Companies begin 30-year search for coalbed methane

CNOOC, Ltd will invest US$1.56 billion in a wide search for coalbed methane in China.

Coalbed methane (CBM) is a form of natural gas extracted from coal beds. It refers to methane adsorbed into the solid matrix of the coal. CNOOC, Ltd is a subsidiary of China National Offshore Oil Corporation, the third largest state-owned oil company in China.

CNOOC, Ltd is partnering with China United Coalbed Methane Corporation Ltd, to explore for CBM throughout China over the next five years. The agreement will see the partners explore, develop and produce CBM in China for 30 years.

CNOOC, Ltd said the deal will allow it to develop its clean energy business and work onshore in China.

Under the agreement, exploration will cover a 10,866 sq km area in Anhui, Hebei, Henan, Hubei, Ningxia, Shanxi, Shaanxi, Shandong and Yunnan. Future coalbed methane production from the project would be shared between CNOOC Ltd and China United.

CNOOC, Ltd will take up to 70% of future development and production costs of a CBM field, while China United will take up 30%.

China is investing US$15.7 billion to double CBM output by 2015. It wants CBM to account for 15% of China's total gas production by 2020, up from 5% last year.

China intends to double the share of natural gas in its energy mix by 2015 and reduce the role of coal to lessen pollution and slow greenhouse gas emissions. China will also import more gas, but also aims to boost output from domestic natural gas fields and develop unconventional sources of gas.