20:58 10Nov2006 China's top coalbed methane firm plans output leap
By Jim Bai
BEIJING, Nov 10 (Reuters) - China's biggest producer of methane from coal seams expects a tenfold output leap next year, the company, China United Coalbed Methane Corp, said on Monday.
Sun Maoyuan, the firm's president, told Reuters output will jump to to nearly 100 million cubic metres (mcm) in 2007 from under 10 mcm this year.
Production capacity will be be boosted from around 70 mcm in 2005 to some 200 mcm by the end of this year, he said on the sidelines of an industry conference.
Actual output is limited by transport problems and competition from cheaper natural gas, and China United could expand production beyond its target next year if gas transportation could be improved, Sun said.
PetroChina <0857.HK>, the country's top oil and gas producer, has a 50 percent stake in China United.
The company is considering building more gas pipelines linking wells in northwestern Shanxi and Shannxi provinces, which hold the majority of China's coalbed methane reserves, to end users in provinces such as Henan.
China United is keen to continue expanding its reserves and will have added over 300 new wells by the end of this year on top of around 300 wells in 2005, accounting for the lion's share of the country's new coalbed methane exploration.
"Exploration has increased aggressively in recent years, with 317 new exploration wells being drilled across the country in 2005, a number higher than the total for the previous 8 years," Sun said at the China Gas Summit in Beijing.
Sun said production costs at Qinnan, in northwestern Shanxi province, the most efficient of China United's CBM projects, is at RMB 600 ($76.27) per thousand cubic metre, and the gas sells for around RMB 1,100 ($139.83) to other provinces.
China boasts coalbed methane reserves of 36 trillion cubic metres, the third-largest in the world after Russia and Canada, according to the National Development and Reform Commission.
But use of the gas is at a primitive stage and each year large quantities are pumped into the atmosphere -- where it contributes to global warming -- to avoid explosions in mines.
Methane is estimated to have 21 times the global warming potential of carbon dioxide.
Beijing plans to boost usage to 8 billion cubic metres by 2010 from around 1 bcm last year, to help meet surging fuel demand amid high oil prices.
((Reporting by Jim Bai, Editing by Emma Graham-Harrison; Reuters Messaging: jim.bai.reuters.com@reuters.net; +86 10 6598 1271))
Keywords: ENERGY CHINA METHANE