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China has the third largest CBM deposit in the world and has been proven to have an abundance

more than double that of conventional natural gas. Estimates show that there are a total of 14 basins with a recoverable CBM resource volume of over 500 billion m3 each, a volume comparable to the current total annual consumption of natural gas in China!

Safety The extraction of CBM significantly increases the safety of coal miners as it reduces the amount of gas in mine shafts, thus preventing explosions. When it is not extracted separately from coal, CBM is the number one cause of death in the coal mining industry in China, accountable for 5,000 miners lives or 80 percent of mining accidents every year.

Environment Methane is one of the six greenhouse gases defined in the UN Climate Change Framework Convention. Its greenhouse effect is 21 times that of CO2 and its destruction to the ozone layer is seven times that of CO2. Largely due to underutilization of CBM in China, it is the worlds number one emitter of methane, accounting for one-third of all coal mine methane emissions. Estimates showthat each year China emits some 15 billion m3 of methane into the atmosphere through the extraction, processing and transportation

of coal. The pollutants generated from the pumping and utilization of CBM are far less than that of both oil and coal (approximately 1/40th of pollutants generated by oil; and 1/800th generated by coal).

International Pressure China is an important player in global efforts to reduce greenhouse gas emissions. According to the Clean Development Mechanism in the Kyoto Protocol, developing and utilizing CBM has many economic advantages for business. For example, an enterprise with a methane-fueled electricity generating device with an installed capacity of 21200kw can reduce 80,000 tons of CO2 equivalent emissions every year. With an average international price of $7.5 USD/ ton for reduced CO2 emissions, this would increase earnings by 4.8 million RMB.

In 2005, Chinese coal mines utilized over 1 billion m3 of CBM from the 2.3 billion m3 that was extracted. Also in 2005, 328 new CBM wells were constructed in China, exceeding the previous combined total number of 287 wells that were functional at the end of 2004. But there are very few participants in CBM in China China United Coal bed Methane Co. Ltd, China National Petroleum Corporation, Jincheng Anthracite Mining Group, and some local mining bureaus are the main entities engaged in CBM extraction and exploration in China. China United Coal bed Methane Co. Ltd. is the primary CBM enterprise in China. has drilled 85 percent of Chinas CBM wells and has formed partnerships with almost two dozen large foreign companies. 40 percent of the resources are in East China gas reservoirs; 18 percent are in Central China; 26 percent are in West China; and 16 percent are in South China. Since the 1990s, experimental CBM exploration activities have been carried out by domestic industrial sectors

The CBM resources in place are 36.8 TCM [1] China plans to increase its annual coal-bed gas output to 10 billion cubic meters in 2010 and 40 billion cubic meters in 2020 China is still in the early stages of CBM development

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Production sharing contracts in china

In coal seams the key drivers to gas in place are: Q Thickness of the coal seam. What is the net thickness of the coal? Q Coal composition. This relates to the amount and type of organic material in the coal. This affects the amount of gas that can be sorbed. Q Gas content. Driven by coal composition, thermal maturity, burial and uplift and migrated thermal or biogenic gas. Q Gas composition. This is generally greater than 90% methane. There are no gas liquids (condensate, LPGspropane and butane) in coal seam gas.

Government benefits for CBM in China

Q The government gives a full VAT rebate (13%) to CBM producers. The rebate should be used specifically in research and development of CBM technology and will not be subject to income tax levy. Q There is no resource tax on CBM. Q Import tariffs on CBM equipment are waived. Q The central government provides a Rmb0.2/cum subsidy for CBM producers and local governments have subsidies in addition to this. Q CBM has priority in connecting to gas pipelines over conventional gas. Q Electricity generated from CBM has a Rmb0.25/Kwh higher price. The SIS (horizontal) wells cost US$1.5m per well to drill and produce 250300mcf/day, while the vertical wells cost US$350,000 per well and produce 100-150mcf/day. Reserve life per well is 15-17 years. One SIS well replaces between five and six verticals.