Coalbed Methane Production!

Transcription

1 Coalbed Methane Production INTERNATIONAL STANDARD RESOURCES (0091.HK) Suzhou City, Anhui Suzhou City is approximately 500km northwest of Shanghai, with its landscape defined by flatlands and a river channel running through the city from west to east, leading all the way to Hung-tse Lake located just north of Nanjing. Traditionally an agricultural city, Suzhou City is fast-transforming itself into a strategic industrial location. CBM Extraction Facility The pumpjack (on the left) is the cornerstone of any scalable CBM exploitation exercise. By pumping out underground water, pressurized CBM is released. On 25 October 2014, International Standard Resources Holdings Limited (ISR) invited a group of independent analysts from Hong Kong to visit the company s coalbed methane (CBM) extraction facilities in Suzhou City. The technical insights allowed the analysts to assess ISR s CBM project objectively, from production to consumption in forming a complete business model. International Standard Resources Holdings Limited (ISR) is a listed company in Hong Kong, with Hong Kong Exchange stock code ISR mainly engages in CBM production business in Anhui Province, China. Major contractual partners include CNOOC, ChinaCoal, and China United CBM.

2 INTERNATIONAL STANDARD RESOURCES (0091.HK) With 1.5 billion m 3 of CBM reserve certified in June 2014 by PRC Ministry of Land & Resources ( 國 土 資 源 部 ), ISR is currently operating 12 extraction test-sites in Suzhou City. An exploitation proposal is in preparation for submission to the Central Government (for the compete project background and execution timeline, please refer the 2014 Project Report). The drill-depth at these test-sites varies from 680-1,050 metres, with effective operational radius at approximately 150 metres. The use of vertical drilling technique allows each test site to produce over 1,000m 3 of CBM per day at steady rate. Due to the nearpipeline-quality characteristic of CBM (over 90% methane, CH4, at extraction), CBM can be utilized directly and cleanly without the complication of traditional refining. CBM can be transported in form of compressed natural gas (CNG) or liquefied natural gas (LNG), and are applied accordingly by logistical requirement in terms of distance. At 300:1 compression ratio, CNG is optimized for localized transport application up to 250km. LNG on the other hand, at 600:1 compression ratio, is economically viable for extended delivery range up to 800km by use of traditional tank trucks. Due to the strong local demand in Suzhou City and from other populous areas in the region, ISR believes that the CNG application, which has a lower production cost compared to LNG, is preferable. Gas pipeline CBM Burning at ISR Test-Site CLG11V-01 CBM is called unconventional gas due to the special techniques required for its extraction. The chemical composition however, being mostly methane, is essentially natural gas in traditional sense. can also be built to convey CBM directly to high volume industrial users. The cost of pipelinebuilding ranges from RMB thousand/km depends on specifications. Parameter Control Individual pumpjacks are remotely monitored, with operational parameters adjustable at ISR s data centre in Beijing. At 300:1 compression ratio, CNG is optimized for localized transport applications up to 250km.

3 INTERNATIONAL STANDARD RESOURCES (0091.HK) Test-site CLG09V-04 Independent analysts and ISR Head of Investor Relations Mr. Charles Chau visited one of the test-sites with Canada Can-Elite Energy, a wholly subsidiary of ISR operating in Anhui Province. The continuous burning of CBM at test-sites is part of the certification process. With vertical drilling, the output rate of 1,000 cubic metres per day is an indicator of satisfactory gas pressure at the intended drilldepth. Combined, over 1 million cubic metres of CBM have been burned at various ISR test-sites for the purpose of such technical confirmation. At retail value of RMB 4.38 per cubic metre, the development overhead of CBM exploitation cannot be understated. At actual production phase, the use of horizontal drilling and hydraulic fracturing can be applied. Similar to vertical drilling, horizontal drilling first reaches an ideal depth vertically where a targeted coalbed can be reached. From there, horizontal drilling can be carried out in multiple direction deep into the coal seam to substantially increase CBM yield from a single gas-well. While the application of horizontal drilling is technically advanced (thus more costly) compared to vertically drilling, such approach is proven to be economical and highly effective. Precision Digital Sensors CBM output at test-sites are measured digitally. Data pool included total volume, rate of flow, pressure, and temperature.

4 INTERNATIONAL STANDARD RESOURCES (0091.HK) Thanks to the chemical purity of CBM, CNG can be derived from a relatively simple industrial process near the point of extraction. While there are a number of existing CNG demand applications including domestic home use, the direct consumptions by taxi fleets are probably the most visible to the general public. The PRC Central Government, through NDRC, has priced CNG at RMB 4.38 (as of October 2014), a level substantially lower (around 40% cheaper) than regular petrol for vehicle use. Additionally, the cost to convert a conventional petrol-driven taxi into a NGV (natural gas vehicle) is merely RMB 4,000. For a typical taxi with regular tank size at 20m 3, the CNG-conversion literally pays For a typical taxi with regular tank size at 20m 3, the CNGconversion literally pays for itself upon 2 months of daily refill. for itself upon 2 months of daily refill. Therefore, a majority of taxi fleet flocked for the conversion and created substantial demand for CNG, while supply remained limited. As of year 2013, China ranked no.2 in the world with 3.23 million NGVs in operation. CNG Refill Station The number of CNG refill stations in Suzhou City, and largely elsewhere in China, is very much limited by the supply level of natural gas, which is in shortage persistently. Converted NGV A typical CNG-converted taxi refilling at the gas station. The substantial price discrepancy between CNG and petrol has driven the number of NGVs to record level nationwide.

5 INTERNATIONAL STANDARD RESOURCES (0091.HK) Contact Information: International Standard Resources Holdings Ltd. 標 準 資 源 控 股 有 限 公 司 HKEx Stock Code: 0091 Web: Tel: Fax: Post: Unit E, 29th Floor Tower B, Billion Centre 1 Wang Kwong Road Kowloon Bay, Hong Kong Independent analysts from Hong Kong took the opportunities to inspect ISR s on-site facilities at close range. The sheer size of the Contract Area ( km 2 ) will be exploited in multiple phases until year 2038 as granted by the Production Sharing Contract signed with China United CBM Corp., a subsidiary of CNOOC and ChinaCoal at 70% and 30% stake respectively. A number of on-site video footages can be viewed at the following web address: Charles Chau 周 世 豪 Head of Investor Relations [email protected]