Technology will help nation lower reliance on overseas companies

With a Chinese company’s development of techniques useful in the recovery of coal-bed methane, the country is in a good position to produce that resource at a low cost and reduce its dependency on imports.

Trapped in coal deposits, the special type of methane is one among several types of high-energy unconventional gases that are expected to become important sources of the country’s energy.

According to the UK consultancy Wood Mackenzie, coal-bed methane could contribute 14 percent of China’s domestic supply of gas by 2030. But because of a lack of expertise in techniques used to retrieve it, the resource is still little used in China.

Even so, progress has been made toward increasing the country’s output of coal-bed methane.

The China National Petroleum Corp, or CNPC, China’s largest oil and gas producer and supplier, has introduced a commercial application of a technique known as multi-branched horizontal well-drilling, which can be used to explore for coal-based methane at a low cost.

“CNPC recently signed contracts with several domestic companies to explore for coal-bed methane and provide them with the independently-produced components needed to produce the gas. That will speed up the production,” Shen Ruichen, director of CNPC’s coal-based methane and reservoir project institute, told China Daily.

Shen didn’t disclose the companies’ names.

Before CNPC’s technological advance, foreign groups had largely held a monopoly over the production of equipment needed to connect horizontal and vertical mine shafts underground, a requirement in multi-branched horizontal drilling. That made it expensive for Chinese companies to obtain those important components. In the past, CNPC had to use imported connecting equipment to operate multiple horizontal shafts.

CNPC’s innovation promises to reduce the cost of a single well by a third, taking it to less than 10 million yuan ($1.6 million), according to the company.

“This independent knowledge will support the low-cost exploration for coal-bed methane,” Shen said. “By 2015, a quarter of the exploration for the gas will be done with the use of independent multi-branched horizontal wells.”

CNPC said multi-branched horizontal wells are capable of producing up to 10 times as much of the gas a day as are vertical shafts.

“As a latecomer to the global coal-bed methane industry, Chinese companies are eager to research and develop their own knowledge about equipment used to establish long-distance well connections, reduce exploration costs and strengthen the ability to compete in large-scale exploration and the commercial production of domestic coal-bed methane,” said Zou Laifang, deputy dean at CNPC’s Drilling Research Institute.

China is the world’s third-largest owner of coal-bed methane resources, containing 36.81 trillion cubic meters of the gas.

To accelerate the exploration for coal-bed methane in Chinese mines, the Ministry of Finance decided to eliminate the tariffs and value-added taxes formerly charged on equipment and components used to refine the gas in mines. That change took effect in 2011.

By 2015, China plans to be able to produce 30 billion cu m of coal-bed methane, up from 1.57 billion cu m in 2010.

Chinese companies have planned to make large investments into projects to tap the resource.

PetroChina International Co Ltd announced plans to put $1.5 billion into a coal-bed methane plant this year and has ambitions to produce 4.5 billion cu m of the gas a year by 2015. China Petroleum and Chemical Corp Ltd, or Sinopec, aims to produce 2.5 billion cu m of unconventional gas a year by 2015.

As the world’s largest energy consumer, China plans to increase its production of unconventional gases, largely because they burn more cleanly than oil or coal.

The financial Times recently quoted Fu Chengyu, chairman of Sinopec, as saying that the company will place a priority on investing in unconventional gas.

Wood Mackenzie said China will be using 566 million cu m of gas a day by 2015, of which it will import about 30 percent.

By Bao Chang