China is considering tripling the subsidy given to coalbed methane producers to Yuan 0.6 (10 cents)/cubic meter, the Shanghai Securities Journal reported Friday, citing a government official.

The newspaper quoted Zhang Huangsheng, head of the research institute at the State Administration of Coal Mine Safety, as saying the central government is considering raising the existing subsidy for CBM production from Yuan 0.2/cu m to Yuan 0.6/cu m. In addition, it is also considering increasing the budget for technological innovation to improve coal mine safety from Yuan 3 billion to Yuan 5 billion.

China started giving subsidies to CBM operators in 2007 to help encourage production. There had also been speculation earlier this year of plans by the government to double this subsidy.

Other incentives given to producers include fully refundable value-added tax of 13% and exemption from import tariffs on certain drilling equipment. CBM prices to end-users are also negotiated directly between buyer and seller and are not regulated by the government.

In the first half of this year, CBM production in China totaled 6.43 Bcm, an increase of 22.8% year on year, the report said. Beijing has targeted 30 Bcm/year of production from CBM and surface coalmine methane by 2015.

China's CBM sector is dominated by state companies such as PetroChina, China United Coal Bed Methane, which have signed production sharing contracts with small-cap foreign companies such as Green Dragon Gas, Fortune Oil and Dart Energy. Much of the gas is currently produced from pilot areas within the PSCs and is monetized via nearby existing pipelines or liquefied and trucked to demand centers, including the transport sector.