Producers are motivated to increase investment and output to meet nation's surging demand for gas
China's coalbed methane industry has lagged behind developed countries in the past decade in terms of exploration and development, but industry insiders said the country's surging gas demand and ongoing industry reform will accelerate the sector's commercial development in the coming years.
China's coalbed gas reserves total an estimated 36.8 trillion cubic meters, the third-largest in the world after Russia and Canada, according to the National Energy Administration.
The majority of China's coalbed methane resources lie in the Qinshui Basin of Shanxi province and the Ordos Basin in the Inner Mongolia autonomous region. Together, these two basins contain around one-third of China's total coalbed methane volume and 93 percent of discovered geological reserves.
Commercial-scale coalbed methane production in China started more than a decade ago. Production increased considerably in around 2008, but remains significantly lower than in developed economies such as the United States and Australia.
Chinese oil and gas majors have been actively cooperating with international players to further tap the massive potential of these resources.
For example, China National Petroleum Corp, the nation's largest oil and gas producer by domestic annual output, is working with Royal Dutch Shell and Greka Group.
In 2017, China National Offshore Oil Corp, the country's largest producer of offshore oil and gas, issued a tender inviting domestic and foreign companies to bid for 10 coalbed methane blocks in the Ningxia Hui autonomous region, and Shanxi, Shandong and Anhui provinces, covering 2,173 square kilometers.
High ambitions
These efforts are in accordance with the country's policy to boost underground mining safety, to increase clean energy supply, and to cut greenhouse gas emissions.
By 2020, China plans to have 420 billion cu m of newly added proven coalbed gas reserves and to build two to three large coalbed gas production bases. By that time, annual coalbed methane output is expected to reach 24 billion cu m, accounting for 13 percent of the country's natural gas production, according to the National Energy Administration
After years of development, China's coalbed gas industry is now entering a fast track, with mature drilling technology and infrastructure construction, said analysts.
Figures from Bloomberg New Energy Finance showed that China produced more than 9 billion cu m of coalbed methane in 2017.
According to Na Min, a senior analyst for oil and gas at Bloomberg NEF, the country's coalbed methane production capacity needs to almost triple by 2020 to meet the government's 24 billion cu m annual production target, as set in the 13th Five-Year Plan (2016-20).
"The prospects for coalbed methane in China are bright, as the country is encouraging the consumption of natural gas to replace coal in a bid to fight pollution, and gas demand growth in northern cities will mean sales opportunities for coalbed methane producers," Na said.
According to an industry forecast from Allied Market Research, high exploration and extraction rates in emerging countries, including China, will drive market growth until 2023. It estimated China's coalbed methane sector will grow at a maximum average rate of 11.6 percent annually in terms of the output value.
China's lower coalbed methane output is not the result of a smaller development scale compared with the US and Australia, but the result of very low single-well gas production rates, according to a report by Chris Carpenter for the Journal of Petroleum Technology.