Foreign investment

China boasts 37 trillion cubic meters of CBM reserves, the third largest in the world, after Russia and Canada. No wonder then, an increasing number of foreign companies have the huge Chinese market in their sights.

This month China United Coalbed Methane signed a contract with Hong Kong-based Longmen Hui Cheng Investment Ltd to develop CBM in Northwest China's Shaanxi Province. The two companies will jointly develop the Hancheng block, in Hancheng City. The block covers 460.93 square kilometers and has CBM reserves of 404.87 billion cubic meters, said a company statement.

"It was the 28th such contract that we inked with overseas investors since 1996," said Sun. "We have worked with a number of foreign companies on exploration, mining and processing of CBM, including those from the US, Canada and Australia."

Several foreign companies have been seeking opportunities in China's CBM sector, including Royal Dutch Shell PLC, US-based Asian American Gas and Canada's Ivana Ventures, he said.

Asian American Gas (AAGI), formed by a number of US energy companies and financial institutions, has been working in China's CBM market for over 10 years.

"AAGI has signed two product-sharing contracts (PSC) with China United Coalbed Methane for Panzhuang and Mabi concessions in southern Qinshui Basin of Shanxi Province, the most promising CBM basin in China," said Stephen Zou, president and CEO of AAGI. The company's CBM well in its Panzhuang project produces about 40,000 cubic meters per day, the highest in China, he added.

"Having gained valuable experience working on CBM in China, AAGI and Chinese CBM technical service company Orion have jointly developed the multilateral Drilling (MLD) CBM well in Panzhuang, which has 40 times the productivity of conventional vertical CBM wells in the country," said Zou.

The success of the MLD technology in Panzhuang has triggered enormous enthusiasm in starting a commercial CBM industry in China, he said. "The aim is to increase our production to 200 million cubic meters in 2008," said Zou.

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