Fortune Oil is to tap some of China’s vast resources of methane gas from coal mines, increasing the country’s gas supply while cutting greenhouse gas emissions.
The Hong Kong-based oil and gas company, which is listed in London, will own half of a joint venture in Shanxi province with China United Shanxi CBM Company.
The aim is to capture methane from coal beds and coal mines, and improve the gas distribution networks in the area so the fuel can be used.
China United Shanxi CBM Company was established by Shanxi Energy Industries Group, an arm of the provincial government, and China United Coalbed Methane Corporation, the principal national government body for the development of the country’s coal bed methane resources.
Most of the methane that comes from unexploited coal seams and from operational coal mines leaks into the air. The gas can be dangerous in coal mines, causing explosions. When it reaches the atmosphere, the methane acts as a potent greenhouse gas.
Using it as a fuel produces carbon dioxide, a less powerful greenhouse gas, and displaces the use of fossil fuels such as oil or coal, meaning its capture and use has a double environmental benefit. The production of the gas is increasing as more coal mines remove the gas to prevent explosions.
But the gas markets and infrastructure in Shanxi Province are not yet sufficiently developed to use methane as a fuel, in spite of China’s rising demand for energy. One of the top priorities for the joint venture will be to improve the gas infrastructure in the area with new pipelines and city gas networks throughout Shanxi province.
Fortune Oil will invest Rmb20.9m ($2.7m) initially in the joint venture, which is the first time a foreign company has been permitted to form a partnership with the government in a coal bed methane venture.
Shanxi Energy Industries Group will hold 37.2 per cent and China United Coal Bed Methane Corporation will hold 9.2 per cent.
Fortune Oil said the joint venture had received the approval of the necessary government bodies.
Qian Benyuan, chairman of Fortune Oil, said: “This is a very powerful combination of companies, bringing to bear the necessary industry experience, funding and government support.” Fortune Oil was already the only foreign company distributing gas in the region, through joint ventures with the provincial gas pipeline company, Shanxi Gas Company.
Shares in Fortune Oil closed on Friday at 6.3p, giving the company a market capitalisation of about £116m ($233m).