Guotai Junan Securities: Coalbed methane has become a new driving force for natural gas production increase, with a relatively broad market space in the medium to long term

According to the Zhitong Finance APP, Guosen Securities released a research report stating that coalbed methane is a new type of unconventional natural gas different from coal seam gas. It is similar to coal seam gas in terms of reservoir type, similar to shale gas in terms of natural gas occurrence characteristics, and similar to shale gas and tight gas in terms of development methods, possessing various characteristics of unconventional natural gas. The resource volume of coalbed methane is large, with geological resources of coal seam gas at depths shallower than 2000m in China amounting to approximately 30.05 trillion cubic meters, of which 1500-2000m accounts for 31.5%. At the same time, the development potential is sufficient, making it a new driving force for natural gas production increase, and the continuous deepening of marketization in China's natural gas sector provides a broad market space.

Event: PetroChina announced that its coalbed methane company produced 1.96 billion cubic meters of coalbed methane throughout the year, a year-on-year increase of 90.4%. The company's total annual output reached 4.12 billion cubic meters, a year-on-year increase of 20.96%.

Guosen Securities' main viewpoints are as follows:

1) Coalbed methane is a new type of unconventional natural gas different from coal seam gas

Before the 14th Five-Year Plan, coalbed methane exploration and development in China mainly focused on coal seams shallower than 1200m. Since the 14th Five-Year Plan, China has entered a new stage of large-scale development of deep coalbed methane. During the development of deep coalbed methane, it was found that this type of natural gas differs significantly from traditional coal seam gas. The permeability and porosity of coal seams deeper than 1500 meters are low, and they have long been considered a forbidden zone for coal seam gas development. As the burial depth increases, the temperature and pressure of the coal seam increase, and the high-temperature desorption effect of coal on coalbed methane adsorption exceeds the enhancement effect of pressure increase on adsorption, which causes the proportion of free gas to gradually increase with the increase in burial depth. When the burial depth exceeds the "critical depth" of the coal seam, the content of free methane gas may gradually increase to more than 50% of the total gas content. In 2003, experts defined coalbed methane as the gas generated by coal itself or migrated from other gas sources, coexisting in free and adsorbed states, with a high content of free gas, which can be quickly produced through reservoir modification and can achieve industrialized extraction of hydrocarbon gases.

2) Coalbed methane possesses various characteristics of unconventional natural gas

Coalbed methane is similar to coal seam gas in terms of reservoir type, similar to shale gas in terms of natural gas occurrence characteristics, and similar to shale gas and tight gas in terms of development methods. Compared to traditional coal seam gas, coalbed methane reservoirs are deeper and have better preservation conditions. Coalbed methane at depths exceeding 2000m has five high characteristics: "high pressure, high temperature, high gas content, high saturation, and high free gas." The uniqueness of coalbed methane's geological characteristics determines that its development differs from that of coal seam gas. Coal seam gas, primarily in an adsorbed state, is bound by van der Waals forces and requires long-term large-scale drainage to reduce reservoir pressure below the critical desorption pressure of adsorbed gas for effective development; whereas coalbed methane has a high proportion of free gas, which can be produced through artificial improvement of reservoir connectivity, with free gas being produced under elastic potential energy, and the desorption of adsorbed gas forming a replacement after reservoir pressure is reduced, achieving long-term effective development.

3) Coalbed methane has a large resource volume and sufficient development potential, making it a new driving force for the company's natural gas production increase

The geological resource volume of coal seam gas in China at depths shallower than 2000m is approximately 30.05 trillion cubic meters, of which 1500-2000m accounts for 31.5%. China has not systematically conducted a national-level evaluation of coalbed methane resource volume deeper than 2000m, but according to research results from China University of Mining and Technology, the coalbed methane resource volume deeper than 2000m in China is very rich, with the resource volume of coalbed methane in 29 major basins (groups) at depths greater than 2000m amounting to 40.71 trillion cubic meters The coalbed methane resource amount is far greater than that of our country’s 2000m shallow coal seam gas resources. Daqi Coalbed Methane is a key area for coalbed methane development by PetroChina, focusing on the 8# coal seam at depths greater than 2000m, with two proven deep coalbed methane reserve areas identified, totaling 11.2162 billion cubic meters of proven reserves. Currently, work is accelerating on the reserve evaluation of four other well areas within the block, and the coalbed methane resource amount is expected to increase significantly.

4) The marketization of natural gas in our country is continuously deepening, and the market space for natural gas is relatively broad

Since 2023, the domestic natural gas pricing work has accelerated, further releasing the vitality of the natural gas market. In 2024, the apparent consumption of natural gas in our country is expected to reach 426.1 billion cubic meters, a year-on-year increase of 8%. Natural gas consumption is expected to continue to maintain medium to high-speed growth in 2025. According to the prediction by the Sinopec Economic and Technological Research Institute, the consumption platform for natural gas in our country is 620 billion cubic meters, indicating that the medium to long-term market space for natural gas is relatively broad