CBM Comprehensive Utilization Engineering Project
Huainan Mining (Group) Limited Liability Corporation

August 2000

1.Resource status of the Huainan Mining Group Corporation
The Huainan coalfield is situated on banks of the middle reaches of the Huaihe River. It is bound to the east by the Tancheng to Lujiang fault, to the west by Fuyang city, to the north by the Minglong Mountain and Shangyao region, and to the south by Shungeng and Bagong Mountains. It is 100 km long from east to the west and 25-30 km wide from south to north, with a area of 3,000 km2. Through the Fuyang-Huainan Railway, the coalfield is connected with the Beijing-Jiujiang Railway and the Beijing-Shanghai Railway. The Huaihe and Hongzehe Rivers in the coalfield can reach the Yangze River. The Huainan coalfield is 100 km away from the Hefei City (the capital city of the Anhui Province), 300 km away from Nanjing, and 500 km away from Shanghai. It can also reach some medium-sized cities such as Bengbu and Fuyang by national highways. The coal measures of the Huainan coalfield are of the Carboniferous and Permian ages, with a basement of the Palaeozoic marine sedimentary rocks and Proterozoic strata. The sedimentary environments of the coal measures are cyclic paralic deltas. The coal measures contain many layers of coal, with small spacing between the layers, and have high proportions of coal. There are 32-40 layers of coal with total thickness of 42 meters, in which the workable seams are mainly preserved in the lower and middle parts of the Permian. The workable coal measures amount to 350 meters in thickness and the total thickness of the 9-18 layers of workable seams is 18-35 meters. 
The exploration in 12 prospecting areas in the Huainan coalfield, conducted by the Anhui coal geology bureau, has predicted nearly 80 billion tons of coal reserves, in which about 30 billion tons are distributed within a depth of 1,000 meters and about 50 billion tons are distributed within a depth of 1,500 meters. Within the depth of 1,000 meters, the proved reserves are 17 billion tons. In addition to coal resources, the coalfield has also abundant associated coalbed methane and kaolinite resources. During the national Sixth and Seventh “five-year plan”, the Huainan coalfield has been listed as an important selected area for the national coalbed methane exploration technology. In 1995, The China National Administration of Coal Geology launched a campaign to have a relatively thorough and actual assessment on the coalbed methane resources in the Huainan and Huaibei coalfields. In all the coal beds of each coalfield, the coalbed methane test data of different exploration phases and the data from 10 coalbed methane test wells were collected to analyze the occurrence and distribution of the coalbed methane in the coalfield. The coalbed gas reserves have been calculated based on the methane data from boreholes and the methane concentration (m3 per ton of coal) of the productive mines. The volume calculation method has been used for this calculation, that is, the coalbed gas reserve equals to the coal reserve multiplied by the methane concentration of the coalbed, in which different mean methane concentrations are taken for different horizontal levels of the different areas and blocks. The details are shown as follows:

Region Total (×100 million m3) Within 1000 m in depth 1000 to 1500 m in depth Lower than 1500 m in depth 
Xie-Li Region 1096.4 64.55 732.44 299.05 
Panji Gugou Region 1311.20 276.61 885.87 158.72 
Zhangji and Xieqian Region 257.57 127.37 130.17 
Guqian and Dingji Region 471.73 230.31 241.42 
Pan’er, Zhuji of Pansi Region 531.41 173.45 359.96 
Zhangou, Kouziji Region 560.1 375.25 184.85 
Shangyao, Shengjiagang Region 1232.46 1232.46 
Xinji, Liuzhuang Region 467.77 158.07 309.7 
Total 5928.25 1395.61 2842.61 1690.42 

The coalbed methane resource density is relatively high in the Huainan coalfield, mostly higher than 140 million m2/km2, with the highest being the Xie-Li Region where the gas density is 405 million m3/km2.

2. Background of the Corporation
The Huainan Mining Group Company, a super company, is one of the 520 national keystone enterprise conglomerates. The Huainan coalfield has been developed into an important national coal production base, with the total designed production capacity of 32 million tons per year, and current designated productive capacity is 19 million tons per year. In 1999, 13.25 million tons of coal has been produced.

The Huainan Mining Group has a total of 14 billion RMB assets. In 1999, income of coal sales as main industries is 2.47 billion RMB, and income of multi-industry is 700 million RMB, with 130 million RMB of profit payments and tax turnover. The group has 40 daughter companies, which engaged in the coal mining, dressing by washing, electric power, chemistry, manufacture of building materials, construction, medicine, tourism, trade, mechanism, real estate, light industry, farm and forestry, and so on.
After changed to a group company in 1997, it has quickened the step to company-based operation management. In order to meet the requirements of socialist market economy, it has improved the company-based operation in system and mechanism, and made fundamental adjustment to the industries and products structure. In less than 3 years, the father-daughter management system in the group has been established and further improved, and 40 daughter companies and secondary management units have been established. The independent economic accounting system of the daughter companies as legal entities was also approved. Within the company, the internal post competition mechanism has been set up.
Since the beginning when the company was established, the decision-making board of the group company (directorate) has made essential adjustment on the development planning of the company and has established “1-6-8” industry system. Based on the market economic development laws, and from the standpoint of resources and talents predominance, the group has brought forward the two-step strategic objective to develop the coalbed methane resources in the minefield. 
The first step is to make full use of the established on-ground centralized pump drainage system, to add gas-storing equipment and transportation and distribution pipelines to provide mine field, or even Huainan city with domestic fuel, and to use the left gas to generate electricity or develop coal gas chemical industry, and so on.
The second step to grasp the “gas-transportation from the west to the east” opportunity to carry on a large-scale borehole risky exploration and commercial exploitation and to import the concentrated gas into the network, by which we can realize the industrial structure adjustment, and seek for new economic growth point. 

3. The necessity and feasibility of the gas utilization project
(1). Huainan Mining Group Company has 11 couples of productive mines now, of which 7 couples have gas burst, and the “high gas burst” mines produce 94% of the total coalfield output. Nowadays, the absolute gas outburst quantity amounts to 492.6 m3 per minute, equivalent to 258.9 million m3 per year. The gas has brought serious threat to the safety of the coalmines, and has aroused several gas explosion incidents. From 1983 to 1998, it caused direct and indirect economic loss of more than 1 billion RMB to our bureau.
(2). Meanwhile, gas has strong greenhouse effect, thus the randomly aired gas will cause warmer climate, and pollute environment.
Gas is also a clean energy. Intelligent use of gas as a clean energy will improve the energy structure, and help to promote the sustainable development strategy of energy. And the comprehensive utilization of gas will also favor safe production of the coalmines. From 1980s, in order to ensure safety in production, our company has invested 150 million RMB to set up seven on-ground centralized pump drainage stations successively, with installation scale of 143 million m3 per year (net quantity). The working efficiency of pump is 0.8, and pump reserve factor is 1.2. The actual installation pump drainage capacity can reach 480 million m3 per year. If calculated with 40% of actual pump drainage concentration and 60% of the normal productive pump operation rate, the actual pump drainage capacity can reach 115 million m3 per year.

The pump drainage quantity of the mines of the Huainan Mining Group Company in the past years was as follows: in 1990, 4.06 million m3; in 1993, 4.2 million m3; in 1995, 5 million m3; 1996, 6.6 million m3; 1997, 10.45 million m3; 1998, 22.60 million m3; in 1999, 37.6 million m3. It is estimated that it will reach 40 million m3 in 2000. From above data, we can see the increasing trends of the pump drainage.
From the analysis of actual pump drainage quantity, it can be seen that the pump capacity has not been fully exerted. Our company will reconstruct the pump drainage equipment to improve the pump drainage technology. After the reconstruction of the pump network, the pump drainage rate will be raised from 15% to 25-30% (it is 65% in Australia) to make the pump drainage scale reach the current design specification, 143 million m3 per year (net quantity). After being thoroughly reconstructed, the pump drainage of old mining areas will reach 73.58 million m3 per year (net quantity), and that of the new mining area will reach 80 million m3 per year (net quantity).
In 1999, the pump drainage quantity of mining field approached 40 million m3, but now, we only established 10, 000 m3 and 30,000 m3 gas containers in Xieyi Mine and Xie’er Mine, respectively. The deflated gas has served as the domestic fuel for some inhabitants (the pump drainage density is larger than 45% and the calorfic value is 10980 kJ). Nearly 10,000 users have consumed 5-million m3 gas per year, which only made up 14% of the total deflated quantity of the company, with the rest aired to the atmosphere.
(3) Market forecast of gas as a domestic fuel
Currently, the Huainan city has a population of 1,102,700 in its urban area, constituting about 315,300 doors. Except the No.2 coal mine of the Huainan minefield which uses coalbed gas, all the rest use air-mixing gas, liquefied gas, coal and others as domestic fuel. Other types of fuel are not welcomed because of their unsafety, high price or high pollution. The Huainan municipality supports this gas utilization project thoroughly, and has dispatched formal documents to request the relevant municipal departments to cooperate with our group company to construct this project. This project has been taken as one of the “doing practical things for the people” projects of the Huainan City in 2000. The Huainan Mining Group Company has attached a great importance to this project, and has internally established the legal entity organizing team with the property company as the main body. The team will serve as the subject of investment and take charge of loan, construction, management and debt paying of the project technically.
According to the population and users of current Huainan city, 315, 300 m3 of gas per day (net result), and 115 million m3 per year will be consumed. Therefore, the development and utilization of the coalbed methane as domestic fuel has broad and reliable market prospective.

4. Introduction of gas utilization project
Our company has entrusted the Anhui Institute of Engineering Consultation and the Huainan Institute of Coalmine Exploration and Design to work out the gas utilization project proposal. 
(1)The range of the engineering project includes the cleaning, storing, compressing and metering of the gas, the piping of the deflated gas to the pressure-regulating stations in living area, the transporting of the decompressed gas to the transportation and distribution pipeline network in living areas, and then eventually pressing of decompressed gas into the low-pressure pipeline network, courtyard pipelines, user pipelines and users’ equipment in order that the user can utilize it.
(2) The design content includes: to add 180,000 m3 gas container (in which: 50,000 m3 for Panyi Mine, 50,000 m3 for Pan’er Mine, 20,000 m3 for Xie’er Mine, 30,000 m3 for Xinzhuangzi Mine and 30,000 m3 for Bijiagang Mine).
Four new storing and distribution stations (each in Panyi Mine, Pansan Mine, Xinzhuangzi Mine and Bijiagang Mine) will be constructed and 1 old storing and distribution station will be reconstructed (in Xie’er Mine). 37 pressure-regulating stations will also be constructed (in which 28 in Xin-Xie region and 9 in Panji region). The total length of main pipeline network in the two main gas-supplying regions, Xin-Xie region and PanJi region, will amount to 143.15km.
The engineering project will also include some other equipments, buildings, storing stations, and equipments and apparatuses for electricity supply and distribution, water supply and drainage, fire fighting and environment protection, and so on.

(3) The total investment will be 178.25 million RMB, in which:
(a) fixed assets is 170.72 million RMB, the interest in the construction periods is 4.14 million RMB, and circulating capital 3.39 million RMB.
(b) fixed assets is 170.72 million RMB, architectural engineering is 9.84 million RMB, equipment and apparatus is 91.44 million RMB, and installation work is 51.38 million RMB, and other expenses is 1.806 million RMB.

(4) In the total investment, 34.93 million RMB will be raised by company itself, and 143,32 million RMB will come from loan.
(5) The construction period will be 28 months, from October 2000 to February 2003. 

5. The financial assessment indicator of the project
The internal financial earnings yield will be 22.47%, the investment payoff will be period 5 years, the investment profit margin will be 18.83%, and the investment profit payments and tax turnover will be 23.99%.

6. Conclusion
Coalbed gas, as a kind of clean energy, is the product of the coal mining during the implementing of the safe production measures. The comprehensive utilization of the gas will not only reduce the greenhouse effect and protect the environment, but also improve the energy structure. This accords with the sustainable strategy. Meanwhile, the comprehensive utilization of the gas can also provide the conditions to adjust industrial structure and to produce employment opportunity. This project will bring well social and economic benefit. We sincerely request the supports and approvals to the construction of the project from the departments in charge.