Shanxi tightens coalbed methane mining oversight

The Shanxi provincial government is toughening up in its management of coalbed methane mining rights to ensure licenses go to capable parties, in order to boost exploration and output.

Coalbed methane (CBM) is a form of natural gas extracted from coal beds.

The exploration rights for new blocks under contracts are valid for three years and three months, with the final three months incorporating an assessment period. If the enterprises fail to invest sufficient capital into the exploration, as stipulated in the contracts, their registered coalbed methane blocks will be reduced proportionally.

The exploration rights will be canceled altogether if the actual investment is less than 30 percent of the stipulated amount.

With years of accumulated tests and experience, the new rules and regulations are largely finalized, according to Lian Bipeng, director of the coalbed methane division of the Shanxi Provincial Natural Resources Department.

"Canceling mining rights is not an aim but only a means to an end. The purpose of such policies is to better allocate resources under market mechanisms, allowing more capable parties to explore and exploit coalbed methane," he said. If the coalbed methane blocks are located in restricted areas, such as those protected for environmental or cultural reasons, the mining rights will be deducted or invalidated.

For existing exploration rights holders, if they fail to fulfill the specified minimum capital input requirements for exploration as per national mineral resources laws, the sizes of the registered coalbed methane blocks will be scaled down proportionally every two years.

"It will be difficult for mining rights holders to register coalbed methane blocks but not make actual moves to prospect and extract the resources," said Lian.

"If the mining rights are canceled, the CBM blocks will be launched to the market for registration."

According to statistics from the local government, at the end of 2015, about 88 percent of total proven coalbed methane reserves in China were in Shanxi, amounting to 578.4 billion cubic meters. At in the end of 2017, that figure rose to 667.5 billion cu m.

Yet, nearly 90 percent of existing mining rights are in the hands of a few State-owned companies.

Experts said the province's new moves will promote coalbed methane exploitation, improve energy security, and help to protect the environment.

It is a positive step that Shanxi is adopting such policies, as it will facilitate the circulation of coalbed methane mining rights, and decrease the proportion of idling resources, said Zhang Sui'an, professor at China University of Petroleum, Beijing.

The exploration and exploitation of coalbed methane helps to increase the supply of natural gas, he said, adding its use also helps to upgrade China's energy mix, reduce greenhouse gas emissions, and protect the environment, because coalbed methane is a clean energy source.

However, Zhang noted: "It is risky for even large-scale companies to invest in coalbed methane operations, because it requires a large amount of capital, equipment, technologies, and personnel, while it is very difficult for companies to get loans from the banks due to the long time span involved."

He suggested the mining rights should be licensed to companies capable of developing CBM, and the authorities should take initiations so that it will become easier for companies to raise fund for CBM investment.

Wang Lijie, retired president with the School of Management of China University of Mining and Technology, Beijing, said such measures also provide an alternative to deal with the probable contradictions between mining rights of CBM and coal, because the two resources often co-exist.