerating the exploitation of coal-bed methane, offering a series of preferential policies on land use, taxation, loans and access of methane-generated electricity to local power grids.

    On Aug. 28, 2006, senior officials with the National Development and Reform Commission (NDRC) said detailed measures are under preparation by financial, taxation and land resources authorities to put the 16-clause guideline into practice.

    NDRC calls upon local governments to follow the practice of east China's Jiangxi Province in earmarking special financial funds to encourage exploitation of coal-bed methane. Jiangxi awards enterprises 0.05 yuan per cubic meter in the exploitation of coal-bed methane.     

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    "Along with the development of science and technology, coal-bedmethane has already become a new source of power generation in China," said Liu Wenge of the China Coal Information Research Institute.

    The expert said apart from the current 90,000 kilowatts from the coal-bed methane, other projects with an installed capacity of150,000 kilowatts are under construction or planned to be built.

    A coal-bed methane power plant with the capacity of 120,000 kilowatts is being built in Jincheng of north China's Shanxi Province. With a total investment of 875 million yuan, it will be the world's largest when completed in June next year, said Yuan Zongben, president of Shanxi Jincheng Coal Industry Group.

    "China's major equipment for coal-bed methane electricity generation are gas turbines and internal combustion engines. As a result, existing coal-fired power plants can be easily rebuilt into coal-bed methane power stations," said Liu Wenge.

    In addition to building power plants, China plans to build two pipelines for coal-bed gas transmission in the next five years, said Hu Aimei, vice president of the China United Coal-bed Methane Corporation.

    The first pipeline, linking Qinshui County of north China's Shanxi Province to Bo'ai County of Henan Province, will be connected to the great pipeline pumping natural gas from energy-rich West to East China. The pipeline is designed to have an annual gas transmission capacity of one billion cubic meters.

    The second one will transmit coal-bed gas from Songzao of southwestern Chongqing Municipality to feed the energy demands of Chongqing, said Hu.

    "Still under planning, the two pipelines have not got formal permission from the state government," said Hu Aimei.

    Foreign investors

    Foreign investors are entering the Chinese coal-bed methane sector as the Chinese government has set out a series of preferential policies for overseas investment to enter the methane exploitation sector, including tax rebates.

    On April 5, 2006, China United Coal-bed Methane Corporation that enjoys exclusive rights to cooperate with foreign investors for coal-bed methane exploitation signed in Beijing a cooperative contract with Orion Energy International Inc. from the United States, to join hands in the exploitation of coal-bed methane in a462-square-kilometer block called Sanjiao, in north China's Shanxi Province. The area is estimated to have 60 billion cubic meters of coal-bed methane.

    During the five-year exploration phase, Orion Energy International Inc. is required to shoulder all the risks in the exploration phase of the contract and adopt advanced exploration technology. Entering the development period, the two sides will invest in and share the profits in accordance with the proportion of their respective investments.

    "This is the fifth contract that the corporation has signed with foreign companies so far this year," said Yang Jian, a senior analyst with China United Coal-bed Methane Corporation.

    To date, the corporation has 27 contracts for coal-bed methane exploitation, including the United States' Chevron and other foreign companies from Britain, Canada and Australia. The total investment exceeds 1.2 billion yuan.

    The corporation will work together with these firms on the exploration, mining, processing and sale of methane, said Yang Jian, adding that the exploitation areas involve northern China, northwestern China and northeast China.

    In addition to businesses from foreign countries, Hong Kong Cregistered Towngas signed a framework agreement with Shanxi provincial government to develop local coal-bed methane in July 2006. The US$100-million deal is the largest coal-bed methane project in China, said Yang Jian.

    "Towngas plans to invest a total of 6 billion yuan in the mainland in the next three years, thus making business in the mainland its major profit growth point," said Chen Yongjian, president of Towngas. Enditem