Sichuan DKT Energy Technology Co., Ltd.( A subsidiary of Hydrexia (China))

　　In the September 26, 2011 issue of the Coal Section of China Electric Power News, titled “Coalbed Methane Utilization to Reach 14 Billion Cubic Meters in the Next Five Years” (reported by Li Qingzhen), the latest developments in the exploration and development of coalbed methane in China were highlighted. The article also introduced our company’s technology for concentrating firedamp and affirmed its advanced nature and reliability. The specific content of the report is as follows:

　　“The ‘12th Five-Year Plan’ for the Development and Utilization of Coalbed Methane, currently being drafted by the National Energy Administration, sets a target of achieving a total coalbed methane production of 21 billion cubic meters by 2015, with 9 billion cubic meters to be produced through surface extraction and 12 billion cubic meters through underground extraction.” Zhang Tiegang, an academician of the Chinese Academy of Engineering and a professor at Henan Polytechnic University, said in an interview with Weekly Energy Watch that over the next five years, coalbed methane utilization is expected to reach 14 billion cubic meters—more than double the target set in the ‘11th Five-Year Plan.’

　　China’s coalbed methane development has been slow over the past five years.

　　“As a clean energy source, coalbed methane extraction offers substantial economic benefits; however, for various reasons, its development remains at an early stage,” noted Lan Zhihuai, Chairman of Sichuan Dacote Energy Technology Co., Ltd., in an interview with Weekly Energy Watch.

　　Wan Xuezhi, an energy industry researcher at CIC Consulting, said in an interview with Weekly Energy Watch that in recent years China’s coalbed methane sector has benefited from a range of favorable policy measures. Nevertheless, progress in coalbed methane development remains slow, owing to both technical and institutional constraints.

　　According to available information, several Chinese enterprises have engaged in independent innovation in coalbed methane extraction technologies and conducted numerous field trials. For instance, Sichuan Dacote Energy Technology Co., Ltd. has independently developed a pressure swing adsorption technology for extracting methane from low-concentration coalbed methane while suppressing explosions and removing oxygen, thereby filling a domestic gap. This technological achievement has reached an internationally leading level and has been officially evaluated and certified by the China Coal Industry Association.

　　Fiscal subsidy policies will be significantly increased.

　　“The ‘12th Five-Year Plan for the Development and Utilization of Coalbed Methane’ is expected to increase subsidies for coalbed methane extraction companies from RMB 0.2 per cubic meter to RMB 0.4 per cubic meter, and for the first time proposes the establishment of an exploration risk fund,” Wan Lizhi told reporters. He added that the monopolistic structure has been significantly optimized, breaking the China National Coal Association’s monopoly and bringing in numerous players such as PetroChina, Sinopec, CNOOC, and Henan Coalbed Methane Co., Ltd., thereby further fostering a more competitive landscape in the coalbed methane industry. The establishment of the exploration risk fund is just as important as the widespread adoption of development and utilization measures, and will greatly boost the growth of the coalbed methane sector.

　　According to informed sources, the yet-to-be-released “Revitalization and Development Plan for the New Energy Industry” is currently under formulation, and the coalbed methane industry will also be incorporated into it. The plan will designate Liang Ge’s newly established coalbed methane industrialization base—the southern Qinshui Basin in Shanxi Province and the Ordos Basin—as a key development area.

　　The industry scale will double within five years.

　　The coalbed methane market has enormous growth potential; with the emergence of gas shortages and the imminent rollout of favorable national policies, the development and utilization of coalbed methane will continue to gain momentum.

　　Analysts point out that the coalbed methane industry is poised to double in size over the next five years. Currently, China’s combined underground and surface coalbed methane production stands at 7.5 billion cubic meters, accounting for less than 10% of total natural gas consumption. However, projections indicate a projected natural gas shortfall of 160 billion cubic meters over the next five years; if half of this gap were met through coalbed methane substitution—and factoring in the broader value chain it would stimulate—the resulting market potential could exceed tenfold.

　　China has pledged to the world that by 2020, carbon dioxide emissions per unit of GDP will be reduced by 40–45% compared with 2005 levels. As an unconventional natural gas, coalbed methane produces only one-fortieth the pollution of oil and one-eight-hundredth the pollution of coal when burned, making it an indispensable contributor to this commitment.

　　“To fulfill its emissions-reduction commitments, the Chinese government has set a target to increase natural-gas consumption from 105.8 billion cubic meters in 2010 to 400 billion cubic meters by 2020, accounting for more than 12% of total energy consumption. This substantial shortfall will need to be partly bridged by unconventional gas resources such as coal-bed methane and shale gas. Based on this projection, China’s coal-bed-methane production is expected to approach or reach 50 billion cubic meters by 2020,” said Sun Maoyuan. “If we assume that expanding capacity by 100 million cubic meters requires an investment of RMB 400 million, then increasing capacity to 50 billion cubic meters would necessitate RMB 200 billion in capital expenditure. Additional investments of another RMB 200 billion would be required for exploration and technological upgrading, while further outlays of RMB 600 billion would be needed for subsequent pipeline construction and related infrastructure projects. Thus, the total investment required to achieve the aforementioned production target would exceed RMB 1 trillion.”

　　“Wherever there is coal, there is coalbed methane. Compared with natural gas, coalbed methane is poised to become a key clean energy source of the future, and we are now at a critical inflection point—shifting from low growth to rapid expansion,” Lan Zhihuai told Weekly Energy Watch. He added that Sichuan Dacote Energy Technology Co., Ltd. has already recognized this overarching trend in the development of coalbed methane.

　　The vast potential for developing coalbed methane presents exceptional investment opportunities and significant room for growth. Sichuan Dacote Energy Technology Co., Ltd., a high-tech enterprise specializing in gas separation and purification technologies—including coalbed methane separation, enrichment, and explosion-suppression—aims to capture a share of this lucrative coalbed methane industry.