1. The PROJECT:
In China, TPC will have three main products: coalbed methane (CBM), electricity, and carbon credits.  The markets for CBM and electricity in China are large and growing rapidly; and by satisfying these markets in an environmentally-friendly way can generate a large supply of carbon credits.

Over the last quarter century, the Chinese economy has performed much better than the world average and also than most developed countries.  This has resulted in China becoming the world's second largest consumer of energy products, after the United States, with about consumption of 1.4 billion tonnes of oil-equivalent in 2005 (approximately one tonne per person).

However, the composition of energy production is unbalanced. China's energy industry is dominated by coal, which accounted for more than 65 percent of total energy production during 2000-05.  By contrast, natural gas amounted to only 2.4 percent of total primary energy production.  The Government has set a target for the share of natural gas in total energy production in 2010 of eight percent.  Along with the serious environmental issue caused by the heavy reliance on coal, scarcity of energy is another important issue.  It has the potential to act as a serious constraint on economic development, since the country's economic growth is mainly built on an economic structure characterized by high-energy consumption and low energy-efficiency.

China possesses the world's third largest reserves of CBM.  The total volume of CBM resources at depth 300-2,000 meters in onshore bituminous and anthracite coal fields is almost 32 trillion cubic meters, of which 10 trillion cubic meters can be exploited.

It is TPC's intention to apply the company's extensive resources and capabilities in CBM development to activities in developing countries that have significant CBM potential and also offer significant opportunities for carbon emission reduction via mine emission reduction and the replacement of coal-generated electricity with methane-generated electricity. 

TPC regards China as the market with most potential for CBM development.  It is conducting promising negotiations with two national petroleum companies (Petro China and Sinopec), and has won active support from key industry players in the Xinjiang Autonomous Region.

TPC's strategy in China is to create value and cash flow by exploiting oil and gas reserves.  The company will rely on its experience, expertise, contacts and creative abilities to identify, evaluate, acquire, and implement profitable projects.  Since value and cash flow generation with minimal risk is the goal, multi-faceted projects will be considered.

2. THE PRODUCT
a. Coalbed Methane
Coalbed methane (CBM) is a type of non-conventional natural gas.  It contains virtually 100 percent methane (CH4) and is often sourced in the shallow depths of coal seams with high water pressure.  It is generated either from a biological process involving microbial action or from a thermal process associated with increasing heat as the depth of the coal seam increases.  Unlike conventional energy sources such as coal and oil, CBM is a clean-burning fuel.  It can be directly used as both household and industry fuel.

Although it is sold and used in the same way, the production of CBM is totally different from that of natural gas.  Since CBM travels with ground water in coal seams, its extraction involves pumping water from the seam in order to reduce the water pressure that holds gas in the seam.  CBM has very low solubility in water and readily separates as pressure decreases, allowing it to be piped out of the well separately from the water.  The movement of water from the coal seam to the well bore encourages gas migration toward the well.  A successful well can produce a steady flow of CBM for about 40 years.

CBM development is most advanced in the United States, where production had reached 38 billion cubic meters in 2000.  The utilization rate of drained CBM has reached 80 percent.

In China, the primary technique used to exploit CBM is underground extraction.  However, compared with developed countries, CBM extraction in China is relative backward.  TPC will cooperate with RAM Energy to explore for CBM in China.  The competitive advantage of the team lies in its use of the most advanced CBM identification and extraction technologies and the in-depth experience of its personnel, a combination that guarantees high and growing production of CBM.

b. Electricity Generation
CBM can be used to generate electricity.  In China, 76 percent of electricity is generated from coal and oil, while nuclear and hydro generate five percent and 19 percent respectively.  The use of CBM as a fuel could lead to a restructuring of electricity generation and make a substantial contribution toward meeting China's rapidly growing demand for electricity.

One cubic meter of CBM generates about 3.2 kilowatts of electricity.  The price of electricity in China, which is strongly influenced by regional governments, depends on both the time and manner of its consumption.  Prices of electricity are divided into selling price and grid price according to the current policies on electricity charges.  For power generation enterprises, the prices of electricity relate directly to their profits.  In 2004, the average selling price of electricity was RMB 0.416 yuan/kWh while the average national selling price of industrial electricity was RMB 0.393 yuan/kWh and the average commercial selling price of electricity was RMB 0.782 yuan/kWh.  In 2004, the average national grid price of electricity was RMB 0.29 yuan/kWh.  Coal prices in China's domestic market have been following a strongly rising trend.  In 2004, the comprehensive selling price of commercial coal was RMB 206 yuan/t while the price of power coal for key contracts was RMB 161 yuan/t, an increase of RMB33 yuan/t and RMB23 yuan/t respectively compared with the corresponding rates in 2003.  In 2004, the average consumer price of natural gas was RMB 1.6 yuan/m3 and the average price of industrial natural gas was RMB 1.9 yuan/m3.  The price of CMM for civil and industrial consumption is much lower than that of natural gas in China.

CBM can be converted into electricity by generation plants such as reciprocating engines or gas turbines.  In order to improve generating efficiency, a combined cycle generation system may be the optimal choice.  One well provides enough CBM to power a 2,000-kilowatts power plants, and TPC anticipates that, at full production, each field will have about 20 such plants.

c. Carbon Credits
Greenhouse gases include carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, HFCs, and PFCs.  The average world temperature has risen substantially over the past century, mainly because of increasing greenhouse gases.  Released methane, a major kind of greenhouse gas, produces about 18 percent of all greenhouse gas.

The Kyoto Protocol is an agreement made under the United Nations Framework Convention on Climate Change (UNFCCC).  Under that agreement, which came into force on February 16, 2005, the industrialized countries commit to reduce their collective emissions of greenhouse gases by 5.2 percent compared with the level in 1990.  The aim is to lower overall emissions of six different greenhouse gases.  The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment to invest in emission-reducing projects in developing countries.

Under the CDM, a developed country can undertake a greenhouse gas (GHG) reduction project in a developing country where the cost of GHG reduction project activities is usually much lower than in the home country.  The developed country would be given credits (Carbon Credits) for meeting its emission reduction targets, while the developing country would receive the capital and clean technology to implement the project.

The CBM Market
China possesses the world's third largest reserves of CBM.  The total volume of CBM resources at depth 300-2,000 meters in onshore bituminous and anthracite coal fields is about 31 trillion cubic meters, of which 10 trillion cubic meters can be exploited (China profile).

Approximately 56 percent of China's CBM resources are located in the northern part of the country.  The northwestern, southern and northeastern regions contain 28 percent, 14 percent and one percent, respectively (NDRC).  As is shown in the map below, China's CBM resources are spread over 24 provinces, municipalities or autonomous regions, including Xinjiang, Shanxi, Henan, Inner Mongolia and Shaanxi (CUCBM).

CBM is mainly exploited in Ordos in Inner Mongolia, Qinshui in Shanxi and the Junggar and Tuha Basins in Xinjiang.  In approximately 14 basins, total CBM resources exceed 500 billion cubic meters.  Among these, nine basins, such as the Ordos, Qinshui, Tuha and Junggar basins, contain more than one trillion cubic meters.

Many foreign investors have entered the CBM industry in China because of the country's huge potential market for clean energy.  For foreign investors, the joint operating model has been preferred.  Initially, most foreign investors formed partnerships with China United Coal Bed Methane (CUCBM), because the latter had a monopoly of the right to cooperate with foreign companies to explore and develop CMM/CBM resources.  Since September 2007, China National Petroleum Corporation and Sinopec also have the right to cooperate with foreign firms to run CMM/CBM projects.  TPC will cooperate with PetroChina and Sinopec to develop CBM in Xingjiang and Shanxi provinces.

The Geographical Distribution of CBM in China
& TPC Project Target Areas