Potential Coal Mine Methane Project Briefing: Jincheng CMA

Background

The Jincheng Coal Mining Administration is located a few kilometers outside of Jincheng City, which lies in the southeastern Shanxi Province. The coal mining administration, established in 1958, operates four active coal mines and a new one, the Shiho, is under construction. The CMA also owns and operates a cement plant, a construction company, and a machine repair workshop.

Occurrence of Gassy Mining Conditions

Total design capacity for the mine operated by the CMA is 13 million tons per annum (Mtpa). Anthracite coal is produced from the mine as seven different products differentiated by grade and size class. The four active coal mines are not gassy, but a new mine, the Shiho, will be in operation within 2 years and is expected to be gassy. Three minable coal seams comprise the producible reserves. Gas saturation of the seams is greater that 90 per cent and ranges up to 107%, averaging around 16 m3/t. In general, the conditions for CBM production are favorable. . 

Gas Drainage

As the surface facilities of the Shiho mine are constructed, the coal reserves are being developed underground. In order to ensure safe working conditions, two temporary gas drainage plants have been installed. Presently, the gas drainage rate is 30 m3/min at each of the plants. In anticipation of increased gas liberation, the CMA is constructing two new gas drainage plants. During the early stages of mining, management expects gas to be released at a rate of up to 200 m3/min by 2001; but, the new plants are designed to accommodate an increase ranging up to 400 m3/min expected by 2007. Presently, the mine uses gob drainage galleries as the primary method of controlling emissions into the workings. As an alternative to driving the galleries, mine management is considering using directional drilling equipment to optimize placement of drainage boreholes. 

The Jincheng CMA has entered a joint venture agreement with GeoMet Corporation. The joint venture, operating under the name of Sino-American Energy, drilled and completed seven vertical wells in virgin coal at the Panzhuang mine's coal reserve field. (It should be noted that there is no mining nearby, except at Shiho). Several of the wells are productive, and a small amount of gas is used, while the remainder is flared or shut-in.

Gas Utilization

The Jincheng CMA uses some of the gas that it produces at Panzhuang or drains at Shiho to produce power. Presently there are two power generation installations. The plant at the Panzhuang facility produces electricity from two 120 kW internal combustion engine generator sets using gas produced from a vertical well. The power generation installation at the Shiho mine uses gas drained from underground and supplied to it from the gas drainage plants. The Shiho installation has 1600 kW capacity installed in a 4x 400 kW internal combustion engine array. Plans are to use the gas that will be supplied by the new gas drainage plants to fuel a 2 x 2MW generation facility. The facility will employ engines built by China South Airplane Engine Corporation. As gas production increases to 200 m3/min in 2001, plans call for installation of a power generation facility with the design capacity of 36 MW.

As mining at Shiho progresses surplus gas will be produced. In addition, the CMA hopes to develop a market that will allow further development of gas resources residing in the virgin coalfields. The Jincheng CMA has considered several options, all of which require outside investment capital. Some options for which they have completed preliminary studies are:

· Supply gas to residents of Jincheng city;
· Use it to fuel vehicles used by the mine, requiring compressing or liquefying the gas (CNG or LNG);
· After needs are met at the Shiho mine and nearby company housing, gas could be supplied to the neighboring cities of Gaoping and Qingsui. This would require that a pipeline be constructed to link a CMA gas production facility to an E-W pipeline that will transport gas from Shanxi to Henan Province. The E-W trunk line construction is under consideration by CUCBM;
· Transport gas to the Changzhi Steel plant located approximately 100 kilometers away;
· Install additional power generation facilities and sell the surplus power to the grid.

The Jincheng CMA has tentatively concluded that power generation may be the best use of the gas. The central government encourages power generation using CBM/CMM, and the CMA hopes that this may give them some leverage when dealing with the regional power grid operating company.

Regional and Local Government Entities: Plans and Preferential Policies 

Provincial and Local governments in Shanxi Province can promulgate policies that could have significant impact on CMM project development. Jincheng City government is responsible for the city and six surrounding counties, which are the home to slightly over two million inhabitants. The gross domestic product of Jincheng City and the surrounding area was 14 billion RMB in 1998. Seventy per cent of the revenue generated in the region is coal-related.

Jincheng City Planning Commission

Any project with a planned capital expenditures budget under 10 million RMB proposed for the region governed by the Jincheng City government must be reviewed and approved by the Jincheng Planning Commission before initial construction is permitted. Jincheng Planning Commission also is responsible for providing project approval recommendations for larger projects to provincial and national planning commissions. The Jincheng Planning Commission is aware of the environmental benefits of substituting recovered CMM gas for coal. Many small coal-fired heating and power generating facilities are located in and around the region governed by Jincheng City and contribute to poor air quality. The commission is in the early stages of promoting clean fuels for residential, commercial, and power generation use. Presently, the regional power demand, 340 MW, is met by purchasing power from the North China Power Network. The Planning Commission has a plan for a 250 MW gas-fired plant that will require development of gas resources and construction of a pipeline from the Jincheng CMA area. The North China Network would manage the 250 MW power facility, but it could be operated by private industry. 

Shanxi Provincial Coal Bureau

Since the move to de-centralize authority over state-owned coal mines, provincial coal bureaus have become more important as policy makers, and overall managers of the local coal industry. The Shanxi Provincial Coal Bureau, in coordination with the Shanxi Provincial Planning commission, is developing preferential policies for the development of CMM and CBM projects. These preferential policies will be aligned with those of the central government and will be directed toward attracting investment from outside of the province. In addition to remedial actions, the Bureau is working to mitigate environmental problems during the planning and development of new coal mines. As an example, new coal mines such as the Shiho mine will not be permitted without some component of the investment being directed toward environmental projects such as CMM recovery and use. 

Presently the provincial government collects about 0.28 RMB/ton of coal produced to finance environmental projects at existing mines. The province has amassed approximately 100 million RMB for this purpose. Funding for a project at a given mine is limited by the amount of funds that mine has contributed. So far funded projects have been ones that have had direct impact on the mines' operations and local environment. The bureau has not received applications for CMM project funding although these projects will qualify.

Jincheng Environmental Protection Agency

The Jincheng CMA monitors air quality as one of its responsibilities, which it says in many instances, is poor throughout much of the region. One of the environmental goals of the region is to meet existing national standards for air quality. The EPA notifies industries that do not adhere to air quality standards and may fine them for lack of compliance. Fines for non-compliance range from 10,000 to 50,000 RMB per incident; but annually, fines imposed by the EPA rarely amount to more than 200,000 RMB. The Provincial government is interested in employing the Clean Development Mechanism to encourage environmentally beneficial projects for the region. In turn, the Jincheng EPA is considering options for a Provincial government-funded demonstration project. The EPA lists the following types of projects among its options: clean coal technology, factory production fueled by clean fuels, comprehensive use of coal wastes, and CMM use.

Taiyuan Coal Gasification Corporation Limited: A Possible Industry Ally

The Comprehensive Coal Utilization Corporation Ltd. owns the Taiyuan Coal Gasification Corporation that was established in 1982 to process coal and gasify it to supply town gas to Taiyuan city. The corporation has 2.68 billion RMB in assets. It owns and operates a coal gasification and delivery system, three coal mines, and several coking facilities. Coal rejects from the processing plant fuel a fluidized bed combustion system that supplies 240 MW of power. The coal gasification process yields 200 million m3 of gas and the coking plants supply an additional 600 million m3 and 720,000 tons of coke per year. The corporation operates the town gas system, which supplies gas to 340,000 households, or 70% of the Taiyuan population. Town gas is supplied to many commercial, and twenty industrial users.

The Taiyuan Coal Gasification Corporation is interested in supplying the remaining 30% of Taiyuan residences with CMM. It feels that using CMM would be a clean alternative and could help the city achieve its goals for complying with air quality standards. In fact, in 1996, the corporation signed a gas contract with a foreign company that intended to produce CBM. However, this gas supply is yet to materialize. The Taiyuan Coal Gasification Corporation has many years of experience in supplying gas to residential, commercial and industrial customers. Therefore, it could be an important strategic partner for those interested in supplying gas to end-users in a developing CMM market.

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