Coal bed methane to remain viable in long term

Prospects for the country's natural gas market remain strong in long term, despite the economic slowdown, according to the head of one of China's leading developers of unconventional gas resources.

Pierce Li is co-CEO and president of AAG Energy Holdings Ltd, an independent producer of coal bed methane, or CBM, which just raised $363 million in a Hong Kong flotation.

"While domestic demand for natural gas will be affected by the temporary economic slump to an extent, we are confident the Chinese economy will warm up in future," he said.

Through a series of production-sharing contracts, AAG holds majors shares in two gas concessions in the Qinshui Basin in Shanxi province: 80 percent of the Panzhuang concession (spanning 67.4 square kilometers) and 70 percent of the Mabi concession (898.2 sq km).

Panzhuang began production in 2007 and is considered the most commercially advanced Sino-foreign-owned CBM asset in China, and remains the only one to have received full development plan approval. At the end of last year its daily output hit a record 1.4 million cubic meters.

AAG started pilot production of Mabi in the first half of 2010, and in November 2013 received preliminary approval for its first phase of development from the National Development and Reform Commission, with production target of 1 billion cu m per year, starting in 2016.

An International Energy Agency report on coal mine methane in China, published in 2008, revealed China has seven geographic regions with different concentrations. Shanxi and Shaanxi provinces, and Inner Mongolia autonomous region contain the richest sources, with the Qinshui Basin considered the best single area.

China has prioritized the development of unconventional energy to reduce its reliance on coal.