Wednesday, August 24, 2011

China has been forced to dig deep to meet its energy needs

It is hard to think of more awkward country in which to drill for gas than the craggy, creviced hillsides that rise up from the banks of China's turbid Yellow River in the northern province of Shanxi, the heart of China's northern coal belt.

So steep are the sides of the valleys that local people are forced to tunnel their houses into the crumbly orange rock, sealing up the arch-shaped voids with neatly fitting windows and doors. Outside, crops grow on narrow terraces that skirt sheer-sided ridges and ravines.

But modern China's thirst for hydrocarbons is not to be deterred by mere geography, and pressure is increasing to develop additional homegrown gas reserves to help meet a newly urbanising country's insatiable demand for energy.

Among the energy targets in China's 12th Five Year Plan, released this year, is a scheme to significantly boost production of coalbed methane (CBM) which is found not in pockets, like natural gas, but actually absorbed into the coal at a molecular level.

Fortune Oil, a China-focused oil and gas explorer listed in London, is among a small clutch of foreign companies hoping to profit from a coming expansion in CBM production, which is being backed at central government level.

Although final targets have yet to be publicly confirmed, industry analysts say China aims to increase CBM production tenfold to 10bn cubic metres a year by 2015, a target that some describe as "very aggressive". more