A Tentative Plan for CBM Industry Development in Shanxi Province Yi Qinglin Chang Jianglin

A Tentative Plan for CBM Industry Development
in Shanxi Province

Yi Qinglin Chang Jianglin
(Shanxi Provincial Development and Planning Commission,
Taiyuan 030002)

Abstract Coalbed methane is an advantageous resources of Shanxi Province. The development of coalbed methane will be of great economic, social and ecological benefits. Facing the increasingly severe market competition, Shanxi Province must bring into full play its own advantages by large-scale development of CBM industry. The authors display their strategic imaginations and development blueprint including the layout of the pipeline networks and predict the goals for different development stages as well as put forward suggestions for policy preparation. The authors also emphasize that every effort should be made to turn the Province of Shanxi into a “silicon valley” in the development of CBM industry in China.

Foreword
Coalbed methane is the natural gas generating from coal seams. It is of great use either because it is a cleaner energy or because it is an important chemical raw material. Development and utilization of coalbed methane began as early as half century ago. However, it is until the ’70s of this century in the United States that development of coalbed methane as resources took a debut. The more than 2-decade long R&D, exploration and development have produced ideal economic, social and ecological benefits. By now, coalbed methane has become a heated point in new energy development that many countries in the world are wooing.

Data show that the world total coalbed methane resources in the shallow strata within the depth of 2000m is about 240 trillion m3 while coalbed methane in China is about 30 ~ 35 trillion m3, the world’s third after Russia and Canada and about three time that of the U.S.A. It is notable that the coalbed methane resources in Shanxi Province proper is about the same quantity as that of the U.S.A.

For a long time in the past, Shanxi Province has been entirely devoted to the production of large quantities of energy to ensure the fast economic development of the nation and earlier realization of the re-doubling of the national economy of China. In face of severe competition under the socialist market economy conditions, Shanxi Province must bring its advantages into full play by nursing its own new industrial sectors and by developing and utilizing clean energy so as to realize a stronger economic development. Development of coalbed methane in Shanxi Province is probably the best choice in this respect.

2. Necessity of coalbed methane industry development in Shanxi Province
It is a well-known fact that the Province of Shanxi has achieved greatly in economic development, improving the living standards of the people as well as in other fields. At the same time, however, many problems remain unsolved. The obvious point is that the comparative advantages in the conventional industries have become less outstanding because of the low economic returns of the extensive economic growth pattern that are always operated on larger scale. Besides, the serious ecological damages and environmental pollution have presented threat to the sustainable development of the economy and society as a whole. Under this context, it becomes more and more important to develop some carefully selected new and high technologies and cultivate some new economic growth areas. As high and new technologies in the new industrial sectors, coalbed methane development deserves the great attention by the Province of Shanxi.

2.1 Coal mining to be decelerated to protect the eco-environment
In Shanxi Province that is rich in mineral resources, the over-intensive mining has resulted in increasingly serious environmental pollution and ecological damages, etc. The development and utilization of coalbed methane can help decelerate the over-intensive coal mining and reduce the methane emission in the course of coal mining. This is undoubtedly helpful to the protection of the eco-environment.

2.2 Speeding up the pace of readjustment of industrial structure
The economy of Shanxi Province mainly relies on the development of resources. Under the socialist economy conditions, the economy of Shanxi is faced with many difficulties. The first is the industrial product structure is mainly based on primary products; the second is there is only one pillar industry and the third is the economy relies heavily on extensive growth pattern. So, it is of urgent importance to identify and cultivate new areas of economic growth and economic development sectors. Coalbed methane stands out brilliantly because of its wider applications and great potentials in development. The utilization of coalbed methane can produce a series of technology intensive chemical products with higher added value. The pillar industrial sectors formed therefrom can promote the development of other relevant industries, hence speeding up the readjustment of industrial structure and upgrading of products.

2.3 Facilitating Shanxi’s enlarged contacts with the outside world
As an in-land province, Shanxi is backward in contacts with outside world. The development of coalbed methane will bring about new opportunities to Shanxi. It is a well-known fact that Shanxi is the state government designated key region for coalbed methane exploration as well as a key region for coalbed methane development and utilization. The state government input into Shanxi for CBM development will also help draw the interests from foreign investors. Coalbed methane development will further widen the areas for economic cooperation with foreign countries and other provinces which is a great impetus to Shanxi Province’s contacts with the outside world and economic development in this Province.

2.4 Speeding up poverty extrication and better-off in poverty stricken areas
Shanxi is a province with underdeveloped economy with comparatively more poverty stricken population. Coalbed methane rich areas in this province are mainly difficulty stricken areas. The CBM development in Shanxi Province will surely foster the local economy hence speeding up the pace of poverty extrication in the poor areas.

2.5 Favorable for safety in coal mines
Coal mine gas is one of the sources of deadly disasters in underground coal mining operation. Great losses in human life and economic loss is caused every year in the coal mining sector of Shanxi Province. Pre-drainage or extraction of coalbed methane in a well planned manner will greatly reduce the methane content in coal seams hence avoiding the occurrence of methane related accidents. This is of great significance to coal mine safety and improved mining economy.

2.6 Adding to cleaner energy and improving energy structure
Coal is the major source of energy of Shanxi Province. The province consumes an annual amount of nearly 100Mt of coal. SO2 and dust resulting therefrom cause very serious pollution to the atmospheric environment. The development of coalbed methane will turn coal burning into gas burning and thus zero emission will be realized.

3. The possibilities of realization of CBM industry
3.1 Shanxi Province is rich in coalbed methane resources
Resources is the material foundations for the formation of a resources based industry. Research and exploration over the recent years show that Shanxi Province is rich in coalbed methane resources that is easy to extract and of higher quality. Preliminary prediction shows that coalbed methane resources in Shanxi in the shallow part strata within the depth of 2000m is totaled at around 10 trillion m3, accounting for one third of the national total. Qinshui area and Hedong coalfield are especially rich in coalbed methane with their reserves of 6.85 trillion m3 and 2.84 trillion m3, respectively. These two coalbed methane bearing areas are all comparable with the famous coalbed methane rich basins called San Juan Basin and Black Warrior Basin in the U.S.A., suitable for large scale commercialized CBM development.

3.2 CBM development and utilization technology is getting mature
3.21 CBM exploration and development technology adapted to the particular conditions in China is improving
The reason why coalbed methane mining has not yet entered into commercial scale development is partly because there is not yet a ready and appropriate technology for use. As a result of the R&D activities by some domestic institutions concerned, a set of CBM extraction and cracking technology adapted to the geological conditions in China has come into being. Experiments with this technology in 12 CBM wells in the exploration areas of Huainan in Anhui Province, Anyang in Henan Province, Liulin in Shanxi Province and Hancheng in Shaanxi Province have all produced optimal result of 100% success. The more than 30 CBM wells under construction in the southern part of Qinshui Basin in Shanxi Province have been proved of over 90% of success and they are now in very smooth process of CBM production. Viewing the present situation, we have generally mastered the surface CBM drainage and extraction technology adapted to the actual conditions in the Province and in this country and the technology concerned is becoming more and more mature. While the underground CBM extraction technology has long been mastered by us and has been widely applied in areas such as Yangquan and Jincheng, etc.

3.2.2 Coalbed methane utilization technology has become mature
With similar composition like that of natural gas, conversion of coalbed methane can refer to the that for natural gas. By far, natural gas chemical processing technology has become mature and it can serve as a reference by the utilization of coalbed methane. Coalbed methane fired power generation technology has been undergoing small scale experiments for accumulation of more experiences and these have also produced successful result in Jincheng Coal Mining Administration in Shanxi.

3.3 Coalbed methane consumption market is ready in the Province and in the peripheral areas
It is predicted on the basis of investigation and analysis that by 2020 the provincial demand for coalbed methane will amount to 7.66 billion m3/a. By 2005, the demand will be about 530 million m3/a and 3.56 billion m3/a by 2010. With the addition of the peripheral areas such as Hebei and Henan as well as the potential fuel gas demands from the provinces and autonomous regions along the route of “western natural gas transmitting to the east” project, coalbed methane produced in Shanxi Province will surely have a very promising market.

3.4 The “Western natural gas transmitting to the east” project and Shaanxi - Beijing natural gas pipeline project create optimal conditions for the development of coalbed methane industry of Shanxi
Gas pipeline network is an important condition for the development of coalbed methane industry. Now, a the Shaanxi - Beijing natural gas pipeline is running through the northern part of Shanxi Province and the “western natural gas transmitting to the eastern part of China” project is to run through the central and southern parts of this province. This project will also connect the Hedong and Qinshui coalbed methane fields. Both said projects will serve as links to connect the economic relations between Shanxi Province and the provinces and cities that they run through, hence promoting the development of coalbed methane industry in Shanxi Province.

3.5 Environment for the development of coalbed methane industry is mature
Mr. Jiang Zemin, Secretary General of the Chinese Communist Party Central Committee, regards the development and utilization of coalbed methane as an industry by saying “Developing coalbed methane industry by relying on technological advancements to benefit the people”. This shows that the central leadership of this country attaches great importance to the development and utilization of coalbed methane. In addition, development of coalbed methane is in conformity with the industrial policy of the nation and the exploration, development and utilization of coalbed methane has been listed in the nation’s development program for the period from the ninth “Five-Year-Plan” through 2010 while the construction of relevant pipeline networks has been listed in the agenda of infrastructure construction. All these are now in the process of implementation. Thirdly, many famous foreign companies have been making their contributions in Shanxi Province and their work has laid sound foundations for making a clear list of the inventories of coalbed methane, developing and utilizing coalbed methane in this province. Fourthly, in the national overall coalbed methane development planning, Shanxi Province has been listed as a key province and Qinshui and Hedong coal fields may well hopefully become important coalbed methane bases of this country. Fifthly, Shanxi Provincial Committee of the Chinese Communist Party and Shanxi Provincial government, both of which forming the highest leadership of the Province, attaches great importance to the development and utilization of coalbed methane and hence listed the exploration, development and utilization of coalbed methane in the provincial overall social and economic development program of the ninth “Five-Year-Plan” planning. For this, Shanxi Provincial Leadership Group and its Office for CBM comprehensive development and utilization has been set up to take up all responsibilities in this respect. Sixthly, many local authorities and enterprises in Shanxi Province are looking forward to utilizing coalbed methane.

4. The overall planning ideas for coalbed methane industry in Shanxi Province
4.1 Basic ideas
Efforts are to be devoted to the development of coalbed methane industry in Shanxi according to the requirements and regularities of socialist market economy for the implementation of sustainable development by taking advantage of the great development of the west part of the nation. The great position and liveliness of Shanxi as the base of energy and heavy chemical industry should be restored again so that Shanxi Province become once again the heat point in the nation’s new energy development and a heat area of the economic development in the middle and western part of this country by intensified R&D activities, fostered exploration and spread application of new technologies.

4.2 Fundamental principles
Coalbed methane development and utilization in Shanxi Province shall be carried out in a market-oriented manner assisted by technological advancement and creation of better investment environment. Different ways should be adopted for both domestic and international cooperation under the principle of mutual benefit so as to promote the harmonized social, economic and eco-environmental development.

4.3 Strategic guidlines
“Coalbed methane resources is the basis, market is the key. Gradual progress is the foundations for stable development”. This is the strategic guidelines for the coalbed methane development and utilization in Shanxi Province. In the actual work tactics, easier and more convenient projects shall be done first so that coalbed methane development and utilization can be promoted starting from large- and medium-sized cities and within the Province to small cities first in- and then outside of the Province. With regard to the sequence of coalbed methane utilization in terms of geographic locations, priority will be given to the central cities where coalbed methane is extracted. Then coalbed methane utilization will be spread to larger cities and finally small cities are to be included for the supply of coalbed methane. Sequence of sectors to utilize coalbed methane is: residential use as fuel gas - industrial fuel gas - chemical industry use - liquefaction.

4.4 Coalbed methane pipeline network planning
A total of 4 coalbed methane pipeline networks are planned with 3 running north - east and 1 running north - south.
The north line: Xingxian County - Shuoxian County - Datong City. The middle line: Liulin - Jie(xiu)Ping(yao) - Taiyuan - Yangquan - Shijiazhuang. The south line: Yuncheng city - Houma city - Jincheng city - Changzhi - Handan. The central north - south line: Yuanping - Taiyuan - Jiexiu - Yuncheng city.
The four coalbed methane pipelines will form a well organized network, forming the shape of a Chinese character of “丰” which means abundance.

4.5 Goals in different stages
4.5.1 During the period 2000 ~ 2005
In exploration, work is to be improved in the explorations in Qinnan and Liulin areas. At the same times, coalbed methane resources exploration in Gujiao and Shouyang areas are to be started.
In pipeline laying, the state trunk pipeline is to be completed, i.e. Liulin - Jie(xiu)Ping(yao) - Hongtong - Linfen - Houma - Jincheng - Jiaozuo pipeline (550km). To go with this trunk line, 2 provincial auxiliary pipelines are to be completed i.e. Jie(xiu)Ping(yao) - Yuci - Taiyuan pipeline (150km) and Jincheng - Changzhi pipeline (95km).
During this stage, natural gas will be supplied to the market because coalbed methane will only account for a very limited amount. The key task in this stage is to do a better job in infrastructure construction.
4.5.2 The period 2006 ~ 2010
In exploration, coalbed methane extraction bases are to be completed in Qinnan and Liulin areas and gas will be supplied to the pipeline network. At the same time, exploration is to be completed in certain sections in Gujiao and Shouyang areas.
In pipeline laying, the following 3 pipelines for CBM supply within Shanxi Province and 2 pipelines for gas supply to neighboring province will be completed. The former 3 pipelines are: Gujiao - Taiyuan pipeline (60km), Shuozhou - Datong pipeline (137km) and Houma - Yuncheng pipeline (80km). The 2 latter pipelines are: Shouyang - Yangquan - Shijiazhuang pipeline and Changzhi - Handan pipeline.
During this period, the overall coalbed methane consumption and conversion capacity of the Province will be bettered with the following places as the key areas such as: Taiyuan, Linfen, Houma, Changzhi, Jincheng and some cities along that line. Sectors of major coalbed methane consumption are mainly fuel gas to urban households, industrial fuel gas for metallurgical industries, construction material production and power generation. At the same time, a good job is to be done in coalbed methane compression and liquefaction to facilitate the consumption by the public transport industry in urban areas. Along with the increase of coalbed methane production, fuel gas supplies to the cities such as Shijiazhuang and Handan in Hebei Province to the east can be increased according to the actual conditions.

4.5.3 During the period 2011 ~ 2020
In exploration work, coalbed methane production bases with high and stable production rate shall be completed in the entire Hedong and the southern part of Qinshui area. While at the same time, coalbed methane production base shall take shape in Gujiao and Shouyang areas.
In pipeline laying, other pipelines shall be laid starting from Taiyuan city and running northward, i.e. the line Taiyuan - Xinzhou - Yuanping (111km) and the pipeline Xingxian - Baode (75km). By then, the backbone coalbed methane pipeline network in Shanxi Province will take shape.
During this period, the entire coalbed methane consumption and conversion capacity of Shanxi Province will be 7.66 billion m3/a. All of the large- and medium-sized cities in Shanxi and towns along the pipelines will be supplied with coalbed methane. In addition to its consumption as fuel gas by urban households, more coalbed methane will be consumed by industrial sectors. Coalbed methane consumption by the fine chemical industries will increase to 1.8 billion m3/a. By that time, the energy structure of Shanxi Province will experience fundamental changes and it is well realistic that the sky may become blue and water clear again in the province of Shanxi.

5. Policy suggestions
As an emerging industry and a morning sun industry, coalbed methane industry needs careful cultivation and support. On the basis of these considerations, the following suggestions are submitted for the preparation of relevant policies:
5.1 With rich coalbed methane resources in this country, the development of coalbed methane industry will undoubtedly present an important impact on the improvement of the national social, economic and environmental development. We suggest that the state government work out as soon as possible an overall coalbed methane development program with Shanxi Province as the key component. This program shall be included in the national development program for the tenth “Five-Year-Plan” for implementation.
5.2 Shanxi Province has very rich coalbed methane resources which is of high quality with great development prospects. Over the recent years, large amount of work has been carried out in Shanxi Province in basic survey and investigations. Experimental development and utilization have also been carried out in a certain range and many experiences have been accumulated as a result. We suggest that the state government make the Province of Shanxi a demonstration region for the development of coalbed methane industry.
5.3 Shanxi Province is just in the starting stage of coalbed methane development and it is natural that it is in bad needs of funds to start several coalbed methane demonstration projects. We suggest that the state government put in appropriate amount of funds in Shanxi Province to increase investment into the construction of infrastructures in this province, implement a preferential loan inclination policy and implement zero-rate to the investment orientation adjustment tax. We also suggest that in taxation, policies for off-shore oil and off-shore natural gas development be referred to to give preferential treatment of income tax reduction or income tax exemption to coalbed methane industry within 5 ~ 10 years after its coming into being.
5.4 In making the overall planning for the long distance natural gas transmission pipelines, careful consideration should also be given to the plans for the construction of coalbed methane pipeline network so that the Shanxi pipeline be merged into the national pipeline network.
5.5 We suggest that Shanxi coalbed methane industry development foundation be set up while considring that the financing be solved out of the cooperation with governments, non-governmental organizations from either within or outside of Shanxi Province and this country. In case of availability of permitting conditions, considerations should also be given to the possibility of going public for financing.
5.6 Every effort should be made to improve the investment environment, work out relevant preferential policies, intensify the technical and economic links with large enterprises and financial institutions from both home and abroad. Cooperation can by in multi-mode either by joint venture or cooperation in other forms to finally speed up the coalbed methane industry development in Shanxi Province.
5.7 In these entire processes, it is very important to identify, select and cultivate special professional from wide possible source and to set up research institutions centering around coalbed methane development and utilization. More attention should be given to the R&D activities on special applied soft-wares, instruments, mechanical equipment and other relevant apparatuses so as to put them into production. It is our lofty goal to turn Shanxi Province into the “Silicon Valley” in coalbed methane development in this country.