) at Donetsk Coal Field - OSTI.GOV

NEDO—1C—00ER03

Feasibility Study on Recovery and Utilization of Coal Mine Gas (CMG) at Donetsk Coal Field

March, 2001

New Energy and Industrial Technology Development Organization Cntrusted to : Japan Coal Energy Center

Feasibility Study on Recovery and Utilization of Coal Mine Gas (CMG) at

Donetsk Coal Field

Entrusted to: Japan Coal Energy Center

Date of Preparation of the Report: March 2001 (242 pages)

This study has been carried out with a view to the execution of a feasibility

study for the Coal Mine Gas Recovery and Utilization Project in the Ukraine

and the establishment of a Joint Implementation Project among Leading

Industrialized Countries under the Kyoto Mechanism.

NEDO—1C—00ER03

Feasibility Study on Recovery and Utilization of Coal Mine Gas (CMG) at Donetsk Coal Field

March, 2001

New Energy and Industrial Technology Development Organization Entrusted to : Japan Coal Energy Center

Foreword

This Report presents the findings of Feasibility Study on Recovery and Utilization of Coal Mine Gas (CMG) at Donetsk Coal Field carried out in fiscal 2000 by the Japan Coal Energy Center (JCOAL) under an assignment from the New Energy and Industrial Technology Development Organization (NEDO).

The 3rd Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COPS) was held in Kyoto in December 1997. At the Conference, the Kyoto Protocol was adopted. For the prevention of global warming due to the emission of greenhouse gases, including primarily carbon dioxide, the industrialized nations agreed to reduce their average emission level by at least 5% during the period from 2008 to 2012 as compared with the 1990 level. The reduction target Japan has accepted is one of 6%. Under the terms of the Kyoto Protocol, the Kyoto Mechanism has been established to provide an element of flexibility in the method of achieving the reduction target. This includes “Joint Implementation” with the industrialized countries, “Clean Development Mechanism” with the developing countries, and “Emissions Trading.” Japan, for her part, is intent on making constructive use of these mechanisms in order to achieve her reduction target.

The Ukraine, the target country of the present study, has a coal mining industry that began to be developed in the 1850s and accounted for 80% of coal production in the whole of Russia in 1912. In the 1970s, production output reached 200 million tons, and this output level was maintained steady thereafter. In the mid-1970s, however, the Soviet government ruled that Ukrainian coal production did not command any priority and reduced its investments on a dramatic scale, with the result that coal output plummeted. Yet, even under these conditions, coal has continued to play a major role in the Ukraine, accounting as it does for approximately 30% of the country’s primary energy.

Amidst the current economic recession, aging and obsolescence are taking a heavy tool on coal mining equipment, with frequent mine accidents, including major disasters such as underground gas explosions. In this context, it may be pointed out that during 1990 - 1994, the incidence of gas explosions and eruptions doubled as compared with the previous five-year period, while the toll of deaths and injuries rose 3.5 fold. In the Donetsk Coal Field where the present study was conducted, the rate of coal mine gas recovery has fallen to an extremely low level (17%) as compared with the industrialized countries, after the collapse of the Ukrainian economy. The fact is that even from the

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safety perspective, coal mine gas recovery is not taking place at an adequate level. In view of this, programs for improving mine safety and the underground working environment have been established in the Ukraine on many occasions and structural reform plans involving the closure of obsolete pits and the development of new promising collieries considered and promoted. These efforts have produced some effect, however small, with coal production at the Donetsk Coal Field showing an increase in 1999 against the previous year.

Yet, the fact remains that sufficient results cannot be hoped for by the Ukraine’s own efforts alone. In particular, the problem is that even though some progress, however small, has been made in the recovery of coal mine gas, the lack of effective gas utilization equipment means that practically almost all of the gas recovered in the Donetsk Coal Field is discharged into the atmosphere.

Apart from the control of global warming, the introduction and dissemination of coal mine gas recovery and utilization equipment and the associated technologies are desirable also from the viewpoint of mine safety and in the interest of consolidating mine management.

The present study has been carried out in order to investigate the feasibility of the coal mine gas recovery and utilization project in the Ukraine and the possibility of execution as a joint implementation project among industrialized countries under the Kyoto Mechanism.

We hereby express our sincere thanks to the Ukrainian Alternative Fuels Center, the Donbass Colliery, the Ukrainian Ministry of Fuel and Energy, the Ministry of Economic Affairs, the Donetsk Coal Research Institute and all organizations concerned for the cooperation and guidance in this study.

March 2001

Masaya Fujimura, Chairman Japan Coal Energy Center

List of Survey Staff Members

Name Position Area of ResponsibilityRyozo Hirai Project Manager Basic Project Parameters (General Manager)HiroakiHirasawa

Survey TeamLeader Basic Project Parameters(Deputy General Manger)

KazuoSasaki

PlanningDepartmentManager

Overall Project Evaluation

ShinkichiNozawa Survey Staff Overall Evaluation of Methane Gas Recovery and

Utilization PotentialAkiraTamari Survey Staff Methane Gas Recovery Planning

Methane Gas Management & Control Planning

KoichiKoizumi

EngineeringDepartmentManager

Planning of Methane Gas DrainingGas Recovery Project as a Whole

TakashiShibata Survey Staff Evaluation of Project’s Economic Viability

Akio Kondo Research Staff Leader Methane Gas Transportation and Storage Planning

KazuhikoFurukawa

Research Staff Leader

Outline of Implementation SiteEvaluation of Methane Gas Resources

AkiraTakahara

Research Staff Cheif

Outline of Implementation SiteEvaluation of Greenhouse Gas Reduction Effect Cost/Benefit Evaluation, Alternative Energy Effect

FumihiroMurakami

Research Staff Leader Planning of Methane Gas Waste Heat Recovery

MasayoshiUchida


Planning of Methane Gas Utilization for Power Generation

NaotakaMinesaki


Outline of Implementation SiteEvaluation of Joint Implementation Potential (Conditions for specific project formulation, possibility of obtaining approval)

KunioMatsumoto


Evaluation of Dissemination PotentialAbility of the Enterprise for Executing the Project

Aiko Izumi Research Staff Plan for Project Finance ProcurementYusakuYokoyama


Outline of Implementation SiteAssessment of Environmental Impact in General

TakanoriOmori


Outline of Implementation SitePower Transmission and Distribution Plan

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Outline

The present study was carried out on the Komsomolets Donbass Colliery (referred to as the Donbass Colliery below) of the Donetsk Coal Field, with the Ukrainian Alternative Fuels Center acting as our counterpart.

The Donbass Colliery went into production in 1980 and represents the most advanced and powerful underground mining operation in the Donetsk Coal Field. The Colliery has a workforce of 5,000 employees and has a production capacity of 2.1 million tons of coal a year. In recent years, it has maintained an output level of 1.2- 1.4 million ton.

Efforts designed to reduce the volume of gas breakouts at the coal face have led to the implementation of drilling to drain off gases. The gas recovered from the drillholes is led to the surface through a pipeline. A certain part of the recovered gas is used as boiler fuel but most of the drained gas is directly released into the atmosphere, with the gas recovery rate (the ratio of recovered gas volume/total breakout volume) being only around 10%. The recovered gas has a low (methane) concentration of only 30%.

The reasons why the gas recovery rate and concentration values are so low are due to factors such as the decline in coal production as the result of economic stagnation, the aging of equipment in consequence of a lack of plant investment and the obsolescence of technology. These factors also account for the large number of gas-related accidents in the Donetsk Coal Field. The degradation of the working environment and the fall in production efficiency associated with the lack of equipment and the aging of the mine put serious strains and constraints on Ukrainian mine management.

The site study conducted at the Donbass Colliery gave an insight into the situation faced by the mine in terms of the underground and surface recovery of mine gases and the state of gas-using equipment and related conditions. While mine gas recovery with drilling is taking place underground the main reasons why it is not possible to achieve adequate boring efficiency are due to the inability to make the necessary drill holes of over 100m length required for longwall mining and the lack of equipment capable of drilling holes of an adequate diameter. A further reason lies in the absence of advanced drilling techniques for drilling holes through the goaf of the overlying seams in the drilling operating carried out while mining the lower seams.

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In terms of the utilization of mine gases, however, it is essential to maintain a steady gas volume and appropriate gas concentration. In terms of ventilation management, it is imperative to prevent gas leaks into the ventilation air stream. In this context, it was found that there is considerable room for improvement in the sealing methods to prevent gas leaks and in the caulking techniques for sealing the bore holes.

Gas recovery and management are critically important for mine safety, and gas draining must be given absolute priority in order to ensure safety. The earliest possible achievement of a stable supply of mine gas to equipment capable of using it, is essential not only for mine safety but also helps to control the emission of greenhouse gases that cause global warming and contributes to the effective use of clean energy. In consequence, this study has made a detailed assessment of the nature of gas-using equipment on the assumption that high-reliability medium-range (300m) boring equipment and gas control technology will be introduced and on an expanding scale to meet these goals.

Forecasts have been made to estimate the gas recovery volumes and concentration that can be achieved with the establishment of these gas recovery and control techniques and on the basis of the future mining plans and present mining conditions at the Donbass Colliery as well as the performance records of the past. The results indicate that under the existing plan the Colliery’s coal output will fall from the 1.5 million ton level of 2000 to 1.4 million tons in 2003. On the basis of this program, however, the total breakout gas recovered from the mine is estimated to reach 133 million m3/year in 2003. It is believed possible that the gas recovery rate and the concentration of the recovered gas may reach 25% and 30%, respectively. These factors have been used as the basic data for the concept design of the gas using equipment and this study examined the type of technology best suited and the possibility of its use on a steady basis without releasing the gas into the atmosphere.

The only way in which the gas can be used under the present normal operational conditions in the Ukraine is to fuel the boilers. Because of the low (methane) concentration of the recovered gas of only 30%, its use as a fuel for automobiles, chemical process plant and gas turbines is not possible. As a boiler fuel, however, the utilization of mine gases has little potential to make any tangible contribution to reducing greenhouse gas emissions because boilers are not operational in the summer so that the mine gas consisting of the greenhouse gas methane has to be released into the atmosphere.

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Under the present Project, it would be possible to utilize the heat in the form of electric power and recovered waste heat and achieve a significant improvement in gas utilization economy as compared with the use of the mine gas to fuel boilers. This would be the result of the use of latest Japanese gas engine technology that permit adequate stable engine operation even at low (methane) concentration.

This Project entails the installation of seven l,710kW capacity gas-operated generators and thus provides the flexibility to accommodate variations in gas volume to ensure highly efficient power generation. The power generating capacity of this complex would be in the region of 11MW. When operated at high output, this might cover 80% of the Colliery’s internal electricity requirement and under average operating conditions the power output might meet 50% of on-site demand. In the winter, it would be possible to utilize about 50GJ/h (12Gcal) of thermal energy by recovering the waste heat from the gas engines using a waste heat boiler. This thermal energy is roughly equivalent to 10% of the heat used internally at the Colliery.

The Project envisaging the establishment of the gas recovery and control technology proposed in the study and the application of mine gas utilization technology to be introduced on this basis can be expected to have a major effect under the present conditions prevailing at the Ukrainian coal mines. It should be noted in this context, that for the Donbass Colliery alone the calculations show that the effect of this technology as an alternative energy could be equivalent to 83,200MWh/year of electric power available for transmission.

The use of methane gas at the Donbass Colliery for power generation and waste heat recovery can be estimated to have a greenhouse gas reducing effect of 482,000t - C02/year.

The economically minable gas reserves in the coal seams of the Donetsk Coal Field have been estimated at 3 trillion m3 or more. As new mines will be developed and mining will be extended to deeper seams in existing mines, it is reasonable to expect a further growth in the potential recovery and use of mine gases.

On the basis of Japanese-Ukrainian cooperation it will be possible to make a substantial contribution to controlling global warming by making positive use of Japanese technology and striving for the joint implementation of this technology. It is also believed that this will greatly assist the structural reform of the Colliery that is being undertaken by the Ministry for Fuels and Energy.

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In view of the results of this study, the Japan Coal Energy Center will hold further discussions and consultations with the Ukrainian side in order to advance this project with other Japanese companies cooperating with us.

Contents

ForwardList of Survey Staff Members Outline

Chapter I Basic Project Parameters page1. Present Situation of the Partner Country

1.1 Political and Socioeconomic Situation...........................................................I - 11.1.1 Political Situation.....................................................................................1-11.1.2 Economic Situation.............................................................................. 1-61.1.3 Social Situation....................................................................................... 1-9

1.2 Energy Situation........................................................................................... 1-141.2.1 General Outline of the Energy Situation................................................1-141.2.2 Energy Production Control System....................................................... 1-191.2.3 Petroleum..............................................................................................1-191.2.4 Natural Gas...........................................................................................1-211.2.5 Coal....................................................................................................... 1-251.2.6 Electric Power............................................. 1-261.2.7 Current Situation of Coal mine Gas Recovery and Use........................ 1-40

1.3 Needs for Jointly Implemented Projects.......................................................1-44

2. Need for the Introduction of Alternative Energy Technologiesin the Target Sectors...................................................................................... I - 46

3. Significance of the Project, Its Necessity and Effect,and Spin-off Effects on the Sector................................................................I - 47

Chapter II Specific Details of the Project Plan1. Project Plan

1.1 Outline of the Project Target Area.................................................................II - 11.1.1 Donetsk District, Donetsk Coal Field Community, Economic

Condition, Energy Situation, etc............................................................ II - 11.1.2 Coal and Coal Bed Methane (CBM) Resources

in the Donetsk Coal Field.......................................................................II - 31.2 Proj ect Description...................................................................................... 11-15

1.2.1 Gas Recovery Management Project.....................................................II - 151.2.2 Gas Utilization Project.........................................................................II - 16

I

2. Outline of the Implementation Site (Enterprise)......................................... II -182.1 Level of Interest Shown by the Implementation Site (Enterprise).............. II - 182.2 State of Related Equipment at the Implementation Site

(Enterprise) (Outline, specifications and operating conditions)................. II - 192.2.1 Coal and Coal Mine Gas from the Donbass Colliery..........................II - 192.2.2 Outline of the Donbass Colliery..........................................................II - 302.2.3 Gas Recovery Technology and Equipment

at the Donbass Colliery........................................................................II - 342.2.4 Gas Utilization Technology and Equipment

at the Donbass Colliery........................................................................II - 382.3 Project Execution Capability of the Implementation Site (Enterprise)..... ..II - 67

2.3.1 Management Basis and Management Policy..................................... II - 672.3.2 Technical Capability........................................................................... II - 672.3.3 Availability of Human Resources...................................................... II - 682.3.4 Availability of Financial Resources....................................................II - 682.3.5 Supervision System............................................................................. II - 682.3.6 Implementation System....................................................................... II - 68

2.4 Specifications After Equipment Modificationat the Implementation Site (Enterprise)...................................................... II - 69

A Gas Recovery Management Project.................................................. II - 692.4.1 Basic Principles of the Gas Recovery Plan.........................................II - 692.4.2 Gas Recovery Plan at the L4 Seam of the Donbass Colliery..............II - 712.4.3 Outline of the Drilling Equipment to be Used....................................II - 812.4.4 Gas Conducting Equipment,

Gas Draining Equipment from Seals..................................................II - 842.4.5 Withdrawn Gas Monitoring System...................................................II - 892.4.6 Future Quality of Recovered Gas and Estimated Volumes................II - 92B Gas Utilization Project.........................................................................II -1022.4.7 Methane Gas Collecting Equipment.................................................. II -1022.4.8 Selecting the Power Generating Equipment......................................11-1022.4.9 Conceptual Study of Power Generating Equipment.......................... II - 1132.4.10 Consideration of the Waste Heat Recovery Equipment..................... II - 1272.4.11 Energy Balance.................................................................................. 11-1282.4.12 Layout Plan.........................................................................................11-131

2.5 Range of the Funds, Equipment, and Services to be Offeredby Each Side When Implementing the Project......................................... 11-139

1.3 Target Greenhouse Gas................................................................................ 11-16

II

2.5.1 Funds................................................................................................. 11-1392.5.2 Equipment, Services, etc....................................................................II -139

2.6 Preconditions for and Problems on Implementation of the Project.......... II - 1412.7 Project Implementation Schedule............................................................. II - 141

2.7.1 Fund for the Project and Establishmentof the Implementation System.......................................................... II - 142

2.7.2 Project Implementation Schedule..................................................... II - 142

3. Embodiment of the Financing Plan........................................................... II -1463.1 Financing Plan in Implementing the Project

(Amount of Required Fund)..................................................................... .II - 1463.1.1 Amount of Fund Required................................................................ II - 146A Gas Recovery Management Project................................................ II -146B Gas Utilization Project........................................................................ II -1463.1.2 Method of Payment, etc..................................................................... II - 147

3.2 The Outlook for Funding (person who is entrusted with survey onfunding and implementation plan of the execution site (companies))..... II - 149

4. Matters Related to the Conditions for Joint Execution........................... II -1504.1 Setting the Conditions for Project Execution on the Basis of the Actual Situation

of the Project Site and Matters on Adjustment with the Other Party Nations for Realization of the Joint Execution such as Sharing the Work.................. II - 150

4.2 A Possibility of Agreement that the Said Project isCarried Out Jointly.................................................................................... II - 150

Chapter III Project Effect1. Alternative Energy Effect................................................................................. Ill -1

1.1 Technical Evidence for the Manifestation ofan Alternative Energy Effect........................................................................ Ill - 1

1.2 Baseline Forming the Basis for the Calculationof the Alternative Energy Effect.................................................................. Ill - 2

1.2.1 The Idea of the Baseline..........................................................................Ill - 21.2.2 Calculation of the Baseline.......................................................................Ill - 21.2.3 Interpretation of the Effect.......................................................................Ill - 21.2.4 Method of Calculating the Effects............................................................Ill - 3

1.3 Concrete Alternative Energy Effect Quantities, the Period of theContinuation of Alternative Fuel Effect, and Cumulative Quantities.......... Ill - 8

1.3.1 Concrete Alternative Energy Effect Quantities........................................Ill - 8

III

1.3.2 The Period of the Continuation of Alternative Fuel Effect..................Ill - 81.3.3 Cumulative Quantities of Alternative Energy Effect...........................Ill - 8

1.4 Specific Method of Verifying the Alternative Energy Effect...................... Ill - 8

2. Greenhouse Gas Emission Reduction Effect..............................................Ill - 92.1 Technical Evidence for the Emergence

of a Greenhouse Gas Emission Reduction Effect........................................ Ill - 92.1.1 Greenhouse Effect of Methane

(Details will be discussed below.)................. ....................................... Ill - 92.1.2 Rationale for Greenhouse Gas Reduction due

to the Combustion of Methane Gas.....................................................Ill - 102.2 Baseline Forming the Basis for Calculation the Greenhouse Gas

Emission Reduction Effect......................................................................... Ill - 122.2.1 The Concept of the Baseline...............................................................Ill - 122.2.2 Method of Calculating the Baseline................................................... Ill - 122.2.3 Calculation of Effect.......................................................................... Ill - 14

2.3 Concrete Greenhouse Gas Reduction Effect Quantities, the Period of Continuation of Greenhouse Gas Reduction Effect,and Cumulative Quantities......................................................................... Ill - 15

2.3.1 Concrete Greenhouse Gas Reduction Effect Quantities..................... Ill - 152.3.2 The Period of Continuation of Greenhouse Gas Reduction Effect

and Cumulative Quantities................................................................. Ill - 152.4 Specific Method of Verifying the Greenhouse Gas Reduction Effect

(Monitoring Procedure)..............................................................................Ill - 162.4.1 Underlying Principle Applicable to Monitoring................................. Ill - 162.4.2 Monitoring in Recovery...................................................................... Ill - 172.4.3 Monitoring of Gas Utilization............................................................. Ill - 20

3. Effect on Productivity.................................................................................... Ill - 21

Chapter IV Profitability1. Economic Return on Investment Effect........................................................IV -1

1.1 Profitability Calculation Base....................................................................... IV - 11.1.1 Project Condition.................................................................................. IV - 11.1.2 Finance Plan.......................................................................................... IV - 11.1.3 Operating Costs..................................................................................... IV - 2

1.2 Project Profitability......................................................... IV - 31.2.1 Essential Conditions on which Calculations are Based......................... IV - 3

IV

1.2.2 Method of Evaluating the Project’s Economic Viability IV-4

2. Cost/Benefit (Project Effect) (Alternative Energy Effect,Greenhouse Gas Emission Reducing Effect)..............................................IV - 6

2.1 Alternative Energy Effect............................................................................ IV - 62.2 Greenhouse Gas Reduction Effect............................................................... IV - 6

Chapter V Verification of Dissemination Effect1. Dissemination Potential of the Technology to be Introduced

under this Project in the Target Country.......................................................V -11.1 Level of Diffusion of Gas Drainage...............................................................V - 1

1.1.1 The Donetsk Coal Field as a Whole.......................................................V - 11.1.2 Ukraine as a Whole................................................................................V - 1

1.2 Dissemination Potential as a Whole...............................................................V - 2

2. Effect Derived from Dissemination.................................................................V - 22.1 Alternative Energy Effect..............................................................................V-32.2 Greenhouse Gas Emission Reducing Effect..................................................V-3

Chapter VI Spin-off Effects1. Socioeconomic Effects.................................................................................. VI -12. Environmental Effects................................................................................... VI -1

2.1 Calculation Conditions................................................................................ VI - 1

Conclusion....................................................................................................i1. Summary of Study Findings...................................................................................1

1.1 Gas Recovery Management Project.................................................................. 11.2 Gas Utilization Project........................................................................................ 11.3 Project Effect........................................................................................................ 21.4 Dissemination Effect............................................................................................ 2

2. Discussion................................................................................................................ 2

3. Future Problems...................................................................................................... 33.1 Technical Development....................................................................................... 33.2 Joint Implementation Scheme.............................................................................. 43.3 T o ward Proj ect Execution.................................................................................... 4

V

Appendix Materials1. List of Reference Materials..................................................................Appendix -12. Local Survey Report............................................................................. Appendix - 2

VI

Chapter I

Basic Project Parameters

In this Chapter we will be dealing with political and socioeconomic conditions of the partner country, the needs for the project on the basis of joint implementation, the necessity of introducing alternative technologies for the target sector, the significance and necessity of the project, its effects and the diffusion of the project results for the benefit of this industrialsector.

1. Present Situation of the Partner Country

1.1 Political and Socioeconomic Situation

1.1.1 Political Situation

(1) Historical Overview of the Period After IndependenceOn December 1, 1991, a public referendum took place alongside with the presidential election. The winner was former Chief Secretary of the Communist Party Kravchuk who became the first President of Ukraine. At the end of that year, the Commonwealth of Independent States (CIS) was established at the initiative of the three Slav countries of the former Soviet Union.

Under President Kravchek, Ukraine started on its new course as an independent nation in 1992. Amidst the rising tide of nationalism, Ukraine kept a distance from the union with the CIS in a bid to achieve a large-power status on a par with Russia. These aspirations led to a deep-cutting rift with Russia on the issue of the return of the Black Sea Fleet stationed on the Crimean peninsula in Ukrainian territory. The Russian parliament adopted a motion, in January 1992, calling for a review of the issue of the return of the Crimean Republic to Ukraine on the grounds that this had always been Russian territory and that it was still inhabited a large majority of about 70% of Russian nationals. Relations between Russia and Ukraine were complicated further in March 1994, when Meshkov who had declared himself publicly in favor of his republic’s annexation by Russia won the presidential election in the Crimean Republic in March 1994.

Ukraine’s relationship with Russia as Ukraine’s supply source of energy, especially natural gas, deteriorated to the point of unleashing a deep economic crisis. Discontent over this issue rose among the a large part of the nation. In March 1994, the elections for the Supreme Assembly were held. These were the first government elections since independence. The pro-Russian parties such as the Communist, Agrarian, and Socialist Parties, which accounted only for roughly a quarter of the entire political spectrum, won a landslide victory in the elections. The nationalistic elements whose support based had been the western part of Ukraine were forced to withdraw. In June of that year, the presidential elections took place. The protagonists were President Kravchuk whose power base was the western Ukraine and who was a powerful proponent of a pro- American and pro-European political course on the one hand and on the other former Prime Minister Kuchma whose main support came from the military-industrial complex in the eastern part of Ukraine and who advocated closer integration with Russia on the

economic front. Kuchma won the election with a majority vote of 52% and became the country’s second President.

Ukraine had been the only Republic of the former Soviet Union retaining the old Constitution, and under the new President Ukraine finally adopted its New Constitution on June 28, 1996. This meant that the parliamentary assembly had endorsed a constitution that substantially increased the powers of the President. The result was that the reform course of the President won greater momentum in the economic policy domain which had been the focal area of contention between the President and the parliamentary assembly. In May 1997, Russian President Yeltsin made his first official visit to Ukraine. On this occasion, the two Presidents signed a “Partnership Treaty for Friendly and Cooperative Relations” which paved the way for closer ties between the two countries. Ukraine also signed a “Charter for a Special Partnership between Ukraine and NATO” with NATO. This helped to maintain a diplomatic balance-of- power course with Ukraine as a non-member, neutral state.

After his rise to power, the President addressed as his first policy issue an economic reform program that won him great appreciation from the West. Yet, the opposition between the President and the Government on the one hand and the Supreme Assembly (led by a strong Communist Party) persisted even after the New Constitution had been enacted. In the parliamentary election for the Supreme Assembly with its 450 delegates held in March 29, 1998, Ukrainian Communist party (under its leader Symonenko) won a majority position as the biggest party in the house. Similarly to the previous parliament, there was no single party with an absolute majority in the Assembly (consisting of a total of 450 delegates, 225 of whom are elected from the proportional voting districts and 225 from the small voting districts). Emerging from the elections was a three-group power constellation consisting of the so-called leftist groups (the Communist Party, the Socialist-Agrarian Union, and the Progressive Socialist Party with a total of 172 seats), the Center Group (the National Democratic Party, Hromada, the Green Party, the Social Democratic Party, and the Non-aligned Groupo with a total of 214 seats) and the Rightist Group (with a total of 47 seats). Although none of the party political groupings reached a majority of seats in the Assembly they had enough power to veto the government’s decisions. As a result, the political situation remained deadlocked over the reform issue as the clash between the President and Parliament continued. In the presidential elections of 1999, however, Kuchma was reelected, defeating the Leader of the Communist Party Symonenko at the polls on November 14. This election victory added new momentum to the reform course.

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(2) Current Political Situation and Outlook for the FutureFollowing the presidential elections, a new cabinet was formed in January 2000. The appointment of Prime Minister went to Yushchenko who was the former Governor of the Central Bank of Ukraine while Yuri Tymoshenko who had been the Chief Secretary of the Comprehensive Energy System Agency before was nominated Deputy Prime Minister in Charge of Energy. It is claimed that the motivation for Yushchenko’s appointment as Prime Minister was the strong support of the Western countries, especially the United States, which had highly appreciated his capabilities as the Governor of the Central Bank.

Under the stable Kuchma presidency, the economic reform program led by Prime Minister Yushchenko saw definite progress in 2000. Yushchenko made it clear that the targets for the reform program were more effective financial measures, a reform of the energy sector and improvements in the investment climate. He tabled a wide range of policies to strengthen the country’s balance of trade and improve Ukraine’s GDP. These policies were successful in generating growth as the country’s GDP in fiscal 2000 registered a 6.0% increase as compared with fiscal 1999.

Reform in the energy sector was pursued through a package of positive policies that included, among other things, the privatization of the local electricity distribution enterprises, a reform in the system for collecting electricity charges, and improvements in the issues concerning the supply of natural gas from Russia. The measures to improve the electricity tariff collection system proved effective. (For details see Section 1.2.6 on the Reform of the Electric Power Sector.) These commitments to energy sector reform and the efforts towards economic progress won the government recognition and were rewarded with the reopening of an expanded credit line and the grant of a 246 million US$ loan by the Board of Trustees of the IMF in December 2000.

From the end of 2000, however, dissension has flared up within the present administration as can be seen by the dismissal of Deputy Prime Minister Tymoshenko and the political situation is showing some signs of instability. The following chart shows Ukrainian government organization as of February 2001.

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Table 1.1.1-1 Ukrainian Government OrganizationAs of February 2001

Head of State

PresidentChief of Staff

Leonid KuchmaVolodymyr Mykhaylovych Lytvyn

Cabinet of MinistersPrime Minister Viktor Andriyovych YushchenkoFirst Vice Prime Minister Yuriy Ivanovych YekhanurovVice Prime Minister for Agricultural Mykhaylo Vasylyovych HladiyPolicyVice Prime Minister Mykola Hryhorovych ZhulynskyVice Prime Minister for Industrial Policy Oleh DubynaSecretary Viktor Ivanovych Lysytsky

Ministers

Foreign Affairs Anatoliy Maksymovych ZlenkoEcology and Natural Resources Ivan Oleksandrovych ZaietsAgricultural Policy Ivan Hryhorovych KyrylenkoCulture and Art Bohdan Sylvestrovych StupkaDefense Oleksandr Ivanovych KuzmukEconomy Vasyl Vasyliovych RohovyiEducation and Science Vasyl Hryhorovych KremenFinance Ihor Oleksandrovych MitiukovFuel Supply and Energy Serhiy Fedorovych YermilovHealth Care Vitaliy Fedorovych MoskalenkoDomestic Affairs Yuriy Fedorovych KravchenkoJustice Siuzanna Romanivna StanikLabour and Social Policy Ivan Yakovych SakhanTransport Leonid Mykhaylovych KostiuchenkoCrisis Situation Management and on Vasyl Vasylyovych DurdynetsProtection against the After-Effect ofChernobyl Disaster

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Higher CourtControl and Inspection National Space AgencyPension Fund

State Committee Chairman: Viktor Vasylovych Skopenko : Mykola Mykolayovych Kalensky

Oleksandr Oleksiyovych Nehoda : Borys Oleksandrovych Zaychuk

Archives : Ruslan Yakovych PyrihBorders Defense : Borys Mykolayovych OleksienkoBuilding Industry, Architecture and : Volodymyr Mykolayovych HusakovHousing PolicyCommunication and Informatization : Oleh Borysovych ShevchukEnergy SavingsForestry

: Viktor Tymofiyovych Merkushov : Valeriy Ivanovych Samoplavsky

Industrial Policy : Volodymyr Stanislavovych NovytskyInformation Policy, Television and : Ivan Fedorovych DrachBroadcastingLand Resources : Anatoliy Stepanovych DanylenkoReligious Affairs : Viktor Dmytrovych BondarenkoStandardization, Metrology and : Petro Stepanovych KubanCertificationStatistics : Oleksandr Hryhorovych OsaulenkoVeterans Affairs : Serhiy Vasylovych ChervonopyskyWater Resources : Viktor Maksymovych KhorievYouth, Sport and Tourism State Treasury Board

: Ivan Nykyforovych Fedorenko : Oleksandr Ivanovych Kirieiev

Republic of CrimeaPresident of the Crimean Parliament : Hrach Leonid IvanovychPrime Minister : Serhiy Volodymyrovych KunitsynVice-Premier : Viktor AntipenkoHead of Ukrainian Presidential : Yevgeny KushnarevAdministration

Prosector-GeneralJudicial

Mykhaylo Oleksiyovych Potebenko

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Verkhovna Rada (Supreme Council)Speaker : Ivan Stepanovych Plyushch

Source: Ukrainian Government Publication

1.1.2 Economic Situation

(1) Maj or Economic IndicatorsWe will first review the changes in Ukraine’s main economic indicators for the period from 1996 until 2000 (the year 2000 covers only the first half from January to June). Figures are quoted in percent and give the relative increase or decrease in comparison to the previous year.

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Table 1.1.2-1 Changes in Economic Indicators(From 996 throng i the First Half of 2000)

1996 1997 1998 1999 2000.1-6

Gross domestic product (GDP)

-10.00 -3.00 -1.70 -0.40 5.00

Mining production -5.00 -0.30 -1.50 4.30 10.80

Agricultural production -9.00 -2.00 -8.00 -5.70 -4.60

Investments -22.00 -9.00 5.00 2.90 21.00

Increase in consumer prices

39.70 10.10 20.00 22.70 18.70

Goods retail sales -5.00 2.00 -4.00 -3.00 6.50

Official unemployment rate

1.30 2.30 3.70 4.30 4.50

Total value of exports (million US$)

12,073.00 14,232.00 12,637.40 11,518.60 6,308.00

Outside the CIS 6,816.00 8,646.00 8,435.10 8,329.40 —

Inside the CIS 5,257.00 5,586.00 4,202.30 3,252.20 —

Total value of imports (million US$)

14,370.00 17,128.00 14,675.60 11,846.10 6,719.00

Outside the CIS 8,124.00 7,249.00 6,778.60 5,102.90 —

Inside the CIS 6,246.00 9,897.00 7,987.00 6,743.20 —

Exchange rate (Ukrainian Hryvna/US$)

1,885.00 1,896.00 3.43 5.22 54,378.00

Source: Russia and Eastern Europe Economic Research Institute: Economic Trends

GDP growth in real terms has been given as 6.0% and the inflation rate as 25.8% for the whole of 2000. The factors that have supported this high level of growth were mainly the recovery of foreign investments and a favorable expansion of mining production underpinned by exports. In fact, mining output rose 10.8% and foreign investments 21%.

Foreign investments had slumped in the wake of two factors, one economic and one political: the devaluation of the Hryvna and the holding of the presidential election. With the beginning of 2000, however, foreign investments started to flow in again as the new Yushchenko cabinet with its political “reform” program and economic

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measures to stabilize the Hryvna came into office. Mining output which had benefited from the devaluation of the Hryvna saw further expansion. By sector, production in the iron and steel industry increased backed by favorable exports. Production also expanded in the food and light industrial sectors after the market had been swamped by imports of these product types before the Hryvna was devalued.

In January (2000), Russia which is Ukraine’s principal import source for petroleum, imposed a temporary ban on petroleum exports. The embargo, introduced as a sanction against Ukraine’s failure to pay for its natural gas imports, caused Ukrainian production output to plummet to less than half. Ukraine is dependent on Russia for most of its natural gas demand and the issue of Ukrainian indebtedness toward Russia has flared up in the debate. This topic will be discussed more extensively in Section 1.2.4.

(2) Foreign Economic Relations(a) TradeUkraine’s total trade value for the first half (Jan.-Jun.) of 2000 stood at 13,027 million US$, an increase of 20.4% as compared with the same period of the previous year. The breakdown shows that exports reached 6,380 million US$ and were up 18.4% while imports rose to 6,719 million US$, an increase of 22.3% as compared with the same period of the previous year. For the period from January through to the end of August of the same year the total value of trade was recorded as 17,900 million US$ (up 23.4%), with exports up to 9,000 million US$ (up 23.5%) and imports up to 8,900 million US$(up 23.2%). Ukraine closed its balance of payments with a surplus of 148 million US$.

This favorable position of Ukraine’s international balance of payments was due to the resumption of trade with the member countries of the CIS, with exports to these countries rising 36.4% and imports from them 21.6%. Trade relations with its major trading partner, the Russian Federation, saw an increase in exports of 45.3% and in imports of 13.6%. Russia accounts for a third of Ukraine’s entire foreign trade.

(b) Direct Foreign InvestmentDuring the first half of 2000 (January to June) direct foreign investments reached 378.7 million US$, an increase of 50% as compared with the same period of the previous year. The most important factor to account for this doubling of direct foreign investments are the stabilization of the Hryvna and the economic upturn brought about by Prime Minister Yushchenko’s economic reform course. Foreign companies felt encouraged to establish themselves in Ukraine. The cumulative total of direct foreign investments

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reached 3,596 million US$, and the major investor country is the United States of America at 629.3 million US$. By sector, the food industry has the largest share, accounting for 20.2% of all foreign investments (with investment amount of 727.9 million US$).

1.1.3 Social Situation

(1) LandGeographically, Ukraine is located roughly in the middle of Europe and was the southwestern part of the former Soviet Union. It borders on Russia in the east and northeast, Belarus in the northwest, the east European countries (Poland, Slovakia, Hungary, and Rumania) in the West and on the Black Sea and the Sea of Azov in the east. It occupies a land area of 603,700 square kilometers, roughly 1.6 times the size of Japan. It is bigger than France (544,000 square kilometers) and Spain (505,000 square kilometers) and the next largest after Russia in Europe.

The length of Ukraine’s territory in the east-west direction is 1,316 kilometers and in the north-south direction 893 kilometers. The total of the national border is 7,590 kilometers, with the land border accounting for a length of 5,631 kilometers. The border with Russia has a length of 2,063km, with Belarus 975km, with Poland 542.5km, with Slovakia 98.5km, with Hungary 135.1km, with Rumania 608.6km, and with Moldova 1,194km. The sea border (1,995km) consists of the shoreline along the Black Sea and the Sea of Azov with the sea ports of Odessa and Yalta.

Most (95%) of the national territory is part of the East European Plain and the remainder forms part of the Carpathian and Crimean Mountains. Ukraine has a generally flat relief and dips from the north to the south and also from the east and west toward the Dnepr River in the center.

There are approximately 73,000 rivers of all sizes, great and small, and their total length amounts to 248,000km. Of these, 125 rivers have a total length of more than 100km and about 4,000 rivers are about 100km long. The main water systems are the Dnepr and Dniester rivers . The Dnepr which flows roughly in the middle of the country has a total length of 2,201 km (981km of which is within Ukrainian territory). Its total water volume is 35km3, making it the third largest river in Europe.

Ukraine also has about 20,000 lakes, and 43 of them have a surface area larger than 10 square kilometers. The largest lake is lake Saks (210 square kilometers) in the

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southwest of the Crimean peninsula, followed by lake Yalf (149 square kilometers) and lake Katlabuk (68 square kilometers).

The main cities apart from the capital Kiev are Khar’kov, Dnepropetrovsk, Donetsk, and Simferopol.

(2) ClimateUkraine straddles two climate zones, namely, a medium-latitude climate (plains and the Carpathian and Crimean mountains) and a Mediterranean climate zone (the southern coast line of the Crimean peninsula). While the southern parts of the country have dry, hot winds in the summer the climate can be generally described as moderate. Ukraine has a relatively high level of precipitation: In the west, precipitation throughout the year reaches 1,500mm, in the mountainous parts of the Crimean peninsula 1,000 - 1,200mm, on the Black Sea coast 300 - 400mm, and in the southwest 400 - 500mm. The following table gives the average atmospheric temperatures, humidity and precipitation for the different months of the year for the capital Kiev. 3

Table 1.1.3-1 Average Monthly Temperatures of KievJan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.-5.3 -4.6 0.0 8.3 14.7 18.5 17.4 19.5 15.5 8.4 -1.1 -9.4

Source: Physical Yearbook (Unit: °C)

Table 1.1.3-2 Average Monthly Humidity of KievJan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.86 85 80 69 59 63 65 67 68 77 87 88

Source: Physical Yearbook (Unit: %)

Table 1.1.3-3 Average Monthly Precipitation of KievJan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.47.5 45.6 39.6 39.7 52.4 61.6 80.2 70.2 45.5 39.7 52.8 45.0

Source: Physical Yearbook (Unit: mm)

(3) PopulationUkraine has a population of roughly 49,153 thousand as of July 2000. Approximately 70% of the population live in cities. The population statistics for the major cities are: Kiev - 2.63 million, Khar’kov - 1.147 million, Dnepropetrovsk - 1.555 million, Donetsk

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- 1.08 million and Odessa - 1.046 million. The age breakdown of the population is as follows.

0-14 years of age: 18% (male: 4,482,800 - female 4,296,200)15-64 years of age: 68% (male: 16,018,000 - female 17,509,000)65 years of age and older: 14% (male: 2,243,300 - female 4,603,400)

The male-to-female ratio is 0.86 : 1 for the entire population, showing a preponderanceof females. The average life expectancy is 60.39 years for males and 71.85 years for females, with females living longer. The rate of population increase is current -0.83% as of 2000. This means that the population is decreasing.

(4) Ethnic SegmentationUkrainians account for 72.7% of the entire population and live in all parts of the country. The next largest ethnic group is the Russian segment (22.0%) living in the most important parts of the countries, that is, in cities such as Donetsk, Lugansk, and Dniepropetrovsk. Ethnic minorities include the Jews (0.9%), Belorusians (0.9%) and Moldovans, followed by the minorities from the neighboring countries on the Eastern border such as Bulgarians, Poles, and Hungarians. All of these minority groups account for less than 1% each.

Table 1. .3-4 Ethnic Breakdown

Ukrainians Russians Jews BelarusiansMoldovans and

other East Europeans

72.7% 22.0% 0.9% 0.9% 3.5%Source: El A Statistics

(5) LanguageUkrainian, an East Slavonic language, is the official language laid down in the Constitution. Nevertheless, Russian which was the official language of the former Soviet Union is in extensive use and generally spoken. In addition, languages, including Rumanian, Polish and Hungarian, are also being used by minorities.

(6) ReligionChristianity (Ukrainian Catholicism) became the popular religion of Ukraine after the Principality of Kiev adopted the Christian faith of the Eastern Church (Greek orthodoxy) in the late 10th century. In the Middle Ages, however, Ukraine came under

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Polish rule and Roman Catholicism spread widely. In the 16th century, the religious sect of the Uniates (called the Eastern Unionist Church, Ukrainian Catholic or Greek Catholic Church) came about through the fusion of with the Eastern and Western Churches. During the Soviet period, this sect was not recognized and oppressed by the regime. In 1989, the increasing demand for the abolition of religious prohibition led to the sect’s being declared lawful in December of the same year. This is the situation as it prevails today.

(7) Historical Overview of UkraineUkraine became a part of the Soviet Union in December 1922 and declared itself a sovereign nation in July 16, 1990. The Declaration of Independence was made on August 24, 1991. In the plebiscite of December 1 of the same year (1991), an overwhelming majority of over 90% voted in favor of Ukrainian independence. Ukraine became an independent nation, both in name and in fact, concurrently with the establishment of the Commonwealth of Independent States (CIS) on December 25, 1991. August 24 is celebrated throughout the country as Ukraine’s Independence Day.

The following overview table 1.1.3-5 is a brief summary of Ukrainian history.

Table 1.1.3-5 Summary Chart of Ukrainian HistoryPeriod Main Historic Events

4th - approx. 6th century

Eastern Slavs settle in the area.

9th - early 12th century

A group of East Slavs settle in Kiev forming the Principality of Kiev (Kiivan Rus).

Early 13th century Ukraine became a Kipchak Khanate under the Mongolian invasion.1321 Most of Ukraine came under Lithuanian rule and a smaller part under

Polish domination.1569 The Grand Dukedom of Lithuania united with Poland with the

formation of the Polish-Lithuanian Commonwealth and Ukraine fellunder the rule of this united Poland. Under the harsh Polish oppression, Ukrainians stages many revolts.

1654 Bohdan Khmelnytsky, the leader of the independence movement, demanded from the Russian Czar protection from Poland in return for a union with Russia. Russia accepted the plea and fought a war against Poland and took possession of the left bank of the Dnieper and of Kiev with recognition of Ukrainian self-government.

Late 18th century Ukraine was totally absorbed as part of Russia.

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Period Main Historic EventsEnd of 18thcentury

Russia occupied Crimea in its wars against the Turks and retook the right bank of the Dnieper with the new division of Poland.

1917 February RevolutionFormation of a government declaring temporary total independence (the Ukrainian Central Rada).Ukraine joined up with imperial Germany and plunged into a three- year long civil war with the newly founded Soviet Union.

1919 Declaration of Ukrainian Socialist Republic1920 Signing of a military alliance with Soviet RussiaDecember 1922 Taking part in the formation of the Soviet Union1939 German invasion of Poland. Beginning of the Second World War.

Most of Ukrainian territory is occupied by German troops and Soviet troops eventually re-occupied the country.

1945 Unconditional surrender of Germany1986 Chernobyl Nuclear Power Plant Accident. The Soviet Union suffered

damage on a scale of over 10 millions victims (over 3,2 million Ukrainians alone).

July 16, 1990 Declaration as a Sovereign RepublicAugust 1991 Failed coup d’etat in Moscow.August 24 Declaration of Independence with change of name to the present

Ukraina (Ukraine).December 1, 1991 In a national referendum on independence, an overwhelming majority

(more than 90%) of the population voted in favor of independence. Kravchuk was elected President in the first presidential elections.

December 3, 1991 The Russian Republic acknowledge Ukraine’s independence and Ukrainian independence (separation) from the Soviet Union was definite. This was one of the important factors for the collapse of the Soviet Union.

End of December1991

Ukraine became an independent nation in both name and fact, in the wake of the disintegration of the Soviet Union.

1994 Ukraine signed the Nuclear Arms Non-Proliferation Treaty. Kuchma was elected as the next President in the presidential elections.

1996 Establishment of the ConstitutionMay 1997 Russian President Yeltsin visited Ukraine. Signing of the “Partnership

Treaty for Friendly and Cooperative Relations’’ with Russia.March 29, 1998 Supreme Assembly (parliamentary) elections. The Assembly was

divided into three power groups: the Leftist, the Rightist, and the political Middle.

1999 Third presidential elections. Kuchma reelected as President.December 2000 Closure of the No. 3 reactor (1,000MW) of the Chernobyl power

station.

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(8) Political StructureUkraine is a republic rules by a President. It has a unicameral (single-chamber) parliament (the Supreme Assembly) with 450 seats. Deputies are elected for a period of 4 years. The present head of state is President Leonid Danilovich Kuchma who was first elected as President in July 1994 and reelected in November 1999. The President’s term of office is for 5 years. The current Prime Minister is Viktor Andreevich Yushchenko. He took office in December 22, 1999. In Ukraine, the Prime Minister is nominated by the President and recognized by the Supreme Assembly (Parliament).

(9) Administrative SystemUkraine consists of 24 States, 1 Self-Governing Republic (Crimean Self-Governing Republic), and 2 Cities (Kiev and Sevastopol’) as the country’s administrative units.

(10) Principal Economic IndicatorsThe following cornerstone data are Ukraine’s most important economic indicators:

GDP (1999) Total valuePer capita GDP

Real GDP Growth (2000)Trade Figures (Jan. - Nov., 2000)

Rate of growth of industrial production (2000) Inflation rate (2000)Working population (1999)Unemployment rate (as of January 2001)

109,500 million US$ 2,200 6.0%

Exports: 13 billion Imports: 12.4 billion 12.9%25.8%22.8 million 4.2%

1.2 Energy Situation

1.2.1 General Outline of the Energy Situation

Table 1.2.1-1 shows the data for the Ukraine’s total energy consumption and production for 1992- 1998.

After the Ukraine became independent in 1991 the country’s industrial output contracted dramatically due to the ensuing stagnation of the economy. As a result, energy consumption also decreased by approximately 26% from 8,880 trillion Btu in 1992 to 6,140 trillion Btu in 1998. The particular pattern of Ukrainian energy

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consumption become evident when comparing these figures with other countries that have shifted to a market economy such as Romania and Poland.

Table 1.2.1-1 U craine’s Total Energy Consumption and Production1992 1993 1994 1995 1996 1997 1998

Consumption (Trillion Btu)

8,880 8,580 7,310 7,120 6,600 6,520 6,140

Production(Trillion Btu)

4,370 4,010 3,510 3,560 3,360 3,500 3,400

Source: US Energy Information Administration (“ElA”)

3ffiCO

"O<03O"

Source: EIA data

Fig. 1.2.1-1 Comparison of Energy Consumption with Different Countries (1992-1997)

A breakdown of the consumption statistics by sector shows that while Ukrainian energy consumption stood at 6,520 trillion Btu in 1997, 64% of this total was used by the industrial sector. The private consumer sector registered a share of 15%, the traffic and transport sector one of 13%, and the commercial business sector one of 8%. Also in the same year, Ukrainian energy consumption accounted for 1.7% of world energy consumption. Table 1.2.1-2 gives the shares of the different fuels in the energy consumption total.

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Tab e 1.2.1-2 Shares oft le Different Types of "uelNatural gas Coal Petroleum Other fuels

43% 30% 13% 14%Source: El A data

It can be seen in the Table above that gas and petroleum together account for a 56% share of total energy. The Ukraine’s level of domestic self-sufficiency in these two forms of energy is only 20%. As a result, both these energies need to be and are being imported, mainly from Russia. Although the Ukraine has relatively abundant coal reserves domestic energy production is riddled with a host of problems, including decreasing mining output due to the financial shortages of this sector, equipment and plant obsolescence and aging, and frequent mine accidents. Vast development resources and funds will be required in order to resolve these problems and achieve an overall improvement in the Ukraine’s energy self-sufficiency in energy. In view of the present domestic situation of the Ukrainian economy, however, it would be extremely difficult for the Ukraine to cope with these problems on her own. Foreign support and cooperation will therefore be absolutely essential for the Ukraine.

The following Table shows the variations in the Ukraine’s the fuel and energy resource production levels.

Table 1.2.1 -3 Ukrainian Fuel and Energy Resource Production1992 1993 1994 1995 1996 1997 1998

Petroleum(1,000 barrels/day)

95 87 85 85 81 85 82

Natural gas (1 billion cb.m.)

21 19 18 18 18 18 18

Coal (1 million ton) 147 128 104 99 83 85 83

Electric power (1 billion kWh)

239 217 192 184 174 169 163

Source: El A data

While the economy slumped after independence, the Ukraine’s total energy consumption reached 6,140 trillion Btu in 1998, a level equivalent to sixth position within the European CIS. It is noteworthy in this context that the Ukraine’s energy intensity, that is, the ratio of energy consumption to GDP, was extremely high on the 1997 evaluation at 135 thousand Btu per US$. Comparison with the same figures for the

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US (11.6 thousand Btu), Japan (5,100Btu) and Russia (65 thousand Btu) underscores the gap between the Ukrainian energy intensity and that of other countries. The same also applies to the carbon dioxide emissions (converted to their carbon equivalent). Whereas the US’s carbon intensity, that is, the ratio of carbon emissions to GDP, was 0.18 ton per 1,000 US$ in 1997, the Ukrainian carbon intensity registered a level 2.2 tons. The reasons for this can be attributed to the Ukraine’s high dependence on coal as compared with other countries and to the industrial production system which has remained inefficient since the Soviet era. Further, C02 emission per head of population (converted to the carbon equivalent) stood at 2.1 tons in 1997. Although this per capital C02 emission is lower that in the US (5.6 tons) and Russia (2.9 tons) it is substantially higher than in the neighboring East European countries of the Ukraine. The above values throw into full relief how much room there is still left in the Ukraine for energy conservation. This is evidence of the potential needs for projects in various field, including the electric power, coal and gas industries, regional heating, the iron and steel sector and transport. Fig. 1.2.1-2 gives the energy intensity (energy consumption/GDP), Fig. 1.2.1-3 the carbon intensity (carbon emission/GDP), and Fig. 1.2.1-4 the carbon dioxide emission level per head of population.

160.000 T

140.000 -135,000

120,000 -

g 100.000 -

5 80.000 -

61.700 61,000

40.000 - 31,200

11.600

Source: EIA data

Fig. 1.2.1-2 1997 Energy Intensity (Energy Consumption / GDP)

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i 2.2

Source: El A data

Fig. 1.2.1-3 1997 Carbon Intensity (Carbon Emission / GDP)

Source: El A data

Fig. 1.2.1-4 1997 Per Capita Carbon Emissions

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1.2.2 Energy Production Control System

The Ministry of Energy continues to have the petroleum, natural gas, coal, and electricity sectors under its control. For each of these sectors, a system of state-run enterprises is in existence and is now in the process of being privatized. Fuller details will be given later.

1.2.3 Petroleum

(1) Supply and Demand SituationConfirmed domestic petroleum reserves in the Ukraine are at least 395 million barrels on present estimates. Most of these deposits are located in the eastern parts of the country, in the Dnieper and Donetsk regions. After The Ukraine’s independence in 1991, domestic crude oil production dropped roughly 14% from 95 thousand barrels/day in 1992 to 82,000 thousand barrels/day, as can be seen in the next figure (Fig. 1.2.3-1). This was the result of Soviet policies which had focused on resource development in Siberia. The outcome was that investment funds were no longer available to a sufficient degree for development in the Ukraine. Consumption dropped significantly at a rate far outstripping the decline in output. Whereas consumption had been 813 thousand barrels/day in 1992 it contracted to only 357 thousand barrels/day in1998. Nevertheless, domestic consumption substantially exceeds domestic production, and The Ukraine depends on foreign imports for almost 80% of its petroleum, with practically all of the crude being supplied by Russia.

(Unit: 1,000 barrels/day)

'92 '93 '94 '95 '96 '97 '98

Source: El A data

Fig. 1.2.3-1 Domestic Petroleum Production

The Ukraine’s domestic pipeline network is divided into two systems, namely, the Pridoniprofski system in the east and the Druzhba system in the West. The former

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carries Russia-supplied petroleum to the refineries and terminals (Odessa, TOREK, etc.) in the eastern part of the country. The latter is used primarily as a supply artery for Russian crude to Western Europe. The Ukrainian domestic pipelines carry approximately 64 - 66 million tons of crude oil a year. The volume recorded in 1999 was 65.2 million tons.

In December 1999, imposed sanctions on the Ukraine by cutting off its oil exports to the Ukraine. This measures was adopted in response to the Ukraine’s accumulated arrears on its gas imports from Russia and to the illegal importation of gas. In protest against the Russian measures, the Ukraine did not consent to a reduction in the domestic tariff rates charged for the export of Russian crude. In retaliation, Russia cut back her crude oil supplies to the Ukraine on a dramatic scale in the beginning of 2000 (in January and February, by 60% compared to the previous year). Although the Ukraine did take certain measures to secure her crude oil requirement by signing a 25 thousand barrels/day petroleum supply agreement with Kazakhstan, for example, an oil shortage hit the domestic market and dealt the country’s refineries a heavy blow, seeing that the buyers of Russian petroleum had dispersed following the escalation of crude prices from that time.

(2) Policies in the Petroleum Area(a) Establishment of Naftgas UkrainaThe state-owned petroleum and gas enterprise Naftgas Ukraina was created as a public corporation (Ukaz (Decree) No. 747) on March 25, 1998. Its purpose was to develop the sector by enhancing efficiency and stability in the supply of petroleum and gas resources through a thorough reorganization of the existing petroleum and gas sector and by attracting investments to this sector. With 3,875km of petroleum pipeline and 35,900km of gas trunk line under its control, the newly founded corporation is a total energy enterprise undertaking petroleum and natural gas development, production, transport and supply. It has a workforce of 150,000 employees and ten member companies under its wings. Its sales are recorded as 36,600 million Hryvna as of January 1, 2000, with net profits given as 3,600 million Hryvna.

President Kuchma and the Ukrainian government had plans to privatize this company at some time in the future. However, this move was contrary to the legislation passed by parliament in 1995 and prohibiting the privatization of the state-owned petroleum and gas enterprises and as a result, confrontation with the parliamentary assembly has continued ever since. In July 1998, parliament passed a bill that prohibited the transfer of the shares held until then by the government in the petroleum and gas enterprises to

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the newly established Naftgas Corporation. Under this bill, the government authorities were not allowed to transfer its gas petroleum and gas sectors from the state enterprises to private stock companies. Kuchma, however, refused to sign the bill into law in August 1998 and demanded that it be withdrawn.

At present, the Corporation plays a key role in the development of the Ukraine’s petroleum and gas sector and is actively engaged in a number of development projects, including the development of the PIFDENI Petroleum Terminal and the construction of an oil pipeline between Odessa and PLODY. (for details see (b)).

(b) Modernization of Petroleum TerminalsThe Ukrainian government has devised a variety of policies designed to reduce the nation’s dependence on Russian oil. These measures recognize the need to diversify the petroleum supply sources and to cement the Ukraine’s position as a transit region for the supply of oil from the Caspian Sea to the West European countries. The projects that are currently taking place are the modernization of the PIFDENI Petroleum Terminal and the construction of an oil pipeline between PIFDENI and PLODY. This terminal is being built near the city of Odessa, facing the Black Sea. It has a total production capacity of 800 thousand barrels a day. This is sufficient to supply all of the six oil refineries in the country with crude. When this project is put into practice, the two domestic oil pipeline systems that have been separated until now will be linked together to achieve a single major oil transport trunk line from the Caspian Sea spanning Baku - Supsa - Odessa - (PIFDENI Petroleum Terminal) - Plody and the West European countries. It has a promising potential for the merits it can offer the Ukraine as a transit location in terms of stabilizing oil supply and earning transit revenue.

1.2.4 Natural Gas

Although the Ukraine’s natural gas reserves are estimated to reach 1,108 billion m3 the current level of production is only around 20% of domestic demand due to a shortage of investments. Most of the demand is met by gas imports from Russia and Turkmenistan. The following figures (Fig. 1.2.4-1) shows the variations in domestic Ukrainian consumption and production from 1991 through to 1999.

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Unit: 1 billion m3

'91 '92 '93 '94 '95 '96 '97 '98 '99Consumption

| | ProductionSource: Naftgas Ukraina

Fig. 1.2.4-1 Variations in Domestic Ukrainian Nautral Gas Consumption and Production

Table 1.2.4-1 gives a breakdown of gas demand for the different sectors for the year1999.

Table 1.2.4-1 Demand Breakdown for 1999Consumerdemand

ElectricPower Iron & Steel Gas Industry Chemical

Industry Other

40% 16% 11% 10% 9% 14%Source: Naftgas Ukraina

Consumption in 2000 has been recorded as 73.4 billion m3, a 3% decrease as compared with 1999. According to a study of the Ministry for Fuels and Energy, demand was slightly in excess of the previous year for the period from January through to September2000. In October through to December, however, gas consumption was below of the previous year because the winter months were relatively milder than in a normal year. Moreover, primary gas vending companies such as Itera adopted a hard-line approach to users in arrears with their gas bills by cutting off their gas supply.

The import statistics show that Ukrainian gas imports in 2000 amounted to 60.1 billion m3 and that roughly 98% of these imports came from Russia. The remainder was imported from Turkmenistan. The gas imports from Russia include a portion that is met by the transit fees payable by Russia for exporting natural gas through Ukrainian

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territory to the West European countries.

Ukrainian gas supply shows a high level of dependence on foreign suppliers. Russia is the Ukraine’s most important supplier of gas, and problems have occurred with Russia due to illegal gas imports by the Ukraine and as a result of Ukraine’s outstanding debts. The Ukraine has also fallen in arrears on its payment to Turkmenistan. A more detailed account of the situation is presented below.

(1) RussiaRussia uses Ukrainian territory mainly as a transit location for its pipelines transporting gas to Western Europe. The gas export volume carried by the pipeline total an average of 115 billion m3 a year. Fig. 1.2.4-2 below gives the variations in the gas transit volume passing through Ukrainian territory. A dispute between the two countries arose over the issue of the transit gas volume at the end of 1998 when the two countries failed to agree on the actual gas quantities sent through the transit pipeline. Russian Gazprom claimed in December of that year that 2.55 million m3 of gas were illegally tapped off from the pipeline (“illegal import”) by the Ukraine. In value terms, Gazprom argued, this amounted to a daily loss to Russia of 5 million US$. At the end of 1999, Gazprom charged the Ukraine with illegally tapping off gas to a value of 1,400 million USS through the year.

Unit: 1 billion m3

I I Transit volume (Total)| | Transit volume (Bound for Western Europe)Source: Naffcgas Ukraina

Fig. 1.2.4-2 Transit Volume Passing through Ukrainian Territory

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At the beginning of 2000, the Ukrainian government announced that the Ukraine’s debts to Gazprom on arrears of gas payments amounted to 2,800 million US$. In payment of this outstanding amount of debt, the Ukraine pledged that it would not take gas in payment of its transit fees for the whole of 2000. In reality, however, the practice of unlawful gas withdrawal has continued. In June, Russia announced that it had suffered damage as a result of illegal gas tapping on a scale of 13 billion m3 in volume and of approximately 700 million USS in value terms for the half-year period from January through to May, 2000. In an attempt both to obviate this problem and to allow for future increases in gas demand in view of the trend among the West European countries looking for increased natural gas supplies from Russia, Gazprom is now in the process of planning the construction of an exclusive pipeline for the Ukraine and the construction of a direct pipeline to (Western) Europe bypassing Ukrainian territory. In September 1996, Gazprom signed a long-term gas supply agreement with Poland (25 years, 250 billion m3) on the so-called Yamal - Europe gas pipeline passing through Poland. Russia’s Gazprom has also made public its plans for the construction of gas pipelines passing through Slovakia and the Baltic States.

The Ukraine has responded to these plans by entering into negotiations with the EU countries and Russia in the recognition of the need to secure for itself transit revenues by encouraging the use of the Ukrainian pipeline. At the end of December, President Putin declared Russia’s intention in principle to continue with the use of the Ukrainian pipeline also in the future. The future developments are therefore a matter of great concern and interest.

On the issue of the Ukrainian arrears on gas payments to Russia, a divergence of opinions has arisen as to the actual amount of debts owed by the Ukraine to Russia. In January 2000, the Ukrainian government announced that its indebtedness to Gazprom was on a scale of 2.8 billion USS, as has already been pointed out. Although the two countries have continued talks since then, a memorandum was exchanged between the two sides on December 22, following the previous discussions between the Presidents of the two countries at the end of November. In this Memorandum, the two sides agreed on the assurance of gas security through Ukrainian territory, the establishment by the Ukraine of a Reserve Gas Fund in Russia, and on the details concerning the payment of outstanding gas debts in 2001. The debt total agreed upon at that time was given as being in excess of 1.3 billion US$.

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(2) TurkmenistanThe arrears on gas payments owed by the Ukraine to Turkmenistan amounted to 815 million USS in 1994, and the Ukraine pledged it would pay off this debt gradually in seven years (from 1995 through to 2001). At the beginning of 2000, the Ukraine suspended its payments while there was still a balance of 280 million USS outstanding. The Ukrainian government proposed to Turkmenistan that it would earmark the payment of the balance as an integral part of its national debt repayment plan due to be newly established. While Turkmenistan rejected the proposal out of hand, agreement was reportedly reached in October 2000 to settle the matter concerning the determination of the repayment method for the outstanding debt in the spring of 2001. The two sides also agreed (at the October 2000 round of discussions) that Turkmenistan would supply 5 billion m3 of gas in November through to December 2000 (at a price of 38US$/1,000 m3) and 30 billion m3 of gas in 2001 (at a price of 40US$/1,000 m3).

As can be seen from the above, there are continuous conflicts between the Ukraine and its supplier countries on gas supplies but the very existence of the pipeline infrastructure will no doubt be an important factor in bringing a gradual solution, however difficult and devious the path that leads to a solution may be.

1.2.5 Coal

Ukrainian coal production has reached a level roughly half the nation’s domestic energy output. In recent years, however, coal output has been on a declining trend. The main coal mining regions are the Donetsk and Donbass basins in the Eastern Ukraine. The following overview table shows the shifts in coal consumption and production for the period from 1992 through to 1998.

Table 1.2.5-1 Shifts in Coal Consumption and Production (1992 - 1998)(Unit: 1 million tons)

1992 1993 1994 1995 1996 1997 1998Consumption 151.52 135.33 108.84 113.78 93.91 92.13 90.23Production 147.33 127.59 104.06 98.79 82.60 85.18 83.31

Source: El A Data

As can be seen in the table above, coal production from 1992 through to 1998 showed a nearly 44% decline from 147.33 million metric tons to only 83.31 million metric tons. The main reason lies in the sharp drop in domestic coal demands due to the standstill of

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the nation’s industrial sector in the 1990s. This low profile of industrial activity also led to a roughly 3 million metric ton decrease in coal imports from 1998 through to 1999.

The Ukraine’s domestic coal industry is facing a number of serious problems, including the non-payment of wages to mine workers, the non-payment of charges by the consumers, frequent strikes, and low productivity due to obsolete plant. The industry has a very low level of profitability. According to a World Bank estimate, the costs of Ukrainian coal is 50 USS per ton whereas the world market cost is only 35 USS per ton. There are 250 coal fields in the Ukraine and a mere 3 or 4 of them are making a profit. Work conditions are also extremely poor as the accident records can show: The number of underground work accidents such as methane explosions cost the lives of 360 miners in 1998 and of 297 miners in 1999.

As stated above, practically all mines are in need of modernization and improvement in work conditions. According to a study conducted by the Academy of Sciences, in the Donbass region, one of the Ukraine’s most important coal mining district, 80% of all coal mines have not seen any appropriate modernization and improvement works for at least 20 years. Nor, for all that matter, have any new mines been built. In January 1997, the World Bank agreed a 3 billion dollar loan for supporting a mine closing scheme coupled with a mine workers’ training program. The scheme schedules the closure of 20 mines a year. There has as yet not been a single incident in which this program has been executed, and the World Bank has decided on the re-negotiation of the loan for the closure of a number of mines. The Ukrainian government did invest 990 million US$ in 1997 and 900 million USS in 1998 for the activation of the coal industry. However, these funds were provided not for a mere increase in the production output of low-grade coal but intended for a reform of the sector, including quality improvement and the closure of unprofitable mines. At the beginning of 2000, the Ukrainian government embarked on a reform commitment in which priority was given to sector reform issues such as the closure of unprofitable mines, the creation of fuller unemployment provisions in connection with the layoffs resulting from mine closures, and improvement in safety standards.

1.2.6 Electric Power

(1) General Outline of the Electric Power Sector and the Power Supply and Demand Situation

Fig. 1.2.6-1 is an organizational chart of the Ukrainian power sector. After Ukrainian independence, the Ukraine adopted a monopoly system of eight public corporations

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exclusively in charge of power generation, transmission and distribution. This monopoly system was known as Energo, the Union of the Power Generating and Electrification Industry which operated under the auspices of the Ministry of Electric Power and Electrification (now part of the Ministry of Fuel and Energy). Under the series of reforms that were initiated in 1994, however, this sector was split into three, namely, the power generating, power transmission and power distribution areas, and an independent corporation took control of each of these fields.

As of 2001, total electric power generating capacity stands at 52,900MW. This includes the generating plant capacity of approximately 47,500MW that is under the control of the Ministry of Fuel and Energy. This includes four thermal power generating companies which are under the jurisdiction of the Ministry of Fuel and Energy: Donbasenergo, Dniproenergo, Centrenergo and Zahidenergo. These have a total of 17 power plants under their wings, with a total generating capacity of approximately 27,700MW. The Dnipro and Dniester systems have two power companies: Dnieprohydroenergo and Dniesterhydroenergo, with a total generating plant capacity of approximately 4,600MW. The five nuclear power plants on Ukrainian territory are under the control of Energoatom NNEGC, with a total generating plant capacity of approximately 11,800MW after the closure of the No. 3 reactor of the Chernobyl nuclear power plant in December 2000.

It is a particular feature of all East European countries, including the Ukraine, that there is a large number of combined heat and power stations (CHP), supplying both electricity and heat mainly to local industry and to residential housing estates. The Ministry of Fuel and Energy has nine stations under its direct control, with a total generating plant capacity of 1,270MW. In addition, the are many small-scale combined heat and power stations under the control of the regional power distribution companies and regional organizations. The Ministry of Fuel and Energy is indirectly in charge of their operation. Some of the regional power distribution companies have small-scale hydroelectric power plants in addition to their combined heat and power stations. The regional electric power distribution companies have a total plant capacity of approximately 2,100MW.

Although small in number, there are also some power generating facilities that are not under the jurisdiction of the Ministry of Fuel and Energy. These include the thermal power plants in the possession of Independent Power Producers (IPP)and some wind power stations which exist mainly in the southern parts of the Ukraine. Tables 1.2.6-1

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and 2 give a list of the thermal, hydroelectric, and nuclear power generating plants under the control of the Ministry of Fuel and Energy.

The National Electricity Company (NEC) functions as the system operating company with 220kV and higher-voltage power transmission lines, substations and the ancillary equipment.

There are 27 power distribution companies based in each district and the two main cities Kiev and Sevastopl. They have and operate small-scale power generating plants and power distribution network, and supply electricity to the private end-user households at the power tariff regulated by the National Electricity Regulating Committee (NERC). In additions, there are also independent power distribution operators in certain areas.

The following sections gives a more detailed description of the power supply system and the power sales price collection system.

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POWER GENERATION COMPANIES

Dniproenergo

1. Zaporizhska TPS2. Kryvorizhska TPS3. Prydniprovska TPS4. Maintenance and

service enterprises

Zahidenergo

1. Burshtynska TPS2. Dobrotvirska TPS3. Ladyzhynska TPS4. Maintenance and

service enterprises

Dniesterhydroenergo

Donbasenergo

1. Zuyivska TPS2. Kurahivska TPS3. Luganska TPS4. Slavyanska TPS5. Starebeshivska TPS6. Maintenance and

service enterprises

Centrenergo

1. Vuglegirska TPS2. Zmiivska TPS3. Trypilska TPS4. Maintenance and

service enterprises

Dniprohydroenergo

Energoatom NNPC

Zaporizhska NPS Pivden. Ukrainska NPS

Khmelnitska NPS Rivnenska NPS

Chernobylska NPS

ENERGOBUDState Joint Stock Holding Company (25)

POWER DISTRIBUTION COMPANIES

1. Vinnytsaoblenergo2. Volynoblenergo3. Dniprooblenergo4. Donetskoblenergo5. Zhytomyoblenergo6. Zakarpattyaoblenergo7. Zaporizhyaoblenergc8. Kyivenergo9. Kyivoblenergo

10. Kirovogradoblenergo11. Krymenergo12. Luganskoblenergo13. Lvivoblenergo14. Mykolaivoblenergo15. Odesaoblenergo16. Poltavaoblenergo17. Prykarpattyaoblenergo18. Rivneoblenergo19. Sevastopilenergo20. Sumyoblenergo21. Ternopiloblenergo22. Kharkivoblenergo23. Khersonoblenergo24. Khmelnitskoblenergo25. Cherkasyoblenergo26. Chernivtsioblenergo27. Chernigivoblenergo

1. Ukrlnterenergo2. Ukrinformservice3. Main data storage and

processing centre4. Ukrenergotrud5. VOHR

MINISTRY OF FUEL AND ENERGY

UKRENERGO- NATIONAL ENERGY

COMPANY

National Dispatch Centre of Ukraine

Regional Power Systems (dispatch centres and high voltage networks)

1. Dniprovska2. Donbaska3. Zahidna4. Krymska5. Pivdenna6. Pivdenno-Zahidna7. Pivnichna8. Tsentralna

EnergorynokState Enterprise

Other enterprises and institutions

Science, design and technical

establishments

Source: OME Power

Fig. 1.2.6-1 Organizational Chart of the Ukrainian Power Sector

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Table 1.2.6-1 List of Thermal Power Plant in UkrainePower Company Power Plant Capacity

(MW)Number of units x Unit

capacity (MW)

Fuel

Donbassenergo (Gorlovsk^ Donetsk)

Zuyivska TPS 1,200 4x300 CoalStarobeshivska TPS 1,750 10x175 CoalLuganska TPS 1,500 1 x 100

8x175CoalCoal

Slavyanska TPS 1,700 1x801 x 100 1x720 1x800

Coal Coal

Natural gas Coal

Kurahivska TPS 1,460 6x2101x200

CoalCoal

Dniproenergo Prydniprovska TPS 1,740 4x1504x285

CoalCoal

Kryvorizhska TPS 2,820 10x282 CoalZaporizhska TPS 3,600 4x300

3x800Coal

Natural gasCentrenergo Vuglegirska TPS 3,600 4x300

3x800Coal

Natural gasZmiivska TPS 2,150 6x175

4x275

Coal/ Natural gas

Coal/ Natural gas

Trypilska TPS 1,800 4x3002x300

Coal Natural gas/

MazutKiev 5 (CHP) 700 2x250

2x100Kiev 6 (CHP) 500 2x250Khar’kov 5 (CHP) 470 1x250

2x110Zahidenergo Burshtynska TPS 1,975 8x195

4x185CoalCoal

Dobrotvirska TPS 600 3x1002x150

CoalCoal

Ladyzhynska TPS 1,800 6 x 300 CoalTotal 27,695

Source: Ukraine Power Privatization Home Page, etc.

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Table 1.2.6-2 List of Hydroelectric and Nuclear Power Plants in Ukraine

Power Company Power PlantCapacity

(MW)

Number of unitsx Unit capacity

(MW)

Doniprohydro Kief 361.2 4 x 16.316 x 18.5

Kief(|§7.k) 235.5 3x373x41.5

Konivsk 444 24 x 18.5

Kremenchuk 625 12x52

Dnieperderzhensk 352 8 x 44

Dnieprovsk 1,538.2 9x721 x 2.6

2 x 104.56x113.1

Khakhovsk 351 6 x 58.5

Dniesterhydro Dnestrovsk 702 6x117Total 4,608.9

Energoatom NNPC Zaporizhska TPS 6,000 6 x 1,000

Pivrano-Ukrainsk 3,000 3 x 1,000

(Chernobyl) 0(after Dec. 2000)

Rivrenska NPS 1,818 1 x 1,0001 x 4161x402

Khmelnitska NPC 1,000 1 x 1,000

Total 11,818(Source: Ukraine Power Privatization Home Page, etc.)

Table 1.2.6-3 gives the electric power output and consumption for the years from 1992 through to 1998.

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Table 1.2.6-3 Variations in Electric Power Output and Consumptionfrom 1992 through to 1998

(Unit: 1 billion kWh)1992 1993 1994 1995 1996 1997 1998

Power output 216.7 200.6 178.1 168.8 159.5 156.7 151.2Powerconsumption

238.6 217.4 192.0 183.6 173.6 168.6 163.2

(Source: EIA materials)

In the domestic economic downturn after independence, electricity production fell from 1992 to 1998. The comer toward a recovery was turned in 1999. Power output in 2000 was recorded as 169,485 million kWh, with thermal power having a 45.1% share, nuclear power one of 45.6% and hydroelectric power one of 7.6%.

(2) Policy Measures in the Electric Power Area (a) Reorganization of the Power Supply SystemAs has been pointed out in (1), the Ukrainian electric power sector underwent a major reorganization after independence. This took place against a backdrop of dramatic economic standstill on the domestic Ukrainian market and a severe fall in power demand following the system change. Moreover, the intra-regional system of preferential fuel prices which had been applied in the Soviet Period was abolished with the result that coal and gas prices soared and that power companies saw their financial situation gravely deteriorating. The situation was seriously aggravated by the low power tariff which had been fixed at a level below the production costs by the National Price Control Board. It was also made worse by the outstanding payment from power users (households fallen in arrears). This situation threatened the nation’s power supply security. In October 1996, the prevailing power supply shortage led to a decrease in the system frequency to 49Hz and a large number of users were cut off from the network by their automatic load control systems.

Under these conditions, the Ukrainian government introduced a sweeping reorganization in 1994 in order to guarantee the high reliability of the supply service, to operate the system effectively and to improve the level of service. The basic direction in which the reorganization took place was on the lines of the following reform package, featuring the introduction of the principle of market competition and the attracting of private-sector investments.

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• Separation of the power generating, power transmission, and power distribution areas in the power sector.

• Establishment of a power wholesale market• Initiating privatization of the power sector• Establishment of the National Electricity Regulatory Commission (NERC) as

supervising authority of the market.

The state enterprise Energorynok (“Electricity Market”) was founded in conjunction with the establishment of the electricity wholesale market. Initially, it was an organization within the Ukrenergo National Energy Company but it has been operational as an independent state enterprise under a government decree of May 2000. Its operational basis are the National Dispatch Centers and the Regional Dispatch Centers that exist in eight locations in the Ukraine. Their business is to manage the wholesale market by purchasing electricity from power generators and selling power to the local power companies. They are also responsible for controlling the market.

The National Electricity Regulatory Commission (NERC) was established in 1994 at a time when the electric power wholesale market was established. Its role is to implement the policies of the government directed toward the development of the market and its function is to prevent the emergence of monopolies on the market, determine the wholesale market prices in the power sector, the selling price to the end-user, and promote competition in the market.

The organization of the Ministry of Fuel and Energy as the government department in charge of the electric power sector was formed in early 2000 through the integration of the Ministry for Electricity and the Ministry for Coal as well as various ministerial agencies. The Ministry is divided into four Departments, the Department of Electricity, the Department of Coal and Gas, the Department of Nuclear Power, and the Department of Coal. The Department of Electricity is responsible for enhancing the transparency and stability of the market by reflecting government policy. Fig. 1.2.6-2 shows electricity supply system at present.

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Payment for electricity transit to own consumers

through electricity networks owned by regional power

distributing companies

POWER GENERATION COMPANIES(ELECTRICITY GENERATION)

INDEPENDENTELECTRICITYSUPPLIERS

(electricity supply under non- regulated tariff)

FINAL ELECTRICITY CONSUMERS

ENERGY MARKET (ELECTRICITY POOL)

REGIONAL POWERDISTRIBUTION COMPANIES

(electricity transmission, distribution, supply under regulated tariff, production on own generating

capacities, supervision)

(Source: IMEPOWER Data)

Fig. 1.2.6-2 Ukrainian Electricity Supply System

The following outline describes the Ukraine’s supply system.

Each quarter, each of the power companies is required to submit a statement of the power generating costs to NERC which then determines the wholesale price for the three months by taking into consideration the financial position of the power generating companies and the balance with the other power generating companies. Based on this, the power generating companies sell the power they have generated to the state enterprise Energorynok (“Electricity Market”). The latter then resells the electricity to the regional power companies and to the major power users. The regional power distribution companies sell the electric power to the end-users.

At present, the determination of the wholesale price of the individual power generating companies is subject to the rulings of NERC. Initially when the reorganization took place the intention was to introduce free competition based on the submission of competitive bids. This principle of free competition, however, is not operative. With the future improvement of the financial structure of the regional power distribution

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companies and of the payment system for electricity charges, the transition to the ad- hoc competitive bidding procedures will take shape.

The electricity charges payment system was improved in July 2000. Before the system amendment the regional power distribution companies collected electricity charges from the end-users (consumers) and paid the part owing to Energorynok (Electricity Market). The situation is that there have been many cases in which electricity charges have been owed from the power distribution companies, with the proportion of paid charges amounting to only 68.0% for the first half of year 2000. Cash settlements have decreased to 16.8%. In response to this, the government ordered the opening of a distribution account at the Savings Bank with a power charge collecting function pursuant to the government decree No. 1136 of July 19. Under this system, all electricity consumers are required to pay their electricity charges into this bank account. As a result, the level of payment to the state enterprise Energorynok (“Electricity Market”) reached 102.3% in the second half of 2000, while cash payment was at level of 51.2%, a substantial improvement as compared with the first half of the year. Comparison between 1999 and 2000 also shows a significant improvement in the level of cash payment from 7.7% to 33.1% (quadruple). Table 1.2.6-4 gives the level of payment of the regional power distribution companies to the state enterprise Energorynok and their indebtedness to Energorynok for fiscal 1999. The further consolidation of the payment system will have a beneficial effect in improving the financial position of the power generating companies.

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Table 1.2.6-4 Level of Payment of the Regional Power Distribution Companiesto the State Enterprise Energorynok (“Electricity Market”) and their Indebtedness toward Energorynok_____ ________ ________ _____

Sold Energy (kWh)

Sales(1,000 Hryvna)

Level of Payment

(%)

CashCollection

Rate(%)

Outstanding debts as of

Jan. 1, 2000 (1,000 Hryvna)

Grand total 141,313,839.3 15,791,301.2 85.4 33.1 9,869,266.0

Total of powerdistribution companies

111,103,300.1 12,093,532.2 75.4 41.8 9,753,413.7

1 - Vinnytsaoblenergo 2,735,971.3 275,763.7 77.8 37.7 227,459.8

2-V olynoblenergo 1,165,480.9 114,768.8 96.8 61.2 48,987.8

3 -Dniprooblenergo 17,081,038.5 1,945,442.3 76.2 53.4 1,510,802.4

4-PDonetskoblenergo 16,348,855.7 1,945,404.1 76.9 34.3 1,852,582.7

5-Zhytomyoblenergo 1,999,635.1 179,405.8 96.8 71.8 50,266.9

6-Zakarpattyaoblenergo 1,565,580.9 139,687.0 71.0 42.3 121,005.5

7-Zaporizhyaoblenergo 8,813,769.5 1,040,442.3 63.4 40.3 711,423.7

8-Kyivoblenergo 3,338,831.0 340,676.7 104.1 71.3 68,138.1

9-Kirovogradoblenergo 2,298,310.9 225,179.1 75.9 30.0 126,641.6

10-Luganskoblenergo 11,125,230.5 1,343,658.5 64.7 29.5 1,523,934.8

11-Lvivoblenergo 3,534,774.6 366,548.6 77.8 35.5 305,133.4

12-Mykolaivoblenergo 2,799,011.7 284,660.4 69.3 43.5 225,017.0

13-Odesaoblenergo 5,730,640.8 576,562.9 71.1 40.6 510,432.7

14-Poltavaoblenergo 3,517,866.4 373,492.1 87.7 49.0 134,759.6

15-Prykarpattyaoblenergo 1,786,644.2 185,946.6 72.2 31.6 107,202.0

16-Rivneoblenergo 1,347,173.6 138,697.9 115.7 44.4 24,033.1

17-Zumyoblenergo 1,807,328.2 180,592.8 64.1 46.3 185,504.9

18-T emopiloblenergo 1,320,662.7 125,785.9 71.3 34.9 131,376.0

19-Kharkivoblenergo 5,604,472.4 547,759.5 91.0 42.9 316,136.3

20-Khersonoblenergo 2,899,989.0 278,370.4 70.1 41.4 386,854.5

21 -Khmelnitskoblenergo 1,982,611.6 188,708.3 82.4 46.3 88,328.3

22-Cherkasyoblenergo 2,679,499.9 276,872.4 86.0 42.6 150,498.2

23 -Chemivtsioblenergo 1,663,891.5 169,966.1 87.1 52.5 94,060.8

24-Chemigivoblenergo 1,215,525.7 112,279.4 65.2 48.0 121,499.8

- Kyivenergo 703,330.5 92,943.8 36.6 21.2 61,449.7

- Krymenergo 4,612,150.6 483,555.2 59.3 37.6 594,879.3

- Sevastopilenergo 778,398.6 87,232.9 73.7 46.4 61,934.5(Source: Ukraine News dated Jan. 19, 2001)

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(b) PrivatizationThe government’s privatization program for state-owned assets was initiated in 1992 with the establishment of the State Property Fund. In the electric power sector, a debate aimed at the reorganization and privatization of the power supply system has also been in progress since 1994. In 1997, the regional power distribution companies and the power generating companies allotted a certain part of their shares to their employees. (For the power generating companies, this proportion was 19.6% and for the power distribution companies, 17.3% in average.) After this, a certain part of the shares of the power generating and distribution companies was sold off on the stock market, with the first commercial bidding scheduled to take place in December 1997 for the seven regional power distribution companies. Yet, except for two of them, namely, Kirovogradoblenenergo and Temopiloblenenergo, this program did end in failure. The reasons why the program was not successful may be attributed to the lack of interest among foreign investors due to a number of problems, including the short time allowed for placing bids, the small proportion of shares offered for sell-off, the absence of government guarantees on the restructuring of the debts of the companies whose stocks were put on offer, and the non-existence of control over the government-owned part of the shares.

Subsequently, the government established in March 1998, its “Fiscal 1998 Privatization Program.” Under this program, power generating companies were permitted to cede to successful bidders government-owned shares (25% - 51%) in the bidding process. As a result, the State Property Fund opened the commercial bidding procedures and was successful in selling off 35 - 36% of the shares of the regional power distribution companies in the summer of 1999. The sole criterion for the success or failure in the placement of bids was the tendered price and no consideration was given to the investment amount put into the power distribution company. Consequently, there were no strategic investors among the bidders and the bidding operation ended in failure, except for five companies, due to the absence of bidders.

In early 2000, the Ukrainian government announced its plans to launch a commercial bid for the selling off of 20 power distribution and four power generating companies from November 2000 through to 2002. The State Property Fund availed itself of the services of Credit Swiss First Boston as the consultant for the bidding operation. In November, a public announcement was made that a bidding procedure for the selling off of six companies was to be launched. The six companies concerned were the Kievoblenenergo (Kiev Power Distribution Company) (75%), the Rivneoblenergo (75%), the Zhytomyoblenergo (75%), the Sevastopilenergo (70%), the

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Khersonoblenergo (65%), and the Kirovogradoblenergo company (51%). The bidding procedures had been scheduled to take place in February 2001 but due to such problems as the outstanding debts owed by the companies to be sold off to the state enterprise Energorynok and the fact that the system for determining the power vending price to the end-users (consumers) had not been established, the bid was postponed to April. A restructuring plan for the outstanding debts was decided upon pursuant to a government decree issued in February. Yet, the system for determining the power vending price to the end-user (consumer) has still not been settled and the way in which this issue will be resolved will have a crucial bearing on the implementation of future bids.

(c) Closure of the Chernobyl Nuclear Power PlantAfter independence in 1991, the Ukraine’s domestic economy went into recession, resulting in a decline in power generation. The extent of this drop in power generation was the worst for thermal power. Nuclear power therefore achieved a relatively greater share in the power mix. As of November 2000, the five nuclear power stations (total of 14 reactors) in the Ukraine have a generating capacity of 12.8GW, a level roughly equivalent to a fourth of the Ukraine’s total capacity. As power output rose to 70 billion kWh, the share of nuclear power also rose to approximately 40% of total domestic capacity. In spite of the stoppage of five reactors in June 2000, power output from the nuclear generating facilities reached a share exceeding 50% of total output for the first time in 1996. In addition, two new 2GW capacity nuclear power reactors (Unit No. 2 at the Khmelnitska Power Station and Unit No. 4 at the Rivnenska Nuclear Power Station) are in the process of being built.

Under these conditions, the No. 3 reactor at the Chernobyl Nuclear Power Stations was turned off on December 15, 2000. The Chernobyl station consisted of a total of four reactor units and until the reactor melt-down accident occurred in the No. 4 reactor on 1986 it had a capacity of 4,000MW (with each unit having a capacity of 1,000MW). It was one of the main nuclear power stations together with the Zaporizhska Nuclear Power Station. Prior to the accident, work had been in progress to build two more reactors. (Their construction was discontinued after the accident). Following the accident in 1986, the No. 2 reactor unit was shut down due to a fire accident in 1992. In 1995, a memorandum was exchanged between the Ukraine and the G7 in which the Ukraine pledged itself to take the No. 1 and No. 3 reactors out of operation within five years. The No. 2 reactor unit at the Khmelnitska and the No. 4 reactor unit at the Rivnenska Nuclear Power Stations, that were under construction were both due to be completed within this period and thus to make up for the loss of output from Chernobyl.

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The Western signatories undertook a commitment to grant the Ukraine credit in an amount of 1,270 million US$.

Under the terms of the Memorandum, the Ukraine did shut down its Chernobyl No. 1 reactor in 1996 and its No. 3 reactor in December 2000. Although the Chernobyl Nuclear Power Station has been shut down in perpetuity the credit pledged by the Western Powers has still not been implemented. The reasons given by the West are that opposition to the construction of new nuclear power plants has intensified and that the Ukrainian government has failed to attract credit.

Immediately prior to the closure of the last Chernobyl reactor in December 2000, the EBRD decided on the provision of credit in an amount of 215 million US$. The European Council followed suit with the decision to grant a credit of 585 US$. The “conditionalities” on which the implementation of the EBRD credit will rest are given as the permanent closure of the Chernobyl nuclear power station, the reopening of credit lines by the IMF on an expanded scale, the submission of a safety guarantee for the 2 new reactors that are being built and for the 14 reactors that are still in operation, and an increase in the power vending tariff. It is expected that it may take at least 3-4 months for these conditions to be fulfilled. The two new reactors that are to make up for the loss in output due to the closure of Chernobyl are likely to be put into operation in about three years’ time.

The permanent closure of the Chernobyl Nuclear Power Station not only poses the problem of how alternative supplies can be secured. It also has a profound impact on the national economy of the Ukraine. The Ministry of labor estimates that the closure will lead to 5,600 layoffs which will cost the government security benefits payable to the unemployed and subsidies to the city of Slavuchi in which the former power workers live. To resolve the many problems associated with the closure funds totaling an estimated 1,697 million Hryvna will be needed over the next eight years.

Yet, Chernobyl is not the government’s only problem. Ukrainian nuclear power plants suffer from fund shortages and shortages in fuel. In February 2000, a number of nuclear reactors had to be stopped because they had run out of fuel.

In order to resolve these problems, it will be necessary to establish and implement comprehensive power development plans that take into consideration not only the construction programs for new nuclear reactors but also the improvement of the other power facilities, including thermal and hydroelectric power.

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1.2.7 Current Situation of Coal Mine Gas Recovery and Use

At present, most of the coal bed methane that is recovered in the Ukraine is the “emission gas associated with mining production (coal mine gas).” Only a small part of the gob well or goaf gas and the coal bed methane is recovered.

The volume of emission gas associated with mining operation is proportional to coal mining output. In 1990, the total emission gas volume was 3.7 billion m3 (converted to pure methane). After 1990, however, coal production declined and with it also decreased the emission gas volume. The emission gas volume since 1996 has been recorded as 1.9 billion m3. While the emission gas volumes are not known for each coal field, the fact that most of the coal is produced in the Donetsk Coal Field suggests that the majority of the emission mine gas comes from the Donetsk Coal Field. The total methane gas emission per ton of coal production is 22 - 27m3 (ton (converted to pure methane).

The volume of methane gas recovered by on-site underground draining was 306 million m3 (converted to pure methane) in 1990. It decreased to only 138 million m3 in 1996. After this, it rose slightly to about 147 million m3. The gas recovery rate (that is the proportion of the recovered gas volume to the total emission volume), however, has remained at a level of 7 - 8% since 1990. This means that 92 - 93% of the methane gas generated in coal mines is still being released into the atmosphere as part of the exhaust gases discharged from the mines.

Table 1.2.7-2 shows the methane gas emission volumes from Ukrainian mines, the recovered gas volumes, and the gas volumes that are utilized in 1990-1998.

In 1997, a total of 56 million m3 of coal mine gas were utilized. Most of the gas was used as a boiler fuel. Practically all of the recovered methane gas was used in the in- house boilers at the collieries. This is because of the low methane concentration and the poor stability of most of the coal mine gas.

Apart from its use as a boiler fuel, it is also used for power generation at the Pervomaisk Colliery of the Mine and Chemical Combinat (GHK) in Shakhtensk Antratsit (Donetsk District). This colliery has a 500kW capacity generator driven by the No. 1 diesel engine using gas produced at the Pervomaisk Diesel plant in Nikolaevsk. This engine uses 3m3 of methane gas per minute and the cost of power generation is 500 US$/kW of electricity. The engine uses a coal coal mine gas with a methane

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concentration of approximately 50%. As far as we were able to observe during our visit, there are still some technical problems to overcome and the development is still at the field test stage.

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-42

Table 1.2.7-1 Situation of Coal Mine Gas Recovery and Use in the UkraineEmission gas volume, recovered volume: Converted to pure methane

1990 1993 1994 1995 1996 1997 1998

Coal production output (million tons) 168.8 115.7 94.4 85.7 75.7 76.9 76.8

i_> g

Volume in main fan exhaust 3,401.53 2,468.90 2,332.02 1,876.71 1,794.85 1,752.01 1,791.85

Recovered volume (%) 306.92 220.25 181.13 160.47 138.29 146.97 147.56

1 § Total emission volume 3,708.45 2,689.15 2,513.15 2,037.15 1,933.14 1,898.98 1,939.41

'll Recovered rate (%) 8.3 8.2 7.2 7.9 7.2 7.7 7.6O Emission volume per ton of coal output

(m3/ton) 22.0 23.2 26.6 23.8 25.5 24.7 25.3

IS Used volume 145.01 69.50 95.05 89.18 48.14 56.83 83.4

is Used volume for recovered volume (%) 47.2 31.6 52.5 55.6 34.8 38.7 56.5

it Used volume for total emission volume (%) 3.9 2.6 3.8 4.4 2.5 3.0 4.3

Source: IEA, Coal Information 1998Gas emission volume: Ukraine Alternative Fuels Center

Note 1: Recovery rate = Recovered volume -r Total emission volume Note 2: Used volume = Volume used at the colliery

The recovery and use of gas from the gob well has been attempted in part on an experimental basis. From 1992 to 1999, a single surface test drill was carried out and approximately 6 million m3 of methane gas were recovered. The methane was supplied to the Makeyevka Metallurgical Combine in the Donetsk District for use as an industrial fuel.

The Ministry of Fuel and Energy has a plan to carry out surface test drills in three locations to a depth of 240 - 400m at the Tomashevskaya-Yuzhneya Colliery, a coal mine in the Donetsk Coal Field that has already been closed. A plan is currently being developed envisaging the use of the recovered methane gas as a fuel for the gas turbine generators (2.5MW x 2 units).

So far, several tens of test drills (CBM drilling) from virgin coal beds have been carried out in the Donetsk Coal Field to recover gas. A part of the recovered gas with a high methane concentration is supplied to the automobile gas-filling compressor station of the Frunze Production Union in NUSY. This station has three units with a gas refilling capacity for 45 refills a day and uses 3 million m3 of gas, including both natural gas and CBM, on an experimental basis.

Further, a pilot project for the recovery of coal bed methane gas is being carried out in the Donetsk Coal Field in accordance with a Cabinet Decision of 1999. This project has been established by the Ministry of Coal Industry and the National Academy of Sciences, with the Center for Alternative Energies acting as the executive body. Under this project, a total of 29 test drill wells and test drill production wells are bored in five areas. Hydraulic fracturing experiments are also scheduled to be carried out at the test drill production wells. At present, one 1,172m deep test drill well and one 1,195m deep test drill well have been completed. By the end of 2000, a further three test production wells are due to be completed.

The American EPA Ukraine Office is in the process of carrying out an independent feasibility study (named Business Plan) on the recovery of methane gas combining the recovery of methane gas from unworked and worked coal beds in 29 areas. The results are to be announced very soon and will help to stimulate foreign investments in Ukraine.

While the Ukraine has a diversity of energy deposits, coal is the most abundant resource. Petroleum and natural gas are produced in small quantities. In 1997, Ukrainian self-sufficiency in petroleum stood at 33.6% and in natural gas at 22.3%.

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(Source: IMF, Staff Country Report 1999). The Ukraine depends on Russia for most of her imports. For the Ukraine it is therefore a national priority to enhance its dependence on its own energy resources. As part of this effort, coal mine gas is viewed as an important resource for the future. The Ukrainian Supreme Assembly (Parliament) endorsed, in 1995, the “Ukrainian National Energy Plan Up to the Year 2010.” The Plan envisions the use of coal mine gas as an energy.

In 1998, the Ministry of the Coal Industry and the National Academy of Sciences established the Center for Alternative Energies with USAID support from the United States. The Center has been assigned the role of the executive body for the development of coal mine gas and is currently engaged in the project work. In 1999, a cabinet decision was passed “On the Development of Industrial Methane Gas Production in the Donbass Coal Region.” Cabinet decided on the implementation of a series of mine gas related pilot plans.

A large number of foreign organizations have also given extensive cooperation in the development of mine gas in Ukraine until the present. Currently, the American EPA has two engineers stationed in the capital Kiev to provide cooperation in the development of the legal and tax system related to coal mine gas, the establishment of a database, and the preparation of a project plan.

The main projects implemented so far with foreign cooperation are as follows and there is further demand for technical and financial cooperation from foreign countries.

1995-1996: Gas recovery in the Donetsk Coal Field /Evaluation (Technical Assistance for CIS)

1994-1998: Pilot Project in the Donetsk Coal Field (World Bank)1997-1999: Feasibility Study in the Donetsk Coal Field (US Trade Development

Agency)

1.3 Needs for Jointly Implemented Projects

- (1) Role of Ukraine in Joint ProjectsAt the 3rd Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COPS) held in Kyoto in December 1997, the C02 emission reduction target for the Ukraine during the period from 2008 through 2012 was settled at a moderate level of 0% as compared with 1990. Ukraine’s energy-related C02 emissions (converted to carbon) since 1992 have continued to decrease: They

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were 154.13 million tons in 1992, 144.87 million tons in 1993, 120.74 million tons in 1994, 120.18 million tons in 1995, 106.09 million tons in 1996, 104.91 million tons in 1997 and 99.73 million tons in 1998. During these seven years alone, the Ukraine has reached a reduction of approximately 35%. This is in clear contrast with the increase in emissions in Japan. Whereas, in Japan, emissions had been 278.35 million tons in 1992 they rose to 288.48 million tons in fiscal 1998.

The Ministry of Economic Affairs anticipates an increase in C02 emission on a scale of approximately 15% over the next ten years on the basis of the present rate of economic growth (5 - 6%). Compared with the 1990 level, there is still a sufficient margin. This suggests that the Ukraine can reach its target without difficulty in the period from 2008 to 2012 during which the Ukrainian pledge to reduce greenhouse gas emissions applies. Concurrently, the Ukraine is in a relatively favorable position in terms of the emission trading and joint implementation as the concrete rules for the implementation mechanism will be established at the previously mentioned Conference of the Signatory Countries. This suggests that the Ukraine will accept a positive commitment toward these issues.

(2) Needs for Projects Such as Joint Implementation Projects in the Ukraine Against the conditions described above, the Ukrainian government fully recognizes the need for energy conservation and environmental improvement through projects, including joint implementation projects. The Ukrainian Ministry of Environmental Protection and Nuclear Safety (now the Ministry of the Environment and Resources issues a White Paper on the Environment in 1998 titled “State of Environment in Ukraine for 1998.” The document contains the following passage.

“It does not go against the benefit of Ukraine to participate in the Kyoto Protocol. The United States and Japan as well as the other industrialized countries are interested in the acquisition from Ukraine of the part of Ukraine’s emission reduction achieved through joint implementation projects aimed at reducing ecological greenhouse gas emissions or increasing their absorption in all economic fields. For Ukraine, it will be possible to promote economic recovery by participating in joint implementation projects and international greenhouse gas emission trading. At present, negotiations are in progress with the Netherlands, the US, Canada and Japan for the realization of joint implementation projects in the near future. This will provide a basis on which Ukraine will be able to participate in international greenhouse gas trading on equal terms.”

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The Ukrainian government is proceeding with its work designed to achieve economic benefits through energy conservation and through the future trading of emission rights. In the present local study, comments were made by the Ministry of the Environment and Resources with great resonance stating that a Joint Implementation Promotion Committee consisting of representatives of the ministries concerned under the chairmanship of Vice Prime Minister Gradi did already exist and that the Ukraine has a system for participating in the concrete mechanisms for the implementation of the COPS and emission trading. The Ministry of the Environment and Resources is the ministry in charge both in name and in reality. Between the Ukraine and the Netherlands, an Improvement Project for the Sugar Factory in Yagotin City is currently in progress in the form of a Joint Effort Project (a so-called Pilot Project). Until the present, however, the specific rules for this mechanism have not been decided at the government level.

In view of the above, the Ukraine has a very strong need for joint implementation projects. These have a vast potentiality for the joint implementation target country. It is also being reported that programs concerning the promotion of joint implementation projects in the Ukraine are being prepared, such as the World Bank’s “Development of National Strategy Plan.”

2. Need for the Introduction of Alternative Energy Technologies in the Target Sectors

Methane gas which is produced in the process of coal mining has a global warming effect 21 times that of carbon dioxide (C02) when released directly into the atmosphere. If recovered, it can be used as an alternative energy to coal and petroleum for purposes, including power supply in coal mines, regional heat supply, and town gas. Errors in mine gas control can lead to gas explosion accidents and thus impede coal production. In this sense, methane gas recovery can also contribute to safety in coal mine operation.

The recovery and use of methane gas has also been practiced in Japan since prewar times in the Sorachi, Yubari and Kushiro coal mine districts. The use of methane gas from coal mines for electricity generation goes back to 1935 and the technology has been successfully proven in many collieries, including the Sunagawa, Akahira, Ashibetsu, and Shimizuzawa coal mines. Coal mine gas recovery and use has a long history also in the world’s most prominent coal-producing countries, including the US, the former Soviet Union, China, Poland, and South Africa.

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With the disintegration of the socialist system, the coal industry of the former Soviet Union under the heavy protection of the planned economy received a fatal blow that has led to the closure of unprofitable coal mines with the serious social consequences of unemployment caused by the layoff of the coal mine workers. Essentially, coal mine gas should be recovered through positive plant investment and renewal in parallel and in conjunction with coal mining operation. Due to the cut in subsidy funds, however, the coal mining companies no longer have the financial margin to be able to afford the efficient recovery and use of coal mine gas.

It is clear from the above that the Ukraine has a sufficient potential demand and capacity for the recovery and use of coal mine gas. The Chief Secretary in Charge of Ukraine’s Ministry of Fuel and Energy and the leading officials responsible for the Donbass Coal Field have repeatedly stated that they feel it will be necessary to introduce the superior Japanese alternative energy technology and to make use of the coal mine gas (as a domestic Ukrainian energy) that is currently being wasted. It can therefore be concluded that there is a great need for the introduction of alternative energy technology for the production of electricity and thermal energy by making use of the coal mine gas at the Ukrianian collieries.

3. Significance of the Project, Its Necessity and Effect, and Spin-off Effects on the Sector

At present, at three Ukrainian coal fields, namely the Lviv-Volyn, the Dnieper, and Donetsk Coal Field, a total of approximately 77 million tons of coal (1998) is produced. About 90% of this output is produced in the underground mines of the Donetsk Coal Field. The total emission gas from the coal mines is 1,939 million m3 (in 1998, converted to pure methane). The recovered gas volume transported in pipelines is 148 million m3 a year (in 1998, converted to pure methane) and the used volume is 73 million m3 a year (in 1998, converted to pure methane). Thus, the volume of used gas is only a small proportion of around 4% of the total emission gas volume.

As a result, the present projects involving the introduction of a system for the effective recovery and utilization of coal mine gas will spread widely through the country once it has been implemented as a model project in the Ukraine and its validity has been proven.

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Chapter II

Specific Details of the Project Plan

This Chapter gives an overview of the Project target area, a description of the project content, a summary of the greenhouse gases and implementation sites (enterprises) targeted by this Project, project implementation capability and post-modification specifications of the relevant equipment. It also gives details about the funds, equipment, and services to be provided by both parties for the execution of this Project, the preconditions, problem areas, the implementation schedule, funding plan, and the relevant conditions for joint implementation.

1. Project Plan

1.1 Outline of the Proj ect Target Area

1.1.1 Donetsk District, Donetsk Coal Field Community, Economic Condition, Energy Situation, etc.

(1) The Donetsk DistrictThe Donetsk District (oblast’) is an industrial zone located in the eastern part of the Ukraine. It is the heartland of the country’s coal industry.

Population: 5,346,700 inhabitantsLand area: 26,500km2Population density: 201.8 (persons/km2)Capital: Donetsk (Population 1,117,000 inhabitants)

(2) Main CharacteristicsA. LocationThe Donetsk district (oblast’) has a land area of 26,500km2 and the Ukraine’s most populated area, with a population of 5 million inhabitants. It is bordered by three other Districts (oblasti) and the Russian oblast’ Rostov. In the South is faces the Sea of Azov which is linked to the Black Sea. The distance between Donetsk (the District capital) and the national capital Kiev is 871km by train and 693km by road. The easiest form of access from Kiev is by airplane, with national airlines offering frequent and regular flights to and from Kiev. The flight time is a mere two hours. There are airports in Donetsk, MalyupoT and Kramatorsk. The Donetsk District has a very well-developed road infrastructure. Its main industries are the metallurgical and chemical sectors, with abundant reserves of coal and other natural resources.

B. Market AccessDonetsk is the Ukraine’s most populated Districts (oblast’) with a population of over 5 million inhabitants. In view of its standing as a major market, it can be easily accessed using the traffic system to the Russian south.

C. Social-Industrial BaseThe Donetsk District has a relatively highly developed industrial base. There are many companies on the industrial estates, with a properly developed railway and road network linking the various plants with the surrounding towns. In Donetsk, MalyupoT and Kramatorsk there are airports with a full-service range. It is possible to reach them

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from any location in the District within three hours. Malyupol’ airport also handles approximately 7,000 tons of cargo every year.

D. EconomyThe Donetsk District is responsible for 20% of the Ukraine’s industrial production output. By sector, it breaks down as follows:

Industrial products: 62%Construction: 14%Transport and Communications : 7%Agriculture: 5%Other industries: 7%Service Sector: 5%

Industrial production breaks down as follows:

Metals: 46%Fuels: 19%Energy: 12%Heavy Machinery: 9%Food Industry and Beverages: 5%Chemicals: 3%Other Industries: 6%

In the metallurgical sector, there are some 80 companies producing half of the District’s total production output. These companies are actively exporting their products to some 50 countries throughout the world.

The following three plants account of a majority share of the District’s industrial sector.

Donetsk Metallurgical Enterprise Azov Stal’ Metallurgical Enterprise Ilyich Metallurgical Enterprise

There are some 200 companies making up the heavy machinery sector of the District. The chemical sector consists of mainly 15 companies. This industrial sector accounts for roughly 7% of the Donetsk District’s exports.

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(3) Donetsk Coal FieldThe Donetsk Coal Field is the largest coal mining area in the former Soviet Union. In 1998, it recorded a coal production output of 76 million tons, with the Ukraine as the world’s eighth largest coal-producing country. With methane gas resources in the order of 12 trillion m3, the Ukraine ranks fourth in the world.

The Donetsk Coal Field faces the following problems following the transition from the planned economy to a market economy after the disintegration of the Soviet Union.

• -Contraction of the coal market• Decline in coal prices• Cost competition among coal producer companies• Delay in mining equipment modernization due to fund shortages• Lack of progress in automation and personnel reduction• Environmental problems• Unstable coal quality

Coal mine restructuring programs are being carried out under the auspices of the Ministry of Fuel and Energy as their execution is a condition incidental to the grant of loan funds by the IMF and the World Bank. The forecast for the next few years is that the Ukraine’s coal mines will be classed into four categories and only the mines with a high level of efficiency and profitability will survive while the unprofitable ones will face closure. Within this process, coal mining is likely to focus on about 70 collieries which will be successively privatized.

1.1.2 Coal and Coal Bed Methane (CBM) Resources in the Donetsk Coal Field

As can be seen in Fig. 1.1.2-1, the Donetsk Coal Field is a vast coal mining area straddling the southeastern Ukraine and southwestern parts of Russia. In terms of its geological structure, including geological faults and folds, the area can be divided into 30 zones. The basement rock of this coal field is the strata of Pre-Cambrian or Devonian age. The carboniferous strata lie unconformably on the basement rock and are coal bearing strata. The coal-bearing strata are extensively interspersed with thin limestone layers. The coal seams extending through the entire coal field are correlated in detail on the basis of this combination of limestone and coal. Each coal seam is named accordingly, including even the thin coal seams. The coal seams are named as Bl, B2 ... Cl, C2 .... PI, P2 in ascending order. There are approximately 100 coal seams with a thickness of 0.45m or more. Almost all of them are thin seams, and there are

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practically no seams with a thickness greater than 2m. The coal seams that are currently being worked have an average thickness of lm or less.

Table 1.1.2-1 shows the geology and the coal seam occurrence characteristics for the coal field concerned.

The Donetsk Coal Field has subbituminous-to-anthracite (smokeless) coal deposits. In the Ukrainian Coal Field, the volatile component gradually decreases in the southeastern direction.

Table 1.1.2-2 gives the average properties for the coal of this Coal Field.

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Ukraine Russia

Starobel’sk

Lugansk (* Mi Hero voKrasnoarmiisk

Doniepropetrovsk

-Donetsk

Shakhtinsk

Fig. 1.1.2-1 Coal Occurrences in the Donetsk Coal Field Source: The Ukrainian Alternative Fuels Center

1 — Petrikov area; 2—Novo Moskovsk area; 3 — Petropavlovsk area;4 — Yuzhno-Donbas area; 5 — Krasnoarmiisk area; 6—Donetsk- Makeyevka area;7—Amvrosiyevka area; 8—Tores- Snezhnyansk area; 9 — Central area;10 —Sonbass north-west bounday; 11 — Starobel’sk region; 12 —Lysychans’k area;13 — Almazny-Marievka area; 14 — Seleznevo area; 15 — Lugansk area;16 — Krasnodon area; 17 — Orekhov area; 18 — Bokovo-Khrsustal area;19—Druzhno-Ropenikiy area 20—Minsk; 21 — Shakhtinsk-Nespetaevsk area;22—Zadonsk area; 23 — Slino-Sadokinsk area; 24—Gukovo -Zuperevo area;25—Krasnodonetsk area; 26—Kamenskii -Gundrovsk area; 27—Perokalitvensk area; 28—Tatsynskiy area; 29—Millerovo area; 30— Tsimlyansk area

Table 1.1.2-1 Coal Bearing Formations in Donetsk Coal Field

Geological ageStratum thickness (m) Number of coal seams

(Thickness 0.45m and more)

Maximum total thicknessof coal seams

(m)West East

Late Carboniferous 720 1,900 2-7 3.40

Middle Carboniferous 2,200 6,400 o ? On O 34.20

Early Carboniferous 460 3,360 4-30 16.40

Source: IEA Coal Research 1993

Table 1.1.2-2 Average Coal Quality - Donetsk Coal Field

Geologicalage

Coalquality

Grading

Moisture * Volatile *Ash content * Sulfur content **Heat valuecontent (%) content (%) (%) (%) (MJ/kg) (kcal/kg)

G 8.0-10.0 37.0-41.0 12.0-15.0 2.S-3.5 33.87-35.58 : (8,090-8,500)GZ 7.8-8.0 33.0 15.0 1.5 35.58 (8,500)

Z 6.0 30.0-33.0 12.0 3.0 35.58 (8,500)LateCarboniferous

K 6.0 25.0 15.0 3.0 36.00 (8,600)OS 4.0 17.0 15.0 3.0 36.00 : (8,600)T 7.0 3.0 20.0 3.0 35.58 (8,500)A 7.0 4.0 16.0 2.4 34.20 (8,170)

Middle Carboniferous D 13.0 43.0 20.0 3.5 30.60 (7,310)D 13.0 45.0 20.0 2.0 30.60 (7,310)

Early G 9.0-10.0 41.0-43.0 12.0 2.0-2.5 31.77-34.70 (7,590-8,290)Carboniferous Z 6.0 32.0-35.0 7.0-10.0 2.0 35.58-36.38 (8,500-8,690)

K 5.0 22.0 7.0 2.0 36.38 (8,690)

Source: IEA Coal Research 1993

Note 1: * dry basis ** dry ash free basisNote 2: Grading: A anthracite, D longflame, G Gas, GZ gas fat, OS lean coking, T lean, Z fat

A number of studies have already been carried out on the amounts of coal bed methane resources deposited in the Donetsk Coal Field. On current evidence it is estimated that the total gas reserves, comprising the gas quantities absorbed in the coal seams, the gas quantities present in the rock formations, and the gas quantities dissolved in the groundwater amount to 22,200 billion m3 and that the extractable gas quantities are 11,600 billion m3 and the economically extractable gas quantities 3,000 - 3,750 billion m3.

The typical compositions of the coal bed methane in the Donetsk Coal Field (that is, the gases present in the virgin field) is as shown in Table 1.1.2-3: CH4 - 93 -95%, C2H6 - 0.5 - 2.4%, C3H8 - trace levels - 0.5%, 02 - 0.1 - 0.5%, N2 -1.4 - 6.0%, and C02 - 0.2 - 0.5%. This composition is close to that of natural gas. According to the explanations given by the Donetsk Coal Field Research Center, however, the gas reports high C02 levels in some areas.

As can be seen from Table 1.1.2-4, the gas contained in the coal of the individual State Holding Company in the Donetsk Coal Field (owning a number of coal mines) is 6.7 - 29.9m3/ton, the average gas content being 15.4m3/ton. The gas volume released from the coal mines as whole in the coal mining process is 8.9 - 55.8m3/ton of mined coal (converted to pure methane) averages 29m3/ton.

Coal bed methane (CBM) extraction by surface drilling has been carried out mainly in the Donetsk Coal Field. According to the explanations furnished by the Donetsk Coal Field Research Center, several tens of drilling operations have already been conducted until now and the results have shown that the average methane recovery per drill is 1.5 million m3 for a recover time of 300 - 350 days. The recovered gas has a high concentration and some of the gas can even be used as an automobile fuel.

The Bureau of the Ukrainian Coal Industry views coal bed methane as an important resource and has developed various plans for its exploitation, including the CBM Extraction Program, the Underground Coal Mine Gas Recovery Program, and the Coal Mine Gas Recovery from Closed Coal Mines Program. The Ukrainian Alternative Fuels Center has been entrusted with the implementation of these programs. At present, test operation has been commenced in some parts of the Donetsk Coal Field, with attention being focused on their results. The authorities are looking for foreign cooperation and investment for these projects in view of the economic recession in the Ukraine.

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The Ukraine’s main coal fields are the subbituminous-anthracite coal fields of L’viv- Volyn and Donetsk and the lignite coal field of Dnieper. At the end of 1996, the country’s coal reserves were estimated as totaling 57 billion tons, comprising 54.2 billion tons of subbituminous - anthracite coal and 2.9 billion tons of lignite. The extractable deposits have been estimated to total 34.3 billion tons, consisting of 32.4 billion tons of subbituminous - anthracite coal and 1.9 billion tons of lignite.

Fig. 1.1.2-2 shows the main location of the Ukrainian Coal Field and Table 1.1.2-5 the reserves by the level of certainty.

Coal production output total 197 million tons in 1980, including 188 million tons of subbituminous - anthracite and 9 million tons of lignite. After 1980, however, Ukrainian coal production declined under the influence of the economic crisis in the Soviet Union. In 1998, output showed a sharp drop to a total of only 77 million tons, including 74 million tons of subbituminous - anthracite and 3 million tons of lignite. Lignite coal is extracted to some extent by open-cut mining in the Dnieper Coal Field and the remainder of Ukrainian coal production comes from underground mines. The Donetsk Coal Field is the most important coal mining areas with a production share of approximately 90%.

Table 1.1.2-6 shows the variations in coal production since 1990 and Table 1.1.2-7 the production output by type of coal since 1992.

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Table 1.1.2-3 Coal Bed Methane Compositions - Donetsk Coal Field

Name of colliery CH, CgH C3H8 02 n2 CO 2Heat value

MJ/m3

(normal)

Deni sty kg/m3

(normal)

Zasyadko 95.2 2.19 0.44 0.29 1.69 0.19(8,910)37.30

0.747

Kalinnin 95.2 2.40 0.45 0.21 1.39 0.35(8,950)37.47

0.748

Skochinsky 94.2 1.69 0.31 0.30 2.98 0.52(8,710)36.46

0.753

60Let Sov,Ukrainy 93.8 2.41 0.52 0.40 2.49 0.38(8,840)37.00

0.759

Butovka-Donetskaya 95.1 1.84 0.36 0.30 2.17 0.24(8,830)36.96

0.747

Glubokaya 94.5 0.52 0.01 0.08 4.65 0.24(8,480)35.50

0.746

Y uzhnadonbass 92.7 0.53 trace 0.48 6.03 0.26(8,330)34.87

0.758

Source: Donbass Experience in Degassing Coalfield, Valentin Konarev Note: Sample: Coal bed methane in virgin field Heat value: kcal/Nm3

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Table 1.1.2-4 Coal Bed Methane Data for State Holding Companies - Donetsk Coal Field

Reserves (100 million m3) Coal-contained gas reserves (m3/ton)

Gas breakout volume per ton of coal

produced (m3/ton)All mines Active mines Extractablereserves

Donetsk Ugolj 302-869 199-573 144-415 12.9 37.1Makeyev Ugolj 408-1,035 126-320 97-245 21.1 53.3Oktyabr’ Ugolj 111-341 72-220 58-179 18.2 55.8Krasnoariisk Ugolj 126-339 126-339 52-140 12.8 34.5Kurasnodon Ugolj 382-669 115-202 87-153 21.9 38.4Shakhtiorsk Ugolj 187-298 95-151 76-122 29.9 47.8Donvass Antratsit 253-604 58-138 42-99 15.9 38.0Lugansk Ugolj 550-849 119-184 84-129 15.1 23.3Artem Ugolj 91-149 60-99 48-79 17.4 28.5Stakhanov Ugolj 271-453 65-108 40-67 14.2 23.7Tres Antratsit 78-187 17-43 14-34 6.7 16.5Dobropillia Ugolj 370-723 83-163 59-115 1.0 21.6Ordzhonikidze Ugolj 75-123 36-59 29-47 15.4 25.2Pavlograd Ugolj 399-449 100-113 79-89 7.9 8.9Pervomaisk Ugolj 242-433 52-93 39-69 14.4 25.7Dzerzhinsk Ugolj 50-79 25-40 18-29 16.8 26.8Ly cy chans’k Ugolj 77-123 26-42 19-31 10.9 17.5

Average 15.4 29

Source: Data of the Ukrainian Alternative Fuels Center

3

■N*«J l\ t

Fig. 1.1.2-2 Location Map of Main Coal Fields in Ukraine

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Har

d Coa

l Br

own C

oal

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Table 1.1.2-5 Ukrainian Coal Reserves (As of the end of 1996)Unit: Million tons

Measured Inferred additionalTotal

Measuredextractable Remarks

reserves reservesreserves

Bituminous (including Anthracite) 21,850 27,256 16,388 Coal seam thickness: 0.6m or more, Depth:

1,800 or less

Subbituminous coal 21,370 5,500 26,870 16,027 Coal seam thickness: 0.6m or more, Depth: 1,800 or less

Lignite 2,588 319 2,907 1,941 Coal seam thickness: 2.7m or more, Depth: 400 or less

Total 45,808 11,225 57,033 34,356Source: World Energy Council “Survey of Energy Resources 1998”

Table 1.1.2-6 Ukrainian Coal ProductionUnit: Million tons

1980 1985 1990 1993 1994 1995 1996 1997 1998

Subbituminous - Anthracite 188.2 173.3 159.5 111.6 91.3 83.5 74.1 75.5 73.7

Lignite 8.9 8.5 9.3 4.1 3.1 2.3 1.6 1.4 3.1

Total 197.1 181.8 168.8 115.7 94.4 85.8 75.7 76.9 76.8

Note: 1998 Production: Estimated figures Source: IAE “Coal information 1998”

11-14

Table 1.1.2-7 Ukrainian Coal Production by Type of Coal

Unit: 1,000 ton

1992 1993 1994 1995 1996 1997

Coking coal 53,726 42,546 36,390 29,595 28,591 31,838

Steaming coal 74,148 69,054 54,910 53,933 45,181 43,676

Lignite 5,779 4,100 3,100 2,296 1,587 1,433

Total 133,653 115,700 94,400 85,824 75,719 76,947

Source: IEA “Energy Statistics of Non-OECD countries, 1996-1997”

1.2 Project Description

1.2.1 Gas Recovery Management Project

The purpose of this Project is to ensure mine safety, utilize unused resources, and reduce greenhouse gas emissions that are responsible for global warming. To achieve this purpose, it introduces the use of coal mine gas recovery and utilization systems at the Donbass Colliery in the Donetsk Coal Field. More specifically, it envisages the following project activities as part of a gas recovery management system.

(Description of Gas Recovery Management Project)The project envisions the introduction of technology at the Donbass Colliery designed increase the gas volume recovered from coal mine (improvement in recovery efficiency), upgrade the concentration of the recovered gas, and ensure the stability of recovered gas supply. This project also involves the transfer of Japanese gas recovery technology.

(1) Drilling to the roof rock of working faces for gas draining (test drill length 300m)(2) Gas conduction (Gas conduction for each gas drain drilling hole)(3) Seal gas draining (gas recovery from within flyash wet-type filler seal)(4) Centralized gas control (Continuous automatic sensor measurement)

The bulk of the Ukrainian coal produced in the Donetsk Coal Field comes from underground mines and, consequently, most of the Ukraine’s coal mine gas breaks out from the coal field. The implementation of the project in this coal field would therefore facilitate the wider spread of the project results. Coal production in the Donbass Colliery is on a relatively large scale reaching about 1.3 million tons a year, and this level of production is likely to be maintained also in the future. It is therefore reasonable to expect that this the volume of coal mine gas emission will also be maintained at a stable level in the future. The emission volume of gas at this coal mine is 128 million m3 (1999, converted to pure methane) and the volume recovered through pipelines 12 million m3 (1999, converted to pure methane). The proportion of recovered gas in relation to the total emission gas volume (“recovery rate”) is therefore rather low at only approximately 9%. The introduction of a new gas recovery system is expected to boost this low recovery rate quite substantially. As the implementation of the project would thus have a clear effect the Donbass Colliery has been selected as the implementation site for the project.

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1.2.2 Gas Utilization Project

The methane gas that is recovered from the Donbass Colliery has a low (methane)

concentration averaging only 30% and cannot therefore be used as a fuel for

automobiles or turbines. These gases are only suited as a boiler fuel which is the use to

which they are normally being put at present. The difficulty is that boilers are not

operated in the summer season and that, in the absence of any alternative use, the

methane gases have to be discharged into the atmosphere. Because methane is a

greenhouse gas their use as a boiler fuel has little impact in the reduction of greenhouse

emissions.

This project leads to a much greater utilization efficiency for the coal mine gases than

that achieved with their use as boiler fuel. The point is that the use of state-of-the-art

Japanese gas engine technology which is capable of achieving sufficient steady engine

performance even at low methane concentrations makes it possible to utilize the gases

for power generation and the heat by waste heat recovery. Under this Project, seven (7)

l,710kW capacity gas-powered generators are to be installed to ensure flexibility to

effectively accommodate variations in the gas production volume and to enable the

efficient production of electric power. The power output capacity will be in the order of

11MW. When electricity is generated at a high level it can be sufficient to meet 80% of

in-house demand. In the average power output regime, about 50% of internal demand

can be met. In the winter, it is possible to use approximately 50GJ/h (12Gcal) from the

gas engine in the waste heat recovery boiler. This is equivalent to about 10% of the heat

used internally.

1.3 Target Greenhouse Gas

The greenhouse gas whose emissions are to be reduced under this Project is coal mine

methane. The Project envisions the use of the coal mine methane as a fuel for the gas

engine. The consumption of this gas would have a substantial greenhouse gas reduction

effect since it has a greenhouse effect 21 times that of carbon dioxide. (Although a mol-

equivalent of carbon dioxide is generated in the combustion of the gas in the gas engine

the greenhouse reduction effect is still very substantial even after subtracting the

greenhouse effect due to this carbon dioxide amount.)

II- 16

The replacement of the electricity generating systems in other coal-fired thermal power

stations with this power generating system would have the additional “bonus” of

achieving a reduction in the greenhouse gas emissions associated with the combustion

of coal at these thermal power plants.

II- 17

2. Outline of the Implementation Site (Enterprise)

2.1 Level of Interest Shown by the Implementation Site (Enterprise)

Donbass has indicated in writing that is has a strong interest in the project. This interestis due to the following background factors.

• Under the Prime Minister’s Decrees No. 1634 of 1999 and a further Decree No. 2218 issued on December 8, it has been confirmed that “coal mine gas development, recovery and utilization will be implemented with foreign funding.

• Because of Ukraine’s scanty natural resources, including petroleum and gas, the nation has to rely on coal as the only domestic resource available in abundant quantities (eighth largest coal reserves in the world) and it is therefore inevitable for the country to recover and use the methane gases generated in the process of coal production.

• During the two year period since 1998, more than a hundred coal mine workers have fallen victim to coal mine accidents. These were due to coal mine gas explosion. The recovery and utilization of coal mine gas is therefore essential for the safe operation of the coal mines.

• The Ministry of Fuel and Energy has established its Alternative Fuels Center in order to promote the recovery and utilization of coal mine gas. This Center acts as the coordinating counterpart for technical cooperation with the industrialized countries of the West and has also recommended Donbass for this Project.

• In addition to Donbass, there are a little under a hundred important coal mines in the Donetsk oblast which is home to the Donbass coal field. The sheer weight of the number of these collieries underscores how great the need for mine gas methane gas recovery and utilization is.

• The recovery and use of coal mine gas may help to meet power needs after the total closure of the Chernobyl nuclear power station.

• The Ministry of Fuel and Energy and the Donetsk oblast look with much expectation toward the Kyoto Program. The recovery and use of coal mine gas is seen as having the potential of generating currency earnings to the Ukraine through greenhouse gas emission rights trading.

• The project can generate new employment. In the wake of the closure of unprofitable coal mines, unemployment among mine workers has become a serious social problem. On the other hand, jobs will be needed for managing and operating the sophisticated equipment due to be introduced.

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• Coal mine gas will be used for power generation to replace coal-fired thermal power generation. This will provide a partial solution to the problem of air pollution due to exhaust gas emissions such as SOx and NOx.

2.2 State of Related Equipment at the Implementation Site (Enterprise) (Outline, specifications and operating conditions)

2.2.1 Coal and Coal Mine Gas from the Donbass Colliery

The Donbass Colliery is located almost in the center of the Donetsk Coal Field (Ukraine). The basement rock of this area is of Pre-Cambrian or Devonian age, overlain by Paleozoic-Carboniferous formations. The ground surface has a thin distribution of Quaternary formations. Their maximum thickness is around 15m. The Carboniferous strata consist primarily of sandstone, sandy shale and shale, with extensive coal and limestone layers interspersed to form the Donetsk coal measures. The coal seams in the vicinity of the Donbass Colliery are of the Middle to Late Carboniferous age. There are 16 seams named L1-L8 and ml-m5 in ascending order.

At present, there are four relatively tick coal seams that are targeted for exploitation. These are the seams called L3, L4, L6, and L7. They have an average thickness of around 1.0-1.4m and are thus comparatively thin. As of the end of September 2000, three seams, i.e., L3, L4, L7, are being mined.

Fig. 2.2.1-1 shows the location of the Donbass Colliery and Fig. 2.2.1-2 its stratigraphy. Table 2.2.1-1 gives data on the main coal seams.

Coal seam L3 is the lowermost working seams in this mine. It has a thin shale layer interspersed in the center of the coal seam. The coal seam has a thickness of 0.7 - 2.0m, its average thickness being 1.38m. There is a danger of gas breakouts in this seam. Between this seam and the overlying L4 seam there is a distance of 30 - 40m. The L4 seam has a thickness of 0.7 - 1.94m, its average thickness being 1.02m. This seam has a predictable danger of gas breakout. The L4 - L6 seams have a distance of approximately 90m between them. The L6 seam has a thickness of 0.5 - 2.0m, its average thickness being 1.23m. There is a predictable danger of gas breakout in this seam. The distance between the L6 and L7 seams is around 70m. The L7 seam has a thickness of 0.8 - 1.15m, with the average thickness being 1.08m. This is not only a very safe seam. Of all seams that are being worked, this seam has the highest grade coal with a low ash

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content. The other coal seams are not targeted for exploitation partly because they are too thin and partly because the coal in them is of a low quality.

In the Ukraine, it is the practice to differentiate coal seams according to their risk of gas breakout into three categories: 1) Seams in danger of gas breakout 2) Seams with a predictable danger of gas breakout, and 3) Safe seam.

The criteria for the assignment of seams to these three categories are as follows:

Criteria for Classification of SeamsSeams in danger of gas breakout:

Seams with prior experience of gas breakout Seams with a predictable danger of gas breakout:

Seams in which gas breakouts have not occurred in this particular colliery but in which gas breakout have occurred in other collieries.

Safe seam:Seams in which no gas breakout have occurred until the present, including seams in this particular collieries and seams in other collieries.

This colliery produces an anthracite coal with a typical quality marked by a moisture content of 1.6 - 2.2%, volatile components of 7.0 - 9.0%, sulfur content of 1.7 - 2.4% and a heat value of 25.12MJ/kg (6,000kcal/kg). The coal produced at this colliery is sold mainly to electric power stations.

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a500 -

400 -

300 -

200 -

100

0 -»

Name oflimestone layer

Name of coal seam

Sandstone

Sandy shale - shale

Limestone

Coal

m5(l)8)5

8)4 (4)

m4 (1)

m3m2

£ 8(1)£ 8£ 7 (Worked seam : Thickness 1.08m)

£ 6 (Worked seam : Thickness 1.23m)

£ 4 (Worked seam : Thickness 1.02m)

£ 3 (Worked seam : Thickness 1.38m) £ 2

£1(1) £ 1

Source: Data from the Ukrainian Alternative Fuels Center

Fig. 2.2.1 -2 Stratigraphy of the Donbass Colliery

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Table 2.2.1-1 Overview of Main Coal Seams in the Donbass Colliery

Name ofseam

Workedseam

Coal seam thickness (m)

Average (minimum - maximum)

Gas content volume m3/ton

Remarks

m5 0.66(0.5—0.9) 29

m4(l) 0.77(0.6-1.4) 30

m3 0.94(05.6—1.09) 35

L7 O 1.08(0.8—1.5) 32 Safe seam

L6 O 1.23(0.5—2.0) 35Seam with a predictable danger of gas breakout

L4 o 1.02(0.7-1.94) 29Seam with a predictable danger of gas breakout

L3 o 1.38(0.7-2.0) 33Seam in danger of gasbreakout

Source: Data from the Ukrainian Alternative Fuels Center Note: Gas content volume: On dry ash free basis

As shown in Fig. 2.2.1-3, the geological structure of this region is dominated by a syncline, of which axis plunges to north-northwest (Chischakovo - Snezhnyansk Syncline). The dip of the coal seams within the mining range in the Donbass Colliery is a gentle dip at 2 - 8 degrees, the average being 5 degrees. In the northeastern shallow area (already mined by other mines), however, the angle of dip is very steep ranging from 30 - 50 degrees due to a fault. Development at the Donbass Colliery was started from the northern wing of the Chischakovo - Snezhnyansk Syncline and mining operation is currently proceeding at both ends of this syncline. According to the records of this colliery, there have been almost no minor faults in the mined out area until the present.

According to the data of the US Environmental Protection Agency (EPA) on the Ukraine, the total extractable coal reserves of this mine are 137,449,000 tons. The extractable reserves above the present mining level (lowermost road SL-560m, approx. 800m below the surface) is 66,530,000 tons.

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\XV. Xx Model Plane View

\\\\ WU: Shaft

v \v\ \ W\ v v\.

Model Cross Section

Shallow goafDonbass Colliery mining area

379 m SL-170m levelSL-380 level

SL-560m level808 m

Source: Prepared from Data from the Ukrainian Alternative Fuels Center

Fig. 2.2.1 -3 Plane View and Cross-section View of Donbass Colliery Model

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There have been various reports concerning the mine gas reserves at the Donbass Colliery. A survey conducted in 1992 showed that the estimated gas reserves of this area are in the region of 11,930 million m3. Similarly, a survey conducted by the Ukraine EPA in 2000 indicated that the reserves in this area are 5,500 million m3 in the main coal seams also, while the reserves in other seams amount to 1,500 million m3 so that the total is estimated at 7,000 million m3.

The total emission gas volume at this coal mine was 88,979,000m3 (normal; converted to pure methane) in 1994. This amount is increasing year after year and reached 128,373,000m3 (normal; converted to pure methane) in 1999. Similarly, the amount of emission gas per ton of coal produced (Total emission gas + Coal production output) is also increasing. It was 68.9m3/ton in 1994 and 93.4m3/ton in 1999. Given that the average emission gas volume per ton of coal produced in the Donbass region of the Donetsk Coal Field is 50 - 60m3/ton, it is clear that this particular coal mine belongs to the collieries with a high gas emission volume. The amount of gas recovered in 1999 was 11,558,000m3 (normal; converted to pure methane), with the recovery rate (proportion of recovered gas to the total emission gas volume) being 9.0%. Furthermore, 4,203,000m3 (normal; converted to pure methane) of the recovered gas were used in- house as a boiler fuel while the remainder was discharged into the atmosphere.

Table 2.2.1-2 shows the variation in the gas emission and recovered gas volumes at the Donbass Colliery. Fig. 2.2.1-4 gives a comparison of the Donbass Colliery’s emission gas volume and Fig. 2.2.1-5 a comparison of its gas recovery rate with other coal mines.

The gas amount included in the coal (gas content volume) varies in accordance with the depth of the coal deposit. According to figures produced by the Ukrainian Alternative Fuels Center, the gas content volume will increase with increasing depth down to 500 - 600m, below the surface. On the other hand, the gas content volumes of coal seams at greater depth remains virtually constant at 29 - 35m3/tons (on dry ash free basis). It is not known what the permeability of the coal seams is.

The gas from normal coal seams contains methane as the main components, with minor levels of C2H6, C3H8, 02, N2, and C02. In some cases, C02 is present in large quantities. The coal seam gas at this particular coal mine has the following composition: CH4 - 90 - 98%,02 - 0.1 - 0.4%, N2 - 1.2 - 5.2%, and C02 - 0.1 - 0.6%. This composition is close to that of natural gas. While there are some areas in the Donetsk Coal Field in which the coal seam gases have a high C02 content the locations in this particular mine do not.

Table 2.2.1-3 shows the coal seam gas composition for the Donetsk Coal Field.

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11-26

Table 2.2.1-2 Emission Gas Volume at Donbass Colliery

YearCoal output

(l,000t)

Emission gas volume (converted to pure methane, 1,00C)m3 (normal)) Emission volume

per ton (m3/ton)Recovery rate (%)

Main fan exhaustvolume

Recovered volumeTotal emission

volume

1994 1,292 78,462 10,517 88,979 68.9 11.8

1995 1,354 83,092 10,517 93,609 69.1 11.2

1996 1,380 97,457 7,884 105,341 76.3 7.5

1997 1,196 125,124 6,307 131,431 109.9 4.8

1998 1,325 108,978 11,038 120,016 90.6 9.2

1999 1,347 116,815 11,558 128,373 93.4 9.0


Million m

Skochinski Colliery

Fig. 2.2.1-4 Comparison of Emission Gas Volume for Different Coal Mines

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Fig. 2.2.1 -5 Comparison of Gas Recovery Rate for Different Coal Mines

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Table 2.2.1-3 Coal Bed Methane Composition

Name of colliery

CH., c2h6 CaHg c4H10 o2 n2 O O CO h2 h2sHeat value

Mj/m3 jkcal/Nm" (normal):

Densitykg/m3

(normal)Donbass 90—98 0.1—0.7 Trace Trace 0.1—0.4 1.2—5.2 0.1—0.6 0 0-2.8 0 34.74 (8,300)

Bazhanov 90.90 5.16 1.35 0.42 0 2.00 0.10 0.02 0 0

Sukochinski 94.20 1.69 0.31 0 0.30 2.98 0.52 0 0 0 36.46 (8,710) 0.753

Glubokava 94.50 0.52 0.01 0 0.08 4.65 0.24 0 0 0 35.50 (8,480) 0.746

Zasvadko 95.20 2.19 0.44 Trace 0.29 1.69 0.19 0 0 0 37.28 j (8,905) 0.747

(Source: Data from the Ukrainian Alternative

Note 1: Sampling: Drill hole sample Note 2: Heat value for Donbass coal: Average heat value Note 3: Glubokaya and Zasydko Collieries: In Donetsk Coal Field

2.2.2 Outline of the Donbass Colliery

(1) Location, Geography, Meteorology and Mining LeaseThe Donbass Colliery is located in the Shakhtior Area in the Donetsk oblast, some 45 km east-northeast of the city of Donetsk. It has a gently undulated, hilly relief at an elevation of +150-250m above sea level. Most of the terrain is occupied by fields and grasslands with villages spread through the countryside. In the summer, temperatures rise to a maximum of 40°C and in the winter, they fall to a minimum of minus 36°C. Annual precipitation is around 500mm. The mining lease, covering an area of 62.5km2, extends about 13km in the northwest-southeast direction and about 5km in the northeast- southwest direction. Fig. 2.2.2-1 is a location map of the Donbass Colliery.

(2) Mine Development MethodThe Donbass Colliery was established in 1974 and went into commercial production in 1980. Its stock is scheduled to be opened to the public in the near future. The shallow coal areas near the mine have already been mined out by other collieries. The Donbass Colliery is thus an underground coal mine developed by driving new shafts in order to develop the coal deposits buried at depth below SL -170.

(3) Production Output and WorkforceThe Donbass Colliery has an output capacity of 2,100,000 tons/year. Since 1994, its actual production performance has been in the range of 1,200,000 - 1,400,000 tons/year. The Mine has a workforce of approximately 5,000 employees.

Production output (1,000 ton)

1994 1995 1996 1997 1998 1999

1,292 1,354 1,380 1,196 1,325 1,374

(4) Underground Skeleton LayoutThere are four worked coal seams: L3, L4, L6, and L7, and roadway development is taking place in these seams. There are six shafts in three locations, with a length of 379m, 633m, and 808m and main roadway having been developed in three locations: SL-170m, SL-380m, and SL-560m. A coal seam road has been driven between SL- 170m - SL-380m and between SL-380m - -560m for coal working. In the ascent direction, the longwall maining method is used for coal extraction. This means that the coal working depth varies as the coal face advances. Fig. 2.2.2-2 is a conceptual schematic of the Donbass Colliery.

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(5) Coal Working FaceUkrainian and German shield frames are to work the coal with drum cutters using the longwall mining method. A study conducted in September 2000 has shown that there are six coal faces currently in operation, two in each of the worked seams L3, L4, and L7. Although the seams are thin, the roof and floor rocks have a favorable quality. As there are practically no faults, the coal faces consist of coal alone with little rock dilution from roof and floor. The coal face length was in the order of 300m but only about 200m of this length is being worked since this is the extent to which efficient operation is possible. The working panels in each of the seams have a length of 1,500 - 2,000m. No support pillars are left between the working faces to protect the roadways. Consequently, each gate entry in coal seam is used twice for air intake and return. After the cutting operation by drum cutters, timber cribs are constructed to support the roof of gate entry. In order to prevent gas breakout to the working face and gas emission, only two cuts are allowed for any one shift using drum cutters for mining.

The mine operates on a four-shifts a day basis, with one shift assigned for maintenance work. The miners take turns in having days off so that the number of working days on the coal face is 350 days/year or more.

(6) RoadwaysThe main roadway developed in the rock and roadway in the coal seam in the strike direction are both developed to approximately 5m width and about 3m height. They are supported on all sides with steel arch frames.

(7) TransportThe coal produced at the coal face is transported on a belt conveyor to the trunk road and hoisted from the underground level to coal preparation plant on the surface.

(8) VentilationThe main fans are positioned in the three shafts to ventilate the mine shafts by suction. Their total exhaust volume is 66,622m3/minutes, including all three fans.

(9) SealIn order to prevent the emission of gas from the goaf into the roadways, the practice is to seal off the roadways that are no longer used after the coal has been extracted. Concrete blocks are used for sealing the roadways, and the seal thickness is about 0.5m. Experience at the Donbass Colliery shows that the methane gas concentration after the seal has been made is rather low at only 20%.

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Fig. 2.2.2-1 Location M

ap of the D

onbass Colliery

Goaf in shallow

Fig. 22.2-2 Conceptual Schematic Layout of Donbass Colliery

11-33

At present, ceiling rock boring are being conducted to drain coal mine gas by facilitating gas release at the ceiling rock caves and collapses into the hollow seam after coal extraction. In these boring the gas tends to accumulate in the cavities and crevices of the ceiling rock that has fallen into the gob well and their purpose is to minimize gas emission into the working face in longwall mining operation. The gas recovered from these bore holes is conducted outside the underground mine via a pipelines installed in the mine. Part of the recovered gas is used as a boiler fuel but most of the excess gas is discharged into the atmosphere. The gas recovery rate (i.e., the ratio of recovered gas to the total emission gas) is only around 10%.

Donbass does not carry out pre-mining gas draining from coal seams by means of test drills (mine gas draining)and gas bleeding in the sealing (sealed gas draining) at present. Surface gas drainage boring on the surface (gob well) is being carried out on a trial basis in two locations and the results of these boring tests will be closely monitored. It should be pointed out that this method recovers the mine gas from the worked coal seams from the ground surface.

(1) Gas Draining Drillings to the Roof RockThe Donbass Colliery uses a boring method in which a bore hole is drilled from a location within 30m to the rear of the longwall working face in the direction toward the ceiling of the coal face. As the coal face advances additional bore holes are drilled in consecutive order by always leaving a gap of 30m between the newly drilled bore hole and the coal working face. Since the gas drainage characteristics are different for each coal seam it is necessary to determine the bore hole intervals, bore hole length and inclination in accordance with the particular characteristics of each coal seam.

2.2.3 Gas Recovery Technology and Equipment at the Donbass Colliery

(Boring Plan)Boring Interval

(m)Boring Length

(m)Inclination

(Angle)Direction(Degree)

L7 seam 24—30 59—64 39—42L4 seam 13—18 30—52 25—32 30—45L3 seam 10-15 43—50 32-35 44—48

For drilling bore holes, the practice is to position the boring machine in the roadway without drilling room and to drill a straight hole from the ceiling rock of the coal seam on the side wall of the roadway. The drilling operation is conducted by first drilling a 6

11-34

- 8m hole with a 112mm dia. non-core bit and then inserting a hole-lining pipe into the 6-8m recess and fixing this pipe with resin. After this, the drilling operation is continued to the bottom of the bore hole with a 76mm dia. non-core bit. The boring operation is performed by the face workers on the longwall. In the case of seam L4, it takes three shifts to complete one test bore hole.

Figs. 2.2.3-1 and 2.2.3-2 show the drilling methods used for gas draining at the Donbass Colliery.

The Donbass Colliery engineers explained that the gas drain-off flow rate from a single bore hole is approximately 5m3/min. (converted to pure methane), the methane concentration at the bore hole approximately 45%, and the time during which gas can be drained off from a single bore hole is about one month.

The gas released from the bore hole flows through the pipeline system laid in the underground mine and is led to the surface outside the mine from two shafts. The pipeline system covers a total length of 16,240m and consists of pipes with various diameters from 426 to 100mm in accordance with the flow rate of the gas. The pipeline close to the working face has a diameter of 150mm and uses iron flanges for the joint connections.

The gas flows under the underpressure applied by (150m3/minute capacity each) blowers installed on the surface outside the mine. During our site survey, the underpressure on the suction side of the blowers was -58,660Pa.

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Fig. 2.2.3-1 Schematic View of Gas Recovery Bore Holes at the Donbass Colliery

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Fig. 2.2.3-2 Typical R

ecovery Bore H

oles at the Donbass Colliery

Plane view

Working face

Direction of working face

Timber crib K* x */x x xy

Air intakeAir return13-' 18m Within 30m

(2) Gas Monitoring and MeasurementAt present, there are methane sensors in all major roadways in the Donbass Colliery. The methane concentrations picked up by these sensors in the underground ventilation air are continuously displayed and recorded in the monitoring station in the ground office building.

The gas flowing through the gas lead pipes is measured by the measurement staff using a gas blower on the ground surface. The measurements determine three values every two hours: the low pressure (vacuum), flow rate, and methane concentration. The test results are recorded in a log book.

(3) Gas Draining through Gob Well Bore Holes Drilled from the SurfaceWork is in progress to drill two bore holes on an experimental basis in the goaf adjacent to the currently worked coal face in seam level L4. The bore holes are drilled to a length of 600 - 640m and have a diameter of 219mm. The drilling work is carried out by a contractor. The No. 1 bore hole has already been completed but is not yet used for gas draining. When the No.l bore hole was being drilled a drilling accident occurred in which the seam collapsed while the goaf on seam L7 above L4 was being pierced. The drill bit was lost in the accident. To prevent a repeat of such an accident, the drilling work for No. 2 bore hole that is now being drilled is to be carried out by protecting the hole with a casing down to the depth of the goaf on seam L7.

2.2.4 Gas Utilization Technology and Equipment at the Donbass Colliery

(1) Gas Transporting Equipment1) General Description of EquipmentMethane gas is recovered in two locations at the Donbass Colliery. One of these locations is near the main shaft and the other recovery point is approximately 3km away from the main shaft. Our field survey covered only the gas recovery equipment near the main shaft.

The recovery equipment’s vacuum pump for sucking in the methane gas is installed in the work shed on surface of the ground. This work shed has two rooms: The vacuum pump is installed in one of them and the valve station in the other room. The gas detectors are set on the ceilings of these rooms and if they detect gas leaks they alarm.

2) System Structure

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Fig. 2.2.4.1-1 shows a schematic of the system configuration of the gas transporting equipment installed near the main shaft.

The methane gas recovery equipment system consists of two subsystems: one for normal operation and the other one as a standby. Each subsystem has two vacuum pumps. Whether only one of them is operated or both depend on the volume of the recovered gas. The work shed on the surface of the ground has sufficient space to accommodate three vacuum pumps. At present, there is only one vacuum pump operated under the following conditions:

• Flow rate: 20 - 75m3/min• Methane concentration: 30% average (ranging from 25% to 35%)• Pressure: -0.05MPa (-0.5kg/cm2G) (on suction side) and 500 -

600mmAq (estimated) (on delivery side)

The coal mine gas sucked up from the vacuum pump is constantly sent to the boiler. When necessary, the valve is reset to discharge the mine gas into the atmosphere. At present, the boiler has been stopped for regular maintenance and repair scheduled for the summer. This means that the methane gas cannot be used as the boiler fuel and has to be discharged in large quantities into the atmosphere. The temperature on the exhaust side is about 50 - 60°C in the summer. WTien we conducted our survey, the methane gas was saturated with steam and looked like a pall of white steam as it entered the atmosphere.

The methane gas concentration is measured every two hours. Ukrainian Law prohibits the use of gas with a methane concentration of 25% or less. When the methane concentration of the mine gas falls short of 25% it is not sent to the boiler room but automatically discharged into the atmosphere.

The methane gas recovery equipment installed at a distance of 3km from the main shaft has the same system structure but all of the methane gas recovered with this system is released into the atmosphere.

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Atmosphere

BoilerGas/liquidseparator

Ground surfaceVacuum pump (2 subsystems)Model: Water-sealedBB-150 (of Ukrainian manufacture)

Methane gas released from the working face

Fig. 2.2.4.1-1 Gas Transporting Equipment System Schematic

3) Equipment Specifications

• Vacuum pump Model:

Flow rate:Pressure:Motor:Year of manufacture:

Water-sealed BBH-150, BBH-150 (of Ukrainian manufacture)130m3/min-650mmHgRated power 250kW, power requirement 180kW 1980

4) Pipeline SpecificationPipe dimensions: 100 - 426mm dia.Pipe length: Approximately 1.6km (up to the boiler room)Pipe material: Carbon steel

5) Current Use of Methane GasTable 2.2.4.1-1 shows how the mine gas methane is being used. It can be seen, that approximately 50% of the gas volume released from the mine has been used as a fuel since 1994. Because the boiler steam is used only in the winter, so in the summer, the mine gas is released into the air from the vacuum pump.

Table 2.2.4.1-1 Use of Coal Mine Gas Methane

Recovered methane gas Used methane (Converted to 100% CH4)

YearDischarged

volume(m3/min)

Methane content of gas (%)

Puremethane(1000m3)

Forresidential(1000m3)

For boiler (1000m3)

For power generation (1000m3

Other uses (1000m3)

1994 66.7 30 10517 — 5259 — —

1995 66.7 30 10517 — 5259 — —

1996 50.0 30 7884 — 3942 — —

1997 40.0 30 6307 — 1840 — —

1998 70.0 30 11038 — 3942 — —

1999 73.3 30 11558 - 4203 — —

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6) Problems• Material: Since the gas contains water, the use of carbon steel for the

vacuum pump and the pipes gives rise to corrosion problems.• Pipe routing: Routing the pipes on the ground may lead to freezing in the

winter since the gas contains water.

(2) In-house Power Generating FacilitiesThere are no in-house power generating facilities in the Donbass Colliery. However, an experimental gas engine generator has been installed nearby at the adjoining Pervomaiskaya Coal Field.

This gas generator uses a 500 horsepower output submarine diesel engine manufactured in Nikolaev Oblast (District). The engine had been run on diesel fuel and its diesel consumption was 80 liters/hour. It has been modified so that it can also be operated with methane gas (dual fuel type). The use of a methane gas with a methane concentration of 37% at a rate of 4m3/minute would permit a reduction in diesel fuel consumption to 9 liters/minute. There are plans for further modification to increase efficiency so as to generate 400kW by using 4m3/minute of a 25% methane gas. Spark plugs will be used for ignition. Approval has been obtained permitting the use of a 25% methane gas for this engine. The factory on Nikolaev oblast has manufactured four identical engines. The use of these engines for power generation leads to a substantial reduction in fuel costs. When using diesel as the only fuel, it costs 1.86 Hryvna (37 yen) to produce lkWh of electricity and when using exclusively gas generating costs are down to 0.57 Hryvna (12 yen)/kWh. The photo below shows the gas engine that is being developed.

Gas engine under development

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(3) Main Electrical Equipment and Transformer PlantIn the present study, we inspected the Donbass Colliery’s power monitoring, electric equipment, power-using, power supply, and internal power distribution equipment, seeing that Donbass envisages the use of coal mine gas for its power generating facilities.

The documentation provided by the Donbass Colliery comprises the answers to the questionnaire forms and two block-schematics (primary system outside the shed and secondary system inside the shed). For supplementary information, interviews were conducted and site inspection visits performed.

1) Main In-house Electric Equipment and Power CapacityThis section gives an overview of the main surface equipment installed on the premises of the Donbass Colliery and their present condition to the extent it was possible to obtain information on the equipment. The voltages used on the Donbass Colliery ground are the high-voltage input of 6,000V which is stepped down to 660, 380, 220, 127, 110, and 36V. The independent control system uses an alternating current of 36V. For safety reasons, the voltage should be as low as possible to prevent sparking during switch operation. The following descriptions refer to the main electrical equipment used at Donbass.

(Main load equipment marked with an asterisk * cannot be stopped.)i) Ventilation equipment (ventilation fans)*

Ventilation fans are essential equipment that must not be stopped as they are vital for ensuring underground ventilation. There are three ventilation fans in normal operations and three spare ones. The three operational units (with a power rating of 3,200kW, 2,800kW and 2,500kW, respectively, as established during our survey) must be maintained operational even in the event of ICCT failure of the power transmission line.

ii) ConveyorsConveyors are used for transporting the extracted coal from the working area in the underground mine to the coal cleaning plant (above ground). They are therefore operative only while coal mining work is in progress.

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iii) Mining machinesMining machines are used only while mining work is in progress in the mine working area.

iv) Water delivery pump*Pump operation varies according to the volume of water requiring to be pumped up. The pump operating pattern and operating time schedule is therefore subject to variation. It is not possible to identify the load changes. Although pumps may be stopped for about six hours they must essentially be on duty without interruption. Their average water delivery capacity is 450m3/h per pump.

v) Shaft winderThere are two types of shaft winding systems, one for person transport and one for handling coal. The winders are operational only when in duty for transportation into the mine or from the mine. The shaft winding systems have therefore only temporary loads. Normally, there are two winders in any one shaft.

vi) Vacuum pumpsThere are four vacuum pumps, with spare space to accommodate a further two.

vii) Lighting loadThe lighting system uses a voltage of 220V above ground and of 127V underground. The load data for all equipment used underground is not known. Some of the emergency equipment is run on a 36V current.

viii) Capacitors used to improve the power factorAs stated above, there is a considerable number of load equipment with an estimated power factor of only around 0.5 - 0.6. Capacitors are used to improve the power factor, with one capacitor each installed in distribution section No. 3 and No. 4, respectively.Table 2.2.4.3-1 shows the capacity ratings of the main in-house electrical equipment.

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Table 2.2.4.3-1 Main Electrical Equipment Used in the Donbass Colliery(kw)

Load description Capacity (kW/each) Quantity Total

Winder 4,000, 1,120, 500 2,4,2 each 13,480Conveyor 400 9 3,600Ventilation equipment 4,000 3 12,000Water pump 1,250 5 6,250Vacuum pump 250 4 1,000Mining machines 300 6 1,800Miscellaneous 1,000Total 39,130

2) In-house Power RequirementThe following explanations concerning the Donbass Colliery’s power requirement refer to the energy demand spread over a day (daily power load), the energy demand spread over a month (monthly power load) and the future plans.

(a) Daily LoadThe Donbass Colliery is entitled to 13,200kW of electric power on what may be regarded as a supply agreement. This corresponds to the regulation values for the morning period from 7.30 to 9.30 a.m. and the afternoon period from 6 to 9.30 p.m. when the total load demand peak. Apart from this, it appears that the Donbass Colliery is entitled to use electricity without being bound by the maximum power limits laid down in the supply agreement. (Fuller explanations will be given later. It should be noted, however, that while the term “Maximum Power under the Supply Agreement” signifies the maximum power that can be used by the user under the terms of the supply agreement, this concept does not exist.) The Donbass Colliery reaches its maximum power requirement in the winter when its load peaks at around 30,000kW. The Deputy Chief Engineer at the Donbass Colliery explained that sometimes this peak load demand is actually exceeded. At present, there are no records of the electricity company’s claiming any penalties for excess power use in breach of the supply agreement. In view of the uncertainty about future power use arrangements the execution of this project would create scope for in-house power generation. This would alleviate such apprehensions and help to improve operational efficiency without being bound by the limitations imposed by the power supply availability. For comparison, it may be useful to add that the daily load factor can be calculated as being roughly 90%,

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a value consistent with the statistical data for the relevant industrial sectors in Japan (coal and petroleum).

Table 2.2.4.3-2 gives the daily electric energy demand of the Donbass Colliery in the winter and Fig. 2.2.4.3-1 shows its daily load curve.

Table 2.2.4.3-2 Daily Energy Demand of the Donbass Colliery

Time 1 2 3 4 5 6 7 8 9 10 11 12Energydemand 16,022 15,806 23,162 18,140 19,646 20,792 26,558 19,578 14,600 19,694 16,550 14,492

Time 13 14 15 16 17 18 19 20 21 22 23 24Energydemand 17,900 16,464 19,302 20,936 17,750 19,190 17,924 19,178 17,096 20,792 17,554 14,288

!jf:Electric energy ^demand ? -

30000

20000

15000J

10000

a f 1 > * Time [h] ‘ ?'

[kwh]Fig. 2.2.4.3-1 Daily Load Curve for the Donbass Colliery

(Per day, in the winter season)

(b) Monthly Energy DemandAt present, Donbass has a high electric energy demand in the winter. Winter demand exceeds summer demand by roughly a third (30%). The increased energy demand in the winter is due to steam boilers that are operated to generate steam for heating.

Tables 2.2.4.3-3 and 2.2.4.3-4 and Fig. 2.2.4.3-2 show the monthly power consumption at the Donbass Colliery and the monthly peak demand, respectively.

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Table 2.2.43-3 Monthly Maximum Power (kW) at the Donbass Colliery

Month 1 2 3 4 5 6 7 8 9 10 11 12Maximam power 15,000 15,000 15,000 14,000 13,000 12,500 12,500 12,500 13,000 13,000 14,000 15,000

Table 2.2.43-4 Monthly Electric Energy Demand (MWh) at the Donbass Colliery

Month 1 2 3 4 5 6 7 8 9 10 11 12Energy

Demand 13,960 12,890 13,700 12,310 11,960 11,200 10,920 10,560 11,050 12,010 12,330 13,440

Monthly Maximum Power and Monthly Electric Energy Demand

i I Monthly Electric Energy Demand —Monthly Maximum Power

16,000

<: 14,000

12,000

o. 10,000

i 8,000

2 6,000

16,000_c<:s

14,000 *ocCO

12,000 §O10,000

<u8,000 c

LUO

6,000 'I<L>

4,000 LU>

2,000 C:!

0

Fig. 2.2.43-2 Monthly Power Consumption and Monthly Maximum Powerat the Donbass Colliery

Future Demand Forecasts:No power demand forecasts are made at the Donbass Colliery because this is not considered necessary as there has been virtually no increase in demand in recent years.

In reality, however, there has been a major increase during one year in the past but the present demand situation is on a declining trend, mainly because of the present economic stagnation. Although there had been plans for the introduction of new equipment to meet the expansion of demand, no decision has been made as yet because of the recent stagnation of demand.

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3) Purchased Electricity and Supply Method(a) Electricity Supply MethodElectricity is supplied to the Donbass Colliery by the local electric power companies Donetskoblenergo from the Skroveshevskaya Hydroelectric Power Station which is located in the village of Skroveshevo in Donetsk Oblast. The Donbass Colliery has three transformer substations: the Zhydanovskaya, Michailovskaya, and B n C (VPS) transformer substations. Since the Zhydanov Transformer Substation has the largest power-receiving capacity of the three, our survey concentrated on this station. The method by which this substation is supplied with electric power is as follows.

i) Transformer Substation (Zhydanovskaya Substation owned by the Donbass Colliery)

As can be seen in Fig. 2.2A3-3 power is supplied through two systems (by two (2) single-line steel pylons) via llOkV power lines from the steel pylon owned by Donetstkoblenergo. These steel pylons are of rectangular construction with a doubleshaft structure. Visual inspection suggests that the power lines have a section of 330 - 410mm2 but it is not clear what type of power lines they are. The Donbass Colliery owns three concrete gantries. The Donbass Colliery and Donetskoblenergo hold the part from the concrete gantries to the isolator installation location from which the power lines are laid to the steel pylon side as shared property. (The jumper line is owned by Donbass but the lead-in isolators by the electric power company.) Until the present, there has never been an incident in which both system have failed simultaneously.

Fig. 2.2.4.3-3 Transformer Substations and Lead-in Equipment

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ii) Lead-in EquipmentFig. 2.2.43-4 is a block schematic of the cable connection from the lead-in entrance to the power-receiving equipment. The power transformer equipment consists of two oil- submerged air-cooled voltage transformers. The voltage on the primary incoming side is llOkV and is stepped down to 6kV on the secondary side. Both units have a capacity of 40MVA and both use one Y-connection on the primary and two star-delta connection on the secondary side.

The breaker system from the pylon to the transformer is structured in such a manner that power can be supplied to both transformers even when the power supply from one power transmission line on the power company’s side has been interrupted.

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To loadsM/C(3200A)

Gas engine generating roomM/C

(3200A)To loads

1710kW/unit x 3 UnitsNew CV cable

To loads

CO

ONo. 1

Transformer substation 40MVA

Mz/C(3200A)

No. 2Transformer substation

40MVATo loadsGas engine

generating room

0 .-To loads

New CV cable 1710kW/unit x 3 Units

Primary-side current transformer for measuring equipment and secondary-side cubicle breakers have been omitted.

Overview Schematic of Zhyranovskaya Transformer Substation - Power Transmission System at DonbassFig. 2.1.4.3-4

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Fig. 2.2A3-5 Transformer Substation (No. 2, 40MVA)

iii) Cubicles in Transformer HouseThe cubicles on the secondary low-voltage side consist of four sections. The circuitry of these sections is designed so that even when one section breaks down, the four sections on the secondary 6kV side will remain live through the busbar between the sections. The sections are interconnected by 6kV cables laid in the transformer house pits and installed indoors in cubicle type breakers (air-isolated).

The actual power demand totals around 1,000A as the sections in each of the cubicles have a load normally amounting to 250A. (There is no major difference in load between the sections. In other words, the section loads are equalized.) The sections have a rated current of 3200A. Fig. 2.2.4.3-6 gives an overview schematic of the cubicle equipment installed in the transformer house.

Cubicles 1 and 2 are vacant and cannot be used (it is not clear whether they have been reserved with the Electric Power Company). It will therefore be necessary to install new ones as part of this project. There will be sufficient space for installation since Units 1 and 2 (assuming the same size) are in one space, Units 2-3 in one space and Units 7-8 in one space. It would therefore not be necessary to extend the transformer house building particularly for this purpose.

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Fig. 2.2.43-6 Cubicle Equipment Arrangement in the Transformer House (6kV cubicles on secondary side)

(b) Voltage and FrequencyAs described above, the Donbass Colliery received power from Donetskoblenergo from two three-phase A.C. route at a voltage of llOkV and a frequency of 50Hz. There are two power supply transformer units, both of which are virtually utilized to the same extent. The Donbass transformer substation has a cluster of voltmeters, power meters and ammeters in a single space. There are no frequency controllers and, consequently, variations in frequency are not recorded.

Donetskoblenergo does prohibit the use of loads that would cause the frequency to fall to, or below, 49.2Hz. The introduction of the equipment envisaged by this Project would in fact contribute to controlling any such drop in frequency. When the generator is started in parallel with the power supply from Donetskoblenergo, however, it will be necessary to control the power factor of the generator automatically to a constant value.

It is not the normal practice to switch the primary-side taps as the voltage drops on the secondary side. The voltage of 6,000V may be fallen short of during the early-morning peak (around 7a.m.). It is therefore the usual procedure to adjust the taps so that the voltage becomes 6,300V. The rate of voltage fluctuation may be within 10%.

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Sections 3 and 4 are provided with one capacitor each for improving the power factor. The use of these capacitors helps to raise the power factor of the secondary-side system from 0.6 to 0.8.

(c) Power Purchase TariffAt present, the power costs paid to Donetskoblenergo amount to 100,000 Hryvna a month (roughly 2 million yen/month) for the whole of the Donbass Colliery. The principle on which the electricity tariff is levied is a consumption-related charge for the entire electricity amount used. In other words, there is no two-tier system consisting of a basic charge according to the contractual power amount and a progressive charge based on the amount of power consumption. The unit power cost is 0.168 Hryvna per kWh (including value-added tax; equivalent to roughly 3.3 yen).

The electric power company limits power consumption peaks at 13,000kW or more to certain time slots (8.30 - 10.30a.m., 6.00 - 9.30p.m.). It does appear, however, that these restrictions are not being adhered to. It seems that there are no particular penalty provisions in force at present and it is not clear what the future practice will be.

(4) Boiler Plant1) OutlineThe boiler plant at the Coal Mine comprises the following eight units.

Name Steam output (t/h/set) Quantity Total

(t/h)25-14 25 4 100

10-14 10 4 40

Total: — 8 140

(Note: lGcal = 1.163MWh)

We inspected during our field survey on four boilers facility.

One of these four boilers is fueled with only methane gas and two boilers are fueled with only coal, and one boiler is confiring with methane and coal. (The latter is currently being modified.)

The boilers were manufactured in 1982, and according to the explanations given by the engineers in charge of the boiler plant the exclusively methane-fueled boiler will stop

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when the methane concentration reaches 26%. Since the gas supply varies considerably, the exclusively methane-fueled boiler may be out of operations for many weeks. The coal-fired boiler tends to have similar problems. It may not generate the required steam amount when the coal fed to the boiler is of poor quality and does not possess a sufficient heat value.

2) System ConfigurationFig. 2.2.4.4-1 is a system schematic showing the configuration of the boiler plant. The steam generated by the boilers passes through a heat exchanger to make hot water to be used in the underground mine or for office in the winter. The feed water for boiler is treated by caustic soda (sodium hydroxide) to make it soft water.

At the time of the survey, the entire boiler plant had been shut down for summer repairs. Most of the repair work consisted of replacing the boiler pipes which had been eaten away by corrosion.

3) Steam Conditions• Pressure: 0.6MPaG (6kg/cm2G)• Temperature: 180°C

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11-57

^ To No.l and No. 2 Hot water heater

From No.l and No. 2 Hot water heater

Replenishingwater

___NaOH (forwatersoftening)

Water feed tank

Waterreplenishing

tank

BoilerNo. 1

BoilerNo. 2

BoilerNo. 3

BoilerNo. 4

Water feed pump

Fig. 2.2.4.4-1 System Schematic of Boiler Plant

Waterreplenishing

pump

4) Steam Drain RecoveryThe steam that is used for heating the hot water for room heating is recovered as steam drain. Its conditions are as follows:

• Pressure: 0.05MPa• Temperature: 70°C• Recovery: 80%

5) Boiler FuelThe fuels used for operating the boilers are coal and methane gas recovered from the mine. Coal mine gas conformed to the specifications indicated in the section on “(1) Gas Transporting Equipment.” The coal used for firing the boilers has the following specifications:

• Type of coal: fuel coal• Average heat value: 24.4GJ/kg (5824kcal/kg)• Sulfur content: 1.5 - 2.2wt.%• Fuel consumption: 163.8kg/kWh(190.4kg/Gcal steam)

These specification data are the design values for the boiler plant. In reality, boiler efficiency will drop substantially when the coal falls short of the design heat value.

6) Feed WaterThe water fed to the boiler is drinking water.The water is first tested for its hardness and may need softening by treating it with caustic soda. Apart from adjusting the water’s hardness, no other water properties are adjusted.

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The following table 2.2.4.4-1 gives the feed water characteristics.

Table 2.2.4.4-1 Feed Water Characteristics

No. Item Unit Water Data

1 Type — Drinking water

2 Feed rate t/day 3,830

3 Feed pressure MPa 5

4 Total hardnessmg/L (converted to

CaCOJ20

5 Solids, dry residues mg/L —

6 PH — 6—8

7) Average Monthly Steam ConsumptionTable 2.2A4-2 shows the average monthly steam consumption levels for room heating. It can be seen that steam is used only in the winter months. In the summer, the boiler plant is shut down for periodic maintenance and repair work.

Since the use of steam is limited to room heating, its use is limited to the period from October of one year to April of next year, as shown in Table 2.2.4.4-2.

Table 2.2.4.4-2 Average Monthly Steam Consumption

Month Jan. Peg. Mar. Apr. May Jun.Max. steam

consumption (MW)21.4 21.4 21.4 8.4 — —

Monthly average steam consumption

(MWh/month)15,920 14,880 15,920 6,010 — —

Month Jan. Peg. Mar. Apr. May Jun.Max. steam

consumption (MW)— — — 11.5 21.4 21.4

Monthly average steam consumption

MWh/month

— — — 8,580 15,400 15,920

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8) ProblemsIt is felt that water quality is not sufficiently controlled and that more effective water quality control will be required. This is essential, among other things, for preventing scale deposition in the pipes and for preventing corrosion.

At the Donbass Colliery which has been studied for this project, heat (steam) is required for only seven months falling mainly in the winter period. The problem is that limiting the use of coal mine gas solely as a boiler fuel, the inevitable consequence is that it will be discharged into the atmosphere during the summer period. On this count, the use of mine gas will need some rethinking from the viewpoint of reducing greenhouse gas emissions.

(5) Air-conditioning/Room-heating Equipment1) General DescriptionThere is no room cooling unit at the Donbass Colliery.For heating the rooms and installations in the winter, the current practice is to use two types of hot water at two different temperature levels:

• For underground mine heating: Hot water inlet temperature: 105°C (returntemperature: 95°C)

• For office/room heating etc.: Hot water inlet temperature: 75°C (returntemperature: 72°C).

2) Hot Water System ConfigurationThe hot water used for heating the mine and offices/rooms is heated with steam supplied from the “(4) Boiler Plant.” The hot water heated in this manner is fed to the respective heating units.

Fig. 2.2.4.5-1 shows a schematic overview of the heating system. The equipment using hot water and their load (demand) share is as follows.

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Table 2.2.4.5-1 Heat Load (Demand) of Hot Water Users

EquipmentHeat load (demand)

(MWh/year)Share (%)

Ventilation system (underground) 40180 43

Coal cleaning plant and offices 28240 31

Wastewater clarification system — —

Welfare facilities 12370 13

Miscellaneous 9810 11

Process losses 2030 2

3) Feed WaterThe water used for replenishing the hot water supplied to the heating facilities is pond water that has been cleaned by filtration. The water generated from the underground mine is temporarily sent to a pond for natural sedimentation. The clear water after sedimentation is referred to as “pond water.” None of the equipment in which this pond water is used has so far suffered any damage due to the pond water. Table 2.2.4.S-2 gives the analysis values for the pond water.

Table 2.2.4.5-2 Pond Water Analysis ValuesDate sampled: March 15, 2000 Pond water

Temperature when sampled, °C 4

Snellen transparency 12.5

Suspended particles, mg/dm3 79.3

PH 8.12

Carbohydrates, mg.eq./dm3 15.7

Hardness, mg.eq./dm3 2.82

Calcium, mg/dm3 18.93

Magnesium, mg/dm3 22.2

Oxidation potential, mg.02/dm3 3.65

Petrochemicals, mg/dm3 0.23

Phenol, mg/dm3 0.001

Chlorides, mg/dm3 185.7

Sulfates, mg/dm3 645.8

Residues after drying, mg/dm3 2202.0

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4) Pipe RouteThe route of the heating pipes is given in the equipment layout. The piping size is 300A with structural carbon steel for mine heating, and for office/room heating is 200A. The pipe route diagram is presented at the top of the equipment layout.

Fig. 2.2.4.S-2 shows the gas engine generator system layout and the piping plan diagram.

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Steam (from boiler)

Condensed water (to feed water tank)

Hot water heater Hot water heaterNo. 2

For underground mine heating

For office heating

No. 1 Hot water No. 2 Hot watercirculating pump . , .

circulating pump

Fig. 2.2.4.5-1 Schematic Overview of Heating Equipment System

Gas engine generatctfsystem building

Methane gas pipeMain fan room

Drinking water tank

Vacuum pump station Chemical laboratory

Spares storage Fire defense

staff roomCoal refuse loading pointOperating water reservoir

Power-receivingstation

"rrmx Truck scaleNo.3 Reloading station

Loading bunker

Incoming coal hopperMagnesite store Servicing crew room (

Main shaftNo. 2 Loading station

Coal cleaning

systemWashing roomAuxiliary shaft

Boiler roomPump station

Canteen Drying areaOfficeCooling tower

Hot water pipe_ [Bus station

Legend----- Pipeline----- Cable line

No. 2 Methane gas recovery

system

Fig. 2.2.4.5-2 Gas Engine Generator System Layout and Piping Plan Diagram

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2.3 Project Execution Capability of the Implementation Site (Enterprise)

2.3.1 Management Basis and Management Policy

In the area of the Donbass Colliery, the implementation site of the present Project, there are various other coal mines that have already been closed. The Donbass Colliery itself has opened new shaft-type mine to develop coal in the deeper deposit of the depleted mine operations. The Ukrainian coal mining industry has widely adopted the scrap-and- build method of development and the Donbass Colliery is a typical example of the build-type colliery. Donbass, a relatively recent mining operation, was founded in 1974 and went into production in 1980. Since 1994 it has maintained a steady coal output in the region of 1.3 million tons a year. It can therefore be described as having a solid management basis.

Donbass is also unique in the Ukraine for being the nation’s first privatized coal mine.Its shares are scheduled to be opened to the public and the enterprise is making firm efforts to introduce new technology and improvement management.

2.3.2 Technical Capability

The mine gas recovery technology and equipment the Donbass Colliery has or uses at present is as described in “2.2.3. Gas Recovery Technology and Equipment at the Donbass Colliery.” The mine gas recovery equipment due to be introduced under this Project is essentially identical with the presently operated equipment which functions on the same principle and employs basically the same operating methods, although there are some minor differences in terms of the specification details. This means that the project can be executed by the Ukrainian engineers provided that some technical training takes place prior to the commencement of the project work when the new equipment is introduced.

Furthermore, Ukrainian industrial technology is of a very high technical level, with pilot plant trials on the use of coal mine gas in a small gas engine, and practical research for its use as a boiler fuel and as an automobile fuel using high-pressure compression is already in progress as a way of developing methane gas utilization technology. The Donbass area, in particular, is the heartland of the nation’s heavy industry and it is therefore easy to procure equipment locally. The region can also offer a copious supply of engineers and skilled workers. It would therefore be easy to build the equipment used for this Project. Similarly, the maintenance needs can be met with equal ease as there are many specialist factories in the vicinity.

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Against the backdrop of highly developed technical capabilities, the Donbass Colliery engineers are fully capable of introducing and operating the new gas recovery and utilization equipment.

2.3.3 Availability of Human Resources

The current practice at the Donbass Colliery is to recover mine gas for safety reasons and to use part of the recovered gas. The mine employs a large number of skilled engineers and technicians for the drilling work required for gas draining, gas conduction, mechanical and electrical engineering work. In the present circumstances marked by a general economic recession in the Ukraine and in the current employment situation in the wake of the progressive use of the scrap-and-build formula in the Ukrainian mining sector, it will be easy to recruit engineers.

Therefore, there are plentiful human resources for the implementation of this Project.

2.3.4 Availability of Financial Resources

As stated in Chapter 1, Section 1.2.5, a large number of Ukrainian mines are faced with the crucial issue of upgrading productivity through modernization. While the Donbass mining operation has a solid management basis it does have a need for further improvement of its productivity. For the time being, however, priority must inevitably be given to investments that are directly linked to coal production. In view of this, the Donbass Colliery would welcome both internal and external aid.

2.3.5 Supervision System

The Donbass Colliery is in operation around the clock and a supervision system has already been established to cope with this continuous work regime. It would therefore be easy to supervise the project with the supervision system that is already in place.

2.3.6 Implementation System

The Ukrainian government officials and the Donbass Colliery have both a very great interest in the Project. In the implementation of the Project, the Donbass Colliery engineers specializing in gas recovery and utilization will play a leading role and enlist the support of the Ukrainian government’s Coal Commission and National Coal Research Institute.

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The Donbass Colliery has already conducted a considerable number of plant construction projects in order to reinforce and extend its mining equipment.

In the area of ground equipment alone, Donbass has extensive prior experience of plant construction projects, including power-receiving equipment, gas draining vacuum pump stations, boiler plant, and pump facilities. As has been pointed out in the Section on “Availability of Human Resources” the enterprise has a sufficient supply of construction, design and erection engineers of an adequately high level availability. Donbass is also at the heart of one of the Ukraine’s major industrial zones. If there is a shortage of qualified personnel at Donbass there would be no problem for the implementation of the project, as staff could be easily procured locally. Nor would there be any problem with the operation and management of the Project equipment after its installation. The Donbass Colliery could easily avail itself of its plant operating and management know-how developed in its coal production activities until the present.

2.4 Specifications After Equipment Modification at the Implementation Site (Enterprise)

A. Gas Recovery Management Project

This Chapter considers the general geological, coal mining, and gas recovery conditions at the Donbass Colliery as the Project site to develop a conceptual design of the gas recovery system with a view to increasing the volume of gas recovery and boosting the methane concentration of the recovered gas in the future. We have also attempted in this Chapter to estimate the gas recovery volume and the recovered gas’s methane concentration when the Project has been implemented.

2.4.1 Basic Principles of the Gas Recovery Plan

At present, the Donbass Colliery practices an extremely effective technique for minimizing the volume of gas emission into the coal working face. This method consists of drilling boreholes for draining gas from the goaf after the roof rock has been allowed to collapse into the goaf cavity, a method described as “gas draining after goaf rock collapse.” Even from a worldwide perspective, there are many coal mines using this method for gas recovery. For the Donbass Colliery it is therefore of paramount importance to upgrade this gas recovery technique still further.

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Gas draining after goaf rock collapse by drilling boreholes from the ground does present some serious problems that need to be overcome. First, Donbass works at deep deposit (Currently the deepest roadway is 800m below the ground.) and it is necessary successively to drill additional boreholes as the coal face advances. This presents the problem of escalating costs. Second, there are four coal seams currently worked at Donbass. Thus, the drilling of boreholes for gas draining presents no problem when it takes place while the uppermost coal seams is being worked. In contrast, when the drilling work takes place while lowermost seam is being worked, it happens very often that the borehole is drilled through the goaf of the upper seams. This not only requires very advanced and sophisticated drilling technology but also considerable drilling costs.

In view of this, the drilling of boreholes from the surface at Donbass may not be an effective method of minimizing the emission of mine gas into the working face.

The practice at Donbass is to seal off the goaf after coal extraction in an effort to prevent the emission of mine gas into the roadways from the goaf and to prevent spontaneous combusiton in the goaf. However, the seal itself is filled with high- concentration methane gas although it does provide a sufficient level of air-tightness.

The mine gas that is recovered from the drilled boreholes varies in quantity and methane concentration. It is therefore necessary to narrow the variation range to make the gas suitable for practical use. In Japanese coal mining practice, gas recovery from the goaf is carried out when the methane content of the recovered mine gas is low and/or when there is a great momentary demand for gas in order. In these situations, the methane concentration is adjusted and demand peaks are met. Donbass does not recover its goaf gas at present. In the future, however, it will be important for the Donbass Colliery to recover its goaf gas to help it expand the use of recovered mine gas.

Goaf gas can be recovered by drilling boreholes from the surface and conducting it through the underground seals. The advantage is that the process of recovery from the underground seals is less cost-intensive and facilitates easy gas measurement and management.

The Plan therefore envisages the recovery of mine gases by drilling boreholes underground in the roof rock overlying the goaf cavity and by draining gas from the seals. Under the Plan, the Donbass Colliery intends to introduce the necessary technology and equipment for drilling, conducting, sealing, and monitoring.

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2.4.2 Gas Recovery Plan at the L4 Seam of the Donbass Colliery

Coal mining is currently in progress in four seams at Donbass. These are the L3, L4, L6 and L7 seams. The present Plan has been developed for recovering the gas from the L4 seam which is the most typical one at Donbass, by means of “gas draining after goaf roof rock collapse” and “gas draining from the seals.”

(1) Gas Draining after Goaf Rock Collapse PlanThe gas draining method currently being practiced at the Donbass Colliery is to drain mine gas from the goaf after allowing the roof rock to collapse into the goaf cavity on the longwall face to facilitate gas effusion. The boreholes are drilled from the sidewalls of the roadway at the working endpoint to the rear of the longwall face in the direction of the coal face roof. The borehole is drilled to a maximum length of approximately 60m. With the method used at present, boreholes are drilled in the roof rock overlying the coal seam into which the rock mass has already collapsed after the coal has been extracted. Consequently, the hole interior is destroyed. As a result, it would be difficult to drill longer holes than is currently the practice. Although it is possible to recover the broken-out gas accumulating in the immediate vicinity of the borehole, it is not possible to recover the mine gas from the wide radius extending over the entire work face. Further, the starting point of the borehole is located in a rock mass in which cracks have already formed so that these boreholes are extremely vulnerable to air ingress which dilutes the methane content and makes it difficult to recover a gas with a high methane concentration.

In contrast, the present Project works on the following plan by drilling gas draining boreholes in the direction of the coal face rock roof from an unworked location in front of the longwall coal face.

Fig. 2.4.2-1 compares the present drilling method with the one according to the Project plan.

Borehole Length:The longer the borehole the greater its effect. In view of this principle, it will be necessary to train and develop long borehole drilling techniques. As the boreholes become longer, however, it must also be recognized that more sophisticated technology will be required. There are also many difficulties in maintaining the borehole intact over a long time. The first step must therefore not be to introduce long boreholing drilling techniques but to make stepwise progress toward long-borehole drilling.

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In connection with the present Project plan, we have intensely examined factors such as the current drilling technology, the speed of advance of the coal face and the gas draining efficiency. The results of our investigations have led us envisage the introduction of a gas draining borehole after roof rock collapse over a 300m borehole length.

Number of Boreholes and Borehole Diameter:The general principle is the gas can be drained from the coal face the more effectively the larger the number of boreholes. This does result in a large volume of gas requiring conduction. Yet, as the number of borehole increases the overall efficiency of drilling will decrease and the drilling costs will also go up. While it is true that the larger the diameters of the boreholes the larger the volume of gas conducted per borehole, it is also the case that large-diameter boreholes result in poorer drilling efficiency and require more sophisticated technology to repair rock irruption into the borehole. It is therefore essential to determine factors such as the gas volume to be conducted, the geological conditions and working conditions in the mine through close study when deciding the number of boreholes to be drilled and their diameter.

Based on the following investigations, the conclusion has been reached that in the present Project Plan three boreholes should be drilled in any one location and that their final diameter should be 112mm.

• Required recovery volume per coal face (assuming that gas recovery will take place from all boreholes in 2003 and the the gas will have a methane concentration of 60%.)

Recovered volume (Converted to pure

methane)

Number of coal faces

Recovered volume per CH4 Total gas volumecoal face (Converted to concentration

pure methane) of gas

33,250,000m3/year -r 6 5,542,000m3/year10.55m3/minute 4- 60% = 17.6m3/minute

• Recoverable gas volume per borehole (Calculation formula)

Q= {(APX43,500XD3)/(X - y - L)}°3where: Q: Flow rate in the conducted state (m3/min.)A P: Pressure drop (mmWG) = 272mmWG

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D: Borehole diameter (m)X: Coefficient of friction in the borehole = 0.02L: Length of borehole (m) = 300my: Gas density kg/m3

= {1.293(100-60)XQ.717X60}/100X273/(273+25) = 0.87kg/m3 1.293: Air density at 0°C and 1 atmosphere 0.717: Methane density at 0°C and 1 atmosphere 60: Methane concentration25: Temperature of methane

(Conductible volume at a diameter of 112mm)Q = {272 X 43,500 X (0.112)"/(0.02 X 0.87 X 300)}"" = 6.32m3/minute

(Number of boreholes required at a diameter of 112mm)Required Conductible volume Required number of

recovery volume per borehole boreholes17.6m3/min. -5- 6.32m3/min. = 2.78 =? 3 boreholes

Position of Boreholes (Horizon), Borehole Inclination:The purpose for which boreholes are drilled is to drain mine gas by allowing the roof rock mass to collapse into the goaf cavity. Seam gas erupting from the seam that is being worked due to the collapse of roof rock in the progress of coal extraction and seam gas emitting from adjacent coal seams is collected on the boreholes as the gas passes through the cracks in the rock mass. It is therefore necessary to drill the borehole in a location in which cracks will form in the rock mass as a result of coal extraction.

At Donbass, the working seam at the longwall face is rather thin and has a height of only about lm. As a result, the range over which cracks are formed in the overlying rock mass after coal extraction is quite small and boreholes must therefore be drilled near the worked coal seam. Under the present Project plan, the borehole drilling is to take place in a position in which the ends of the boreholes penetrate through the roof rock mass to a height some 20m from the worked coal seam.

The inclination at which the boreholes need to be drilled may differ to some extent according to the inclination and angle of strike of the coal seam and according to the drilling direction. The plan is to drill upwards at an angle of 0 - 3 degrees.

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Fig. 2.4.2-1 O

verview of G

as Recovery Plan at the L4 C

oal Seam of the D

onbass Colliery

Present gas recovery boreholes

Seal after coal extraction

Gas recover borehole

Gas recovery borehole according to Project plan

Seal after coal extraction recover

Drilling Method:The starting end (mouth) of the borehole is drilled at 112mm and after inserting and fastening the starter pipe the borehole is drilled to the bottom end at a diameter of 76mm. For the Project plan designed to increase the gas recovery volume, it is necessary to widen the borehole diameter so that the final diameter is planned to be 112mm. Drilling boreholes at a large diameter results in a drop in drilling efficiency and is prone to cause problems such as rock collapse inside the borehole. For this reason, a mouth or starter pipe is inserted and fastened in the initial borehole at a diameter of 120mm after drilling to a length of 6m. Following this, the borehole is drilled to the bottom end with a 77mm non-core bit first and then reamed with a 112mm reamer bit. Fig. 2.4.2-2 shows the borehole drilling plan.

Borehole Stabilization:Drilling subject to the limitations of the borehole position such as ordinary exploration drilling, often requires some hole protection using a casing when difficulties occur as a result of rock collapse in the borehole when it is necessary to complete the borehole in this particular location. Flowever, when the borehole for draining mine gas from a goaf with collapsed roof rock is stabilized with a casing, it is virtually impossible to recover this casing after the gas has been entirely withdrawn. As a result, the boring costs will rise to a high level as the casing has to be sacrificed.

Consequently, the plan is to overcome this problem by reaming the borehole in the case that rock collapse gas occurred in the hole. In risk locations liable to localized rock collapse in the hole the plan is to introduce a technique permitting the insertion of a shirt casing protecting only the risk location.

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^j~?7 m 112~i —

Starter (mouth) pipe

T120 mm

JL

Drilling sequence(1) Drilling a 120mm borehole (0 - 6m) first.(2) Inserting and fastening the starter pipe next.(3) Then drilling a 77mm borehole (6 - 300m).(4) Finally, reaming to a 112mm diameter (6 - 300m)

Drill room

Fig. 2.4.2-2 Borehole Drilling Plan

Drill Room:In order to increase the gas recovery, the Project plan envisages the drilling of three boreholes for draining the mine gas. Although each borehole has a length of 300m the plan is to recover gas in a steady manner by drilling three boreholes at 250m each.

The boreholes are to be drilled in front of the longwall coal face. When the drilling takes place in a roadway, a drill room has to be fixed and the drilling carried out in this room because drilling in a roadway obstructs the movement of equipment required for working at the longwall face and the transportation of the extracted coal. The size of the drilling room will vary according to the size of the drilling equipment that will be used. In the case of the present Project plan, however, a medium drill is to be used to drill a 300m long borehole. The drilling room to match this drilling equipment will therefore be 5m x 5m.

Fig. 2.4.2-3 gives a schematic overview of the drilling room plan.

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Plane view

Section view

Fig. 2A.2-3 Schematic Overview of Drilling Room Plan

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Drilling Process:The number of days required for drilling at each drilling room (300m x 3 boreholes) can be estimated approximately 1.5 months, in accordance with the following calculations.

Number of days required for drillingPositioning 2 daysPositioning inside drilling room and securing the mouth 6 days Drilling (300m x 3) -r 70m/day = 13 daysReaming (300m x3)t 120m/day = 8 daysWithdrawal 1 daySubtotal 30 daysExtra time allowance 15 daysTotal 45 days (1.5 months)

The speed of advance of the longwall coal face can, in turn, be estimated as being an average of 2m/day, in accordance with the following calculations.

• Daily coal production output:Daily Number of

Working output working faces Annual output (tons) days (tons) tons/face*day

Develop coal 1,400,000 X 0.07 = 98,000Longwall coal 1,400,000 X 0.93 = 1,302,000-F 350 days = 3,720 t-6= 620t/day

• Coal amount per face per meterLongwall face Average mining Coal amount per meter

length (m) thickness (m) Specific gravity (ton)200 X L18 X 1.40 = 330

• Average speed of advance of coal face per dayCoal amount per meter Speed of advance of coal

tons/face*day face face (m/day)620 -r 330 = 1.88 = 2m/day

Thus, the time (number of days) required for extracting coal in the space between consecutive drilling rooms (250m) is 250m -r- 2m/day =125 days (approximately 4 months). In contrast, the time required for drilling per drilling room is only around 1.5 months. As a result, the drilling equipment required for each face can be estimated to be 0.5 set.

Fig. 2.4.2-4 shows how the coal mining process related with the mining and the gas draining operation.

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Fig. 2A.2-4 O

verview of D

rilling Process

Mining position

700 Days

Number of mining days

(2) Gas Drainage from SealThe current practice at the Donbass Colliery is to use concrete blocks for the seals. As these blocks do not provide an adequate hermetic seal and the methane concentration in the seal is low, the mine gas is not drained from the seals. The present Project plan envisages the construction of an airtight seal using the wet-type filling method with fly- ash to recover the gas by draining it from the seals. Fig. 2.4.2-5 is a bird’s eye view of the seal.

Gas draining pipe

Safety barrier pillar

Timber crib

Fig. 2.4.2-5 Bird’s Eye View of Seal

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2.4.3 Outline of the Drilling Equipment to be Used

The maximum length of the boreholes drilled for gas drainage at the Donbass Colliery is around 60m, and the drilling equipment owned by the Donbass Colliery does not sufficiently provide the required performance. It will therefore be important to introduce the drilling equipment corresponding to this Project plan.

Moreover, Donbass has six longwall coal faces that are currently in operation. Since 0.5 sets of drilling equipment is required for each coal face, the Project plan envisages the use of three sets of drilling equipment. The plan also envisages that Donbass should provide all consumable items such as drill bits, stabilizers (that is, protective shielding to prevent the borehole from bending), and mouth pipes. However, a demonstration test is to be performed on one coal face (longwall gate length of 200m, gateway length of 1,500m). All drill bits, stabilizers and mouth pipes required for this pilot test are to be provided by the Japanese side. The main items of drilling equipment to be provided by the Japanese party are as follows:

Items of equipment to be provided by the Japanese side:Drilling machines Drill pumps RodsLocalized fans for ventilation in the drilling seats Power distribution panel Types of bit Stabilizers Mouth pipes

(1) Drilling Machines Drilling machines will be used underground in the coal mine and will need frequent movement from one place to another. Consequently, the requirement must be that the drilling machines should not only have adequate drilling performance but also be lightweight and compact for easy transportability. The general practice both in Japan and abroad is therefore to use medium drilling equipment. Thus, the plan is to use three spindle-type drilling machines (manufactured by Koken Industry Co., Ltd., type RK-3A, nominal performance 500m), seeing that this equipment has a proven reliability.

Main Specification Data for the RK-3 A Type Drilling Equipment:Motor output (explosion-proof type): 1 lkW

3 units 3 units 3 sets 3 units 3 setsSufficient for 1 coal face Sufficient for 1 coal face Sufficient for 1 coal face

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Maximum torque: 21 Okg -mSpindle speed: 50 - 500rpmBody dimensions (LxWxH): 2,260 x 1,050 x 1,560mmEquipment weight (excluding motor): 1,300kg

(2) Drill PumpThe pump is needed for discharging the slime generated in the drilling operation and for cooling the drill bit. To ensure high drilling performance and prevent rock collapse in the borehole it is important to vary the water feed rate and water feed pressure in the borehole in accordance with the rock conditions. To meet this requirement, three pumps (manufactured by Koken Industry Co., Ltd., type WL-MG-15h) will be used as these units have a proven reliability and permit easy adjustment of the water feed rate and water feed pressure.

Main Specification Data for the WL-MG-15h Pump Type:Motor output (explosion-proof type): Delivery pressure:Delivery rate:Body dimension (LxWxH):Unit weight (excluding motor):

llkW 22-70kg 9 - 2301/min.2,420 x 840 x 1,140mm (inch) 695kg

(3) RodsIn accordance with the Project plan, the boreholes are drilled for draining gas. As a result, the rods that are used for drilling are required to have a high strength and a large thickness for long-life durability. As they are used in a narrow space in the mine it is also important that they should be short and easy to handle and transport and that they should be lightweight and compact. On the other hand, however, rods made to special specifications would be prohibitively costly and could not easily be supplied. For these reasons, standard-type BW rods of 1.5m each (outer diameter 54mm, thickness 8mm) will be used under the Project plan.

As rods may break during drilling it will be necessary to keep spare rods. The present plan is to introduce 405m (270 rods) per drilling machine. The total number of rods for all three drilling machines will therefore be 1,215m (810 rods).

Number of rods required per drilling machine:Number of rods Operational rods Spare rods405m (270 rods) = 300m (200 rods) + 105m (70 rods)

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(4) Localized Fans for Ventilation in Drilling RoomsGas emission may occur while a borehole is being drilled. For this reason, it is necessary to install a localized fan in the drilling room during the drilling operation. The plan is therefore to drill the boreholes with simultaneous gas drainage and to use three 1.5kW localized fans.

(5) Power Distribution PanelThe drilling machines, pumps, and localized fans will all be electrically operated. The underground power supply to the power distribution panels for the equipment is to be provided by the Donbass Colliery while the Japanese party is to provide the three sets of power distribution panel.

(6) BitsThe amount of drilling work at the coal face (longwall gateway length 200m, gateway length of 1,500m).

Total drilling length

Holes per drilling Number ofTotal

drilling Number ofroom drilling rooms length holes

Main drill (300m X 3 holes) x 6 = 5,400m 18 holesAuxiliary drill 200m x 1 = 200 1

150m X 1 150 1Total 5,750 20

Total drilling length by borehole diameterBorehole Number of Total drilling

length holes lengthDrilling 120mm starter hole (mouth) 6m x 20 holes = 120mDrilling 77mm hole 5,750mReaming to 112mm 5,750m

The critical factor for drilling gas drainage boreholes is the safety and efficiency of the drilling operation. The plan envisages the use of a non-coring drill because this offers a faster drilling speed than a coring drill. The bits to be used are of a type (Strata Pack Bit) that have an inset special alloy tip with diamond dust. This type has a proven record in hard rock operation both in Japan and abroad.

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The rate of wear of the bits will vary according to the geological conditions and also as a function of the level of skill of the drilling engineer. To allow for wear, the plan is to introduce two 120mm bits, 35 77mm bits, and 18 112mm bits, including spare ones.

Number of bits to be introducedTotal drilling Total number

length Rate of ware Drilling bits Spare bits of bits120mm bits 120m -r 200m = 1 only + 1 only = 2 only77mm bits 5,750 4- 200 = 29 only + 6 only = 35 only112mm bits 5,750 4- 400 = 15 only + 3 only = 18 only

(7) StabilizersThe angle of inclination of the boreholes will be in the range from 0 - +3 degrees. This means that the drilling will take place almost in the horizontal direction. With the ordinary drilling methods, horizontal drilling has the great risk that the borehole might bend downwards. For this reason, the plan is to drill the 77mm diameter hole by connecting a stabilizer between the bit and the rod in order to prevent borehole bending. It is estimated that the stabilizer might wear at a rate of 1 stabilizer for every 1,000m drilled so that six stabilizer will be introduced.

(8) Mouth PipesThe sidewalls of the drilling room are vulnerable to the development of cracks due to impact and earth pressure during the drilling operation. When gas drainage is performed by applying a underpressure (vacuum) inside the rock that has developed such cracks there is a serious danger of spontaneous combustion and also of air ingress from the cracks with the result that the gas’s methane content would be diluted. In order to prevent such spontaneous combustion, to improve the gas concentration and to upgrade the efficiency of gas drainage, it will therefore be necessary to ensure adequate caulking of the borehole prior to gas drainage. The Project plan is to insert and fasten a 6m long mouth pipe in the borehole.

This will be a steel pipe in order to prevent gas explosion due to static electric charges, and the plan is to introduce mouth pipes on a scale sufficient for 20 boreholes.

2.4.4 Gas Conducting Equipment, Gas Draining Equipment from Seals

(1) Gas Conduct EquipmentIn gas draining boring operation, the practice is to measure the gas concentration and flow rate in each borehole to adjust the suction pressure (vacuum) and the flow rate for

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conducting the gas in accordance with the prevailing conditions. This is essential for preventing spontaneous combustion and also important in order to maintain the methane concentration of the gas withdrawn from the mine. As a result, the plan envisages the use of gas conducting equipment capable of withdrawing the mine gas independently for each borehole. Since it is also anticipated that water may flow from the boreholes, the plan envisages the use of water draining facilities. The drain system will be an automatic pneumatically operated drain capable of draining water automatically when a certain volume has accumulated. The drain uses compressed air for operation.

The plan envisages the use of 12 sets of conduction equipment, seeing that there are six working faces (panels) in the mine and each panel requires 2 sets. Two sets are needed for any one panel because gas withdrawal in a longwall panel takes place both at each drilling room and during the drilling operation at the drilling room (from the completion of one hole to the commencement of the next gas conduction operation).

The gas withdrawal equipment consists of the following items. Fig. 2.4.4-1 shows the equipment arrangement at the drilling room.

Conduction equipment corresponding to 1 set:Automatic drain (inch water storage pipe) Conduction pipeOpen/close valve (inch pipe connectors) Conduction hose

1 unit 1 only 3 only 3 only

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Fig. 2.4.4-1 A

rrangement of C

onduction Equipment inside D

rilling Roo

Conduction pipeConduction hose

Open/close valve

' Borehole

Automatic drain

Water storage pipe

(2) Equipment for Draining Gas from SealsThe present Project plan is designed to permit the recovery of gas from the seals and to create a sufficiently airtight seal in order to prevent gas emission from the seal into the working gateway. The sealing method to be used is the wet-type filling system using finely particulate fly-ash. The most effective way to produce a fly-ash filled seal is to conduct the fly-ash through a pipeline to the seal point by installing a plant base outside the mine. However, if this method will be used from the beginning at Donbass, the Donbass personnel will not have much technical experience in this technique, and it is likely that problems such as pipe clogging may frequently occur. As a result, the plan envisages the transfer of fly-ash at the sealing location. The greater the seal length the better the airtightness of the seal but the longer will also be the time required for making the seal. In view of this, the plan will be to have a seal length of 1 Om.

The Donbass Colliery has no prior experience of making fly-ash seals. For this reason, model seals will be made to recover gas from them in two locations on the deep and shoulder sides of 1 panel. The purpose of the model seals will be to demonstrate the effectiveness of the fly-ash seal.

Under the Project plan, the transportation of the equipment for making the seals will fall to the share of the Donbass Colliery. The plan envisages the introduction of the following equipment by the Japanese side. Fig. 2.4.4-2 shows a practical example of the sealing method.

Sealing equipment (corresponding to two locations)

Fly-ash transfer pump (identical model to the drilling pump)

Stirring mixer

Fly-ash transfer pipe

Sealing equipment (timber, piping, etc.) 2 sets

100m

1 unit

1 unit

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Fig. 2A.4-2 Seal D

esign Schematic

Sluice valve

Raised 30cm or more above the frameMonitoring hole §##

JDrying clothTo main gas withdrawal pipe

"Gas conducting pipe (4 inch or 6 inches, according to gas volume)

2 inches)

I 11 Facing downwards using a[ bent pipe m order t0

prevent mouth obstructionby felling rock

30cm or more below the floor $

10m or more

,Timber plate

-Mine timber (thick timber)

- ■

Roadway width 5.0m Rear frametpront frame

2.4.5 Withdrawn Gas Monitoring System

At present, the Donbass Colliery uses methane sensors installed in the exhaust ventilation roadways at the working face and in the main gateways. The methane concentration of the air stream in the roadways picked up by these sensors is continuously displayed and recorded in the office on the ground. In contrast, the withdrawn gas is measured at regular intervals by measuring personnel only at the gas drain boreholes and the blowers above ground. In view of the expanded use of the recovered gas in the future it will be necessary to reinforce the measurements of the drainage gas. The Project plan therefore envisages the continuous implementation of measurements of the conducted gas in all major locations both underground and on the surface. It also allows for the introduction of a monitoring system capable of displaying and recording the measurement data in a ground monitoring station.

The locations in which measurements of the drainage gas must be carried out are the gas drain holes at the working face, the gas draining points at the seals, and the blowers above ground. The measurements of the gas withdrawn from the boreholes should preferably take place at the mouths of the boreholes. When sensors are used for the measurements, however, there is a serious risk that these sensors may not function correctly in case of water emissions from the boreholes. The Project plan therefore allows for a general measurement of the gas withdrawn from the boreholes in the gas conduction pipes laid in the roadways. The measuring points and measurement items are as follows.

Fig. 2.4.5-1 shows the monitoring flow.

Measuring locations (total of 10 points)Gas withdrawn from the gas drain boreholes

Gas withdrawn from the seal:

Gas conducted by the ground blower:

Measurement itemsCH4 concentration, CO concentration, flow rate, underpressure, temperature, pressure (blower only)

The withdrawn gas monitoring system consists of the following equipment:

: Measured at the six coal faces currently in operation Measured in two seals on 1 coal faceMeasured at the 2 blowers.

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• Equipment installed at underground measuring points (Total of 8 sets installed.)Sensors (CH4, CO, flow rate, underpressure and temperature), transmitters, power supply units, Sample gas suction equipment, interlocks

• Equipment installed at the gas measuring points on the ground blowers (Total of 2 sets installed)

Sensors (CH4, CO, flow rate, underpressure, temperature and pressure), transmitters, power supply units

• Communications cables underground and above ground• Equipment installed in monitoring station (1 set)

Receivers, processors, display units, recorders

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Fig. 2.4.5-1 Monitoring System Schematic

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2.4.6 Future Quality of Recovered Gas and Estimated Volumes

Mine gas can be classed into gas contained in the main fan exhaust gas and gas drained from the gas drain holes, special gas draining roads, and from the seals. The mine gas that is contained in the exhaust gases of the main fan has normally a low methane content of less than 1%. Because of this low methane content, the worldwide practice is not to use it and directly discharge it into the atmosphere, except for some very few mines that use the gas as the fuel air for thermal power plants. For this reason, we have excluded the use of this gas in this Report and will use only the drained gas.

(1) Method of Estimating the Recovery Volume and QualityThe main factors, affecting the emission of mine gas are the conditions prevailing not only in the worked coal seam but also in the coal seams located in the neighborhood of the worked coal seam and influenced by the coal extraction process (seam thickness, coal quality, gas inclusion volume, permeability, etc.), the geological conditions (roof and floor, rock strength, porosity, geological faults, cracks, earth pressure, etc.) the mining conditions (production output, mining method, number of worked coal seams, mining thickness, depth of working face, length of working face, rate of advance of the working face, gas draining method, sealing method, length of maintained roadway, etc.). There are thus many factors involved.

The methods by which the volume of emission gas and the recovered gas volume can be estimated include one that is based on simulation and one based on forecasting. The simulation method uses a mining model and is extensively used in Australia. The forecasting method estimates the emission volume by analyzing the conditions under which emissions have occurred in the past. Now, Donbass is a mine operating in four coal seams with significant changes in mining depth ranging between SL-170m - SL- 560m. For a mine of this type, a vast quantity of data would be required to estimate the gas emission volume on the basis of simulation. It has not been possible so far to obtain the necessary data. This is why estimation by simulation has not been considered here. Instead, we will estimate the future emission volumes and recovery volumes by analyzing the gas emission conditions up until the present. In detail, we have proceeded with our examination in the following order. On the basis of the 1994 - 1999 data provided by the Ukrainian Alternative Fuels Center we have estimated the emission volumes and recovery volumes for the year 2003.

Analysis procedures:1. Examination of production plans2. Examination of emission volume per ton of coal production

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3. Estimation of total emission volume4. Estimation of recovery volume from gas draining5. Estimation of methane content of recovered gas.

(2) Examination of Production PlansDonbass has a production capacity of 2,100,000 tons a year. During the period from 1994 through 1999, it has produced 1,200,000 - 1,400,000 ton/year. Production in 2000 is forecast to reach 1,500,000 tons. Although the production plans for the future are not definite it can be assumed that production will continue at the present rate. While production increases or cutbacks imposed by government action and production stops due to some unforeseeable mine accident cannot totally be ruled out, it does seem highly likely that production output will be maintained at or around the present level, given the production and underground mining conditions up until the present. In view of this production output in 2003 can be assumed to remain at the present level of 1,400,000 tons. On this output basis, we have then estimated the emission volume.

Production output (Unit: 1,000 tons)1994 1995 1996 1997 1998 1999 2000 20031,292 1,354 1,380 1,196 1,325 1,347 (1,500) (1,400)

(3) Examination of Gas Emission Volume per Ton of Coal Production As stated above, the emission volume of mine gas (gas contained in main fan exhaust gas and drained gas) depends on the coal seam, geological and mining conditions. Yet, even without a detailed assessment of these conditions, it is possible to determine the “emission volume per ton of coal production” from a close examination of the gas emission conditions of the past. This emission volume per ton of coal production provides a tell-tale indication of the gas emission volume. As there is a whole range of conditions affecting the emission volume per ton of coal production, this parameter is extensively used for comparing and forecasting gas emission volumes.

At Donbass, the data for the gas emission volume per ton of coal production varied between 68.9 - 76.3m3/ton for 1994 - 1996. In 1997, however, this volume rose sharply to 109.9m3/ton. This was due primarily to the temporary the production output. In 1998 - 1999, the gas emission volume was between 90.6 - 93.4m3/ton. The general trend at Donbass is to go into more distant although the mining areas will continue operation at the present mining depth (SL-170m - SL-560m). On this basis, it can be assumed that the gas emission volume per ton of coal production will be 95m3/ton in 2003.

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Fig. 2.4.6-1 gives the future estimated gas emission volume per ton of coal production.

Gas emission volume per ton of coal production (m3/ton)1994 1995 1996 1997 1998 1999 2003

68.9 69.1 76.3 109.9 90.6 93.4 (95.0)

(4) Estimation of Total Emission VolumeThe total emission volume of gas can be calculated by multiplying the above estimated emission volume per ton of coal production with the coal production volume.

Total emission volume (converted to pure

methane gas)133,000,000Nm3

Gas emission volume per ton of coal production

95m3/ton

x Coal output

x 1,400,000 ton (2003)

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Coal production output (l,000t) Gas emission volume (m3/ton)

1,600— 80

1.200— 60

1,000 — 50

400— 20

200— 10

1996

Fig. 2.4.6-1 Coal Production Output - Gas Emission Volume per Ton of Coal ProductionDonbass Colliery

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(5) Estimation of Recovery Volume from Gas DrainingThe recovery volume can be calculated multiplying the total emission volume with the recovery rate.

Recovery volume (converted to pure methane)= Total emission volume (converted to pure methane) x Recovery rate

Donbass recorded low recovery volumes for the two years from 1996 - 1997 of 6.7 - 7.9 million m3 (normal). In the other years, the recovery volume was between 10.5 - 11.5 million m3 (normal). The total emission volume was high only in 1997 when it reached a value of 131.4 million m3 (normal). In general, however, there has been a gradual increase from 89.0 million m3 (normal)in 1994 to 128.4 million m3 (normal) in 1999. Consequently, the recovery rate gradually decreased from 11.8% in 1994 to 9.0% in 1999.

The collieries in the Donetsk Coal Field have furnished gas emission and recovery volume data for 1999: Kholodnaya-Balka Coal Mine reported a recovery rate of 54.7%, the Coal Mine named after Kirov one of 46.5%, the Bazhanov Mine one of 36.6% and the Skochinski Mine one of 10.4%. Many of the coal mines have just had a methane recovery rate of 30% or more.

In Japan, however, the recovery rate reported for underground mines in 1992, when many mines were in operation and carrying out gas recovery, was also 30% or more. Thus, the Sorachi Colliery gave a value of 46.7%, the Akabira Colliery one of 40.5%, the Ashibetsu Colliery one of 39.0%, the Taiheiyo Colliery one of 30.2%, while the Miike and Ikeshima Collieries have nil % recovery.

In contrast, Donbass has a recovery rate of 10% and thus belongs to the group of mines with a low recovery rate among the mines carrying out gas recovery. The reason why the recovery rate has been low until the present is this: Due to the increase in total gas emission volume there has also been an increase in the emission volume into the roadways but this increase has remained within a range that did not affect mining operation to any significant degree. Another factor is that the volume of recovered gas that has been utilized has been quite small. The Donbass Colliery has a sufficient technical potential for increasing its gas recovery rate in the future.

In this examination, it is planned to upgrade the recovery rate from and including 2003 by introducing the new gas recovery technology and equipment described in 2.4.1. -

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2.4.5, by the end of 2002. The introduction of this new technology and equipment calls for cautious approach giving due attention to safety. This will also require a certain training period. It will generally be difficult to achieve a high recovery rate at one stroke. Consequently, the recovery volume has been estimated on the basis that the recovery rate in 2003 will be 25%.

Fig. 2.4.6-2 shows the forecast gas recovery rate for the Donbass Colliery in the future and Table 2.4.6-1 gives the gas recovery rates for other mines.

Gas Recovery Volume (converted to pure methane, 1000m3 (normal))1994 1995 1996 1997 1998 1999 2003

Total emission volume 88,979 93,607 105,341 131,431 120,016 128,373 (133,000)

Recovery rate (%) 11.8 11.8 7.5 4.8 9.2 9.0 (25.0)

Recovery volume 10,517 10,517 7,884 6,307 11,038 11,558 (33,250)

The gas recovery volume of a coal mine varies according to the operating conditions whether work is in progress or not at the coal face, and also according to the geological conditions. The Donbass Colliery has a large number of six active working faces. It also plans to introduce “gas drainage from seals” as a new technique. In view of this, it can be assumed that despite the significant changes in the recovery volume at each face the overall volume will change little. Consequently, the plans have to be established on the basis that the recovery volume might vary to an extent of around 10% when the recovered gas will be used.

(6) Estimation of Methane Content of Recovered GasThe gas spontaneously erupting from the coal seam usually has a high methane content of 90% or more. Since one of the reasons why gas recovery is carried out in a mine is to ensure safety, it is vital to recover the mine gas even when it is diluted with a little air in order to reduce the gas admission to the working face or the roadway. In order to raise the gas recovery rate an increased suction pressure (vacuum) is applied by the blower to recover more gas. This does lead, however, to a larger volume of air ingress. At the same time, air will leak into the connectors of the gas conduction pipelines which leads to an even greater dilution of the methane concentration of the recovered gas. It is therefore extremely difficult to recover mine gas at a high concentration.

The gas recovered at Donbass until the present has had a methane concentration between 25% - 40%. In Japan, the Taiheiyo Colliery recovers its mine gas for use as

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town gas. The methane concentration of the recovered gas for the years from 1989 through 1998 was between 33% - 39%.

The present plan envisages the introduction of new gas recovery technology and equipment, including drilling and sealing. It is reasonable to expect that this will help to improve the methane concentration of the recovered gas. However, with the progress of mining operation, the working face will gradually move toward more distant and the pipeline for transporting the gas will become increasingly longer, accordingly. At the same time, the existing pipelines will be subject to progressive aging. In view of this, we have estimated that the average methane concentration of the recovered gas will be 30% in 2003. It variation range is estimated between 25 - 35%.

Ukrainian regulations prohibit the use of a recovered mine gas with a methane concentration of 25% or less. Table 2.4.6-2 compares the gas recovery situation between the case in which the Project is implemented and the case in which it is not.

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Fig. 2.4.6-2 G

as Recovery R

ate

Gas recovery rateGas recovery rate (%)

^tn(foay^'Ba*ka Colliery

After introduction o'

Skochinski Colliery

1994 1996 1996 1997 1998 1999 2000 2001 2002 2003

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Table 2.4.6-1 Comparison of Recovery Rates among Coal Mines in the Donetsk Coal Field

1994 1995 1996 1997 1998 1999DonbassColliery

Emission volume (1000m3) 88,979 93,609 105,341 131,431 120,016 128,373Recovery volume (1000m3) 10,517 10,517 7,884 6,307 11,038 11,558Recovery rate (%) 11.8 11.2 7.5 4.8 9.2 9.0Utilization volume (1000m3) 5,259 5,259 3,942 1,840 3,942 4,203

SkochinskiColliery

Emission volume (1000m3) 54,736 51,365 51,351 46,200 38,421 38,593Recovery volume (1000m3) 3,206 3,022 3,259 4,084 3,942 3,995Recovery rate (%) 5.9 5.9 6.3 8.8 10.3 10.4

Utilization volume (1000m3) 0 0 0 0 0 0BazhanovColliery

Emission volume (1000m3) 37,160 31,900 27,590 40,680 35,720 36,170

Recovery volume (1000m3) 10,620 8,880 7,250 15,610 15,820 13,250Recovery rate (%) 28.6 27.8 26.3 38.3 44.9 36.6Utilization volume (1000m3) 5,300 5,300 5,400 5,460 6,400 6,400

Kholodnaya-Balka

Colliery

Emission volume (1000m3) 22,860 25,230 23,490 22,920 30,960 32,170Recovery volume (1000m3) 4,630 5,940 5,360 8,300 15,610 17,610

Recovery rate (%) 20.3 23.5 22.8 36.2 50.4 54.7Utilization volume (1000m3) 4,004 4,004 4,720 6,400 6,400 6,400

KirovColliery

Emission volume (1000m3) 8,460 8,880 9,040 8,460 11,930 15,720Recovery volume (1000m3) 1,310 1,840 1,310 2,730 6,410 7,310

Recovery rate (%) 15.5 20.7 14.5 32.3 53.7 46.5Utilization volume (1000m3) 0 0 0 0 0 0


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Table 2.4.6-2 Estimated Recovered Gas Volume and Quality at the Donbass Colliery

YearProduction

output (100 tons)

Emission volume

per ton of coal

(m3/ton)

Gas emission volume (converted to pure methane) Recovered gas volume

Used gas volume (pure methane

volume)

Main fan exhaust

Recoveredgas

volumeTotal Recovery

rate TotalMethane

concentration

Puremethanevolume

Usedvolume

Utilizationrate

1994 1,292 68.9 78,462 10,517 88,979 11.8 35,057 30 10,517 5,259 50.0

1995 1,354 69.1 83,092 10,517 93,609 11.2 35,057 30 10,571 5,259 50.0

1996 1,380 76.3 97,457 7,884 105,341 7.5 26,280 30 7,884 3,942 50.0

1997 1,196 109.9 125,124 6,307 131,431 4.8 21,024 30 6,307 1,840 29.2

1998 1,325 90.6 108.978 11,038 120,016 9.2 36,794 30 11.558 4,203 36.4

1999 1,347 93.4 116,815 11,558 128.373 9.0 38.527 30 11,558 4,203 36.4

20031,400 95.0 119,700 13,300 133,000 10.0 44,334 30 13,300

1,400 95.0 99.750 33,250 133,000 25.0 110,834 30 33,250Note 1: Recovery rate = Recovered gas volume -r Total emission volume Note 2: Utilization rate = Used gas volume -r Recovered gas volumeNote 3: Data in top line for 2003 refer to the case in which Japanese technology is not introduced.

Data in bottom line for 2003 refer to the case in which Japanese technology is introduced.

B. Gas Utilization Project

2.4.7 Methane Gas Collecting Equipment

At present, methane gas is collected in two locations. The first one is near the office block, and is currently used as a boiler fuel in the winter season. The second place is 3 km from the office block. Here, the methane gas is not used and directly discharged into the atmosphere.

We have planned the route of the piping of collected methane gas for utilizing as fuel of power generator.

A pipeline from the No. 1 gas collecting unit is sent to the boiler, and it will be necessary to extend this pipeline up to the gas engine generator plant. From the No. 2 collecting point, the gas is currently discharged via a pipe into the atmosphere, and it will be necessary to extend up to the gas engine generator plant with roughly 3km long on surface of the ground. Both units will be provided with dehumidifiers and have an automatic select valve capable of releasing the gas into the atmosphere in accordance with operating conditions.

Fig. 2.4.7-1 is a methane gas collecting system schematic showing the pipe routing plan. The piping route can be seen in the previous Fig. 2.2.4.5-2 showing a schematic overview of the gas engine generator equipment arrangement and piping layout.

2.4.8 Selecting the Power Generating Equipment

(1) Properties and Particular Features of Mine Methane GasThe Donbass mine methane gas has the following properties and features.

1) Concentration• Average methane concentration: 30%• Residual gas components: Air• Range of concentration variation: 25% - 35%

2) Methane gas volume recovered from coal mine• Annual recovered gas volume:• Variation range in annual recovered gas volume:

33,250,000m2 3 (normal)Zyear ±10%

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3) Other features• The gas recovery volume drops for 2 - 3 weeks when the coal face is shifted.

(2) Features of Energy Utilization at the Coal Mine1) Electric Power DemandThe Donbass Coal Field has a high electric power demand throughout the year. In view of the chronic shortage of electricity in Ukraine, electric power use is subject to restrictions. Nevertheless, Donbass uses an average of 12MW to 15MW. In the peak load time slots when consumer power demand is particularly high in the morning and evening for cooking in the homes, the electric power company imposes restriction on electricity use. Since production equipment can only operate when spare power is available, and in view of the significant improvement in productivity, there will be a great demand for in-house generation.

2) Heat DemandIn the Donetsk area winter temperatures drop to a minimum average of -15°C. There is therefore a great demand for heating the ventilation air and also for room heating in the work rooms, including the offices. From mid-April to mid-October, however, there is only a very small need for heat.

(3) Utilization Methods for Coal Mine GasThe methods by which coal mine gas is used are as follows. These processes use essentially methane since methane is the main component of the mine gas.

1) Use as boiler fuel2) Use for gas turbine power generation3) Use for gas engine power generation4) Use as automobile fuel (high-pressure fill)5) Use as feedstock for chemical plants

With regard to these utilization methods,- the use of coal mine gas as a boiler fuel 1) is limited to the winter period covering

about six months, and a large volume of methane gas goes to waste as it is discharged into the atmosphere.

- the use of coal mine gas as an automobile fuel 4) applies to a high-concentration methane gas such as CBM. The Donbass mine gas with a methane concentration of only around 30% is not suited for this purpose.

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- the use of coal mine gas as a feedstock for chemical plants 5) would be economically feasible only if Donbass recovered 20 to 30 times the mine gas it currently does.

The utilization methods that are appropriate among these techniques are power generation to meet Donbass’s internal electricity needs, power generation using the gas engine and gas turbine, and heat utilization by waste heat recovery.

(4) Comparison of Gas Turbine and Gas EngineTable 2.4.8.4-1 is a general comparison between a 1MW to 2MW capacity gas turbine and gas engine in case of using methane gas.

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Table 2.4.8.4-1 Comparison between Gas Engine and Gas Turbine ____________ (Generating Capacity: 1MW - 2MW)____________

Item Gas engine Gas turbine RemarksSystem features Waste heat

recovery as steamand hot water

Waste heatrecovery as steam

Because the exhaust gas temperature is high, a high- temperature steam is obtained.

Thermalefficiency

Electricity 38%Hot water 11.5%Steam 26.0%

Electricity 29% Steam 50%

The gas engine has a substantially higher power generating efficiency than the gas turbine and is therefore more advantageous for the plant of the Power Generating Organization.

Total 9%Total 75.5%

Effect ofambienttemperatureAtmospherictemperature

Up to 40°C, no output correction is needed. (100% output is available.)

Output correction is needed with thestandardtemperature being 15°C.

The rated output of the gas turbine is generally specified for a temperature of 15°C. At the high summer temperatures, output correction is required.

Fuel gas properties

The gas turbine requires fuel gas compression. At lower methane concentrations, its economic performance will therefore substantially deteriorate.

Methaneconcentration

Approx. 40% ormore(Conventionaltype)

Approx. 60% ormore

Influence of frequency of start/stop operations

In the case of the gas turbine, a single start/stop sequence is equivalent approx. 10-30 hours’ operating time. Consequently, when start/stop sequences have to be frequently repeated due to changes in the fuel gas’s methane concentration, the gas engine is more favorable.

Maintenanceintervals

MaintenanceintervalsNo influence

Has an influence

The mine gas from the Ukrainian Donbass Coal Field has an average methane gas content of 30%. This means that the fuel gas needs compression for use as the gas turbine fuel. The problem is that the fuel compressor of the gas turbine causes considerable energy losses so that the power generating efficiency is as low as only around 15%. This is why we have preferred the gas engine for power generation in this case.

(5) Gas Engine GeneratorThe types of engine suitable for gas engine generators differ according to the way in which the gas is ignited. There are essentially two types: one with electric spark plug ignition and one with pilot oil ignition.

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1) Gas Engine with Electric Spark Plug IgnitionAfter the fuel gas has been compressed in the cylinder it is ignited by the sparks generated from the electric spark plug. This principle is identical to that of the ignition of the ordinary gasoline engine. Methane has a low flame propagation speed. Lean-bum combustion system uses with very low methane content gas, and therefore ignition on lean-bum gas becomes instable. Even when this is compensated by increasing the energy (increased voltage and current) of the spark plug (normally less than 0.1J), the ignition will present problems, especially in terms of the endurance of the spark plugs. This is the reason why spark plug ignition leads to unstable performance when a fuel gas with a low methane concentration is used. Normally, the engine will stop when the methane concentration falls short of 40%.

2) Gas Engine with Pilot Oil IgnitionIn the compression cycle when the methane gas is compressed in the cylinder, a liquid fuel (kerosene or similar) corresponding to about 1% of the total heat amount of the methane fuel is injected into the pre-combustion chamber for igniting the fuel instead of the spark plug. The principle is identical to that of the diesel engine. Because it has an energy 5,000 to 100,000 times that of the spark plug (approx. 500J-1,000J) it is capable of instantaneously igniting a dilute methane fuel gas in the cylinder without fail. As a result, stable operational performance can be achieved even when the methane concentration of the fuel gas in the cylinder is as low as around 4.5%. In principle, this engine will operate with a methane concentration from 100% to 4.5%. Lean combustion technology is essential for building a high-efficiency and low-NOx engine. In the past, however, lean-bum combustion was difficult to achieve with methane gas fuel because of the slow rate of combustion of methane and because of the methane concentration fluctuation in the cylinder. These problems have now been overcome with this new technology.

Table 2.4.8.5-1 compares the particular features and problems of these two types of engine.

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Table 2.4.8.5-1 Gas Engine Type Comparison

No. Gas engine type Generatingcapacity

Problems in use of coal mine gas with a 30% methane concentration

1 Lean-bumcombustion withpilot oil ignition

650kW ~1950kW

(F eatures/Merits)• The fuel gas is ignited by compressing and

igniting a liquid fuel. Gas ignition is therefore not affected by the fuel’s properties.

• Since a lean mix with an air surplus ratio of 2 or more is burned, combustion is not affected even when the fuel gas’s air content reaches70%.

• It has been demonstrated that the engine can perform in the low-calorific (digestion gas, etc.) range.

2 Lean-bumcombustion withelectric spark plug ignition (precombustionchamber type)

lOOOkW ~5000kW

(Problem/Demerits)• It is not easy to adjust the air surplus ratio to

meet the fluctuations in fuel gas properties. It is thus necessary to develop a device for controlling the air surplus ratio in accordance with the changes in fuel gas properties.

• Changes in fuel gas properties make it difficult to control the air surplus ratio in the vicinity of the spark plug in the precombustion chamber. It is therefore difficultto maintain stable combustion.

• Unstable operational performance at amethane concentration of 50% or less.

In view of the above descriptions, we select the gas engine generator with pilot oil ignition for the utilization process on Donbass Colliery, because of achieving stable performance using coal mine gas with a methane concentration of 30%.

(6) Examining the Capacity of the Gas Engine System 1) Coal Mine Gas Specificationsa) Coal field:

Ukrainian Donbass Collieryb) Gas volume supplied per year (standard gas volume):

33,250,000m3(normal) (converted to pure methane) (Fluctuation ± 10%)

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Gas flow rate per hour:3795Nm3/h

c) Low-level heat value of fuel:Approx. 10,800kJ/Nm3 (2580kcal/Nm3) (with CH4 content of 30%)

d) Average methane concentration:30% (variation range: 25 - 35%)

e) Fuel gas supply pressure:0.098MPa (l.Okgf/cm2) (Absolute pressure)

f) Intake air:Exhaust gas of the underground ventilation system with a methane gas content of 0.3% is used as the intake air.

2) Selection of Suitable Gas Engine Types (Single-unit Output) and Selection Criteria

(a) Pre-conditionsConventional gas engines with spark ignition have been considered incapable of achieving smooth ignition when the methane concentration of the fuel gas is as low as around 30%. As described in the previous section, the gas engine that has been selected is a type that uses pilot oil ignition with a high ignition energy. To start the engine, this type also uses a spark plug in parallel with the pilot oil ignition system. To use the pilot oil, it is necessary to provide a small pilot oil feeder in addition to the coal mine gas (CMG) supply unit.

In selecting the engine output, the use of recovered coal mine gas is not the only criterion. Since the ventilation exhaust gas is used as the intake air (combustion air), the engine type (unit capacity) must also be selected from the viewpoint of upgrading its economic performance.

(b) Selection of Engine Type (Output)We have selected the engine type (output) on the basis of the volume of the recovered methane gas.- Pilot oil ignition type gas engine: 22AG type- The 22AG type engine range has the following six models according to their

output:

Table 2.4.8.6-3 gives an overview of the output ratings and specifications of the six models (6L, 8L, 12V, 16V, 18V).

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- When we take the engine crankshaft efficiency as 30% (8825.9kJ/kW h) and the power generator efficiency as 95.5% (average) we have:

The amount of gas FQ (converted to pure methane) required to generate lkW of electricity in 1 hour is:

= 8825.9 x 1.05b y 0.7355 x 0.955 x 36000.0

FQ # 0.367m3(normal)/h • kW

In this calculation we have allowed for an extra fuel gas consumption +5.0%.

- The following relationship applies between the number of engines and their output:

_ , „ . Gas supply volume (3,795m3/h)Number of engines = Q 367 x Rated engine output (kW)

(c) Calculation ResultsTable 2.4.8.6-1 shows the results of the calculations.

Table 2A8.6-2 Gas ngine Type and Electric Power OutputType 6L22AG 8L22AG 12V22AG 16V22AG 18V22AG

Number of units * 1 14.8 - 18.2 11.0 ~ 13.5 7.2 - 8.9 5.4-6.6 4.8-5.9

Rated output (kW) 625 840 1275 1710 1920

Note * 1: The number of units given in the above table is based on the standard gas volume and allows for a ±10.0% variation.The ambient temperature is taken as 30°C (average value) and the cooling water temperature at the air cooler inlet for cooling the engine’s combustion air as 38°C.

3) Use of Underground Mine Ventilation Exhaust AirThe exhaust gas from the underground ventilation system contains 0.3% methane. Using the exhaust gas as the suction air for the gas engine helps both to improve combustion efficiency and achieve a greater reduction in greenhouse gas emissions. By utilizing the ventilation exhaust air it is possible to enhance the economic combustion efficiency by a whole 6.3%. In the case of the 16V22AG engine model, this means an average increase (in methane supply) of 241 m3(normal)/h (converted to pure methane).

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Table 2.4.8.6-2 compares the number of gas engine units required for the different engine models on the assumption that ventilation exhaust gas is used.

Table 2 A8.6-2 Gas Engine Model Using Ventilation Exhaust Gas ______________ and Their Power Output Values_______________

Model 6L22AG 8L22AG 12V22AG 16V22AG 18V22AG

Number of units(Note)

15.7—'19.4 11.7-14.4 7.7-9.5 5.7—7.0 5.1—6.3

Rated power output (kW)

625 840 1275 1710 1920

Note: The number of units given in the above table is based on the standard gasvolume and allows for a ±10.0% variation.

4) Effect of Changes in Gas Recovery Volume (during Coal Face Shifts)Normally, a worked coal face in a coal mine will be finished in about a year, although this does depend on the conditions of the coal seam. After this, work will shift to the next coal face. During this shift, work on the coal face will stop for a while and the gas volume recovered from this face will diminish to a considerable extent. The effect on the system as a whole depends on the number of coal faces that are being worked in the mine.

5) Number of Gas Engine Units and Their AvailabilityWhen the volume of combustion gas changes the output of the gas engines will change accordingly. The engine is constructed so that it cannot operate in excess of 100% of its design capacity. Its generating efficiency, however, will drop as its output decreases. When we compare the power output of two engine units working at 50% fuel of their full capacity for each engine with that of one engine unit working at 100% fuel of its capacity (and on the same fuel amount), it will be found that the one unit operating at 100% fuel of its capacity provides an approximately 20% higher output than the two units working each with half fuel of their capacity. For this reason, it is clear that an equipment design that uses many units and permits highly detailed operating mode control to adjust engine operation in accordance with the changes in the gas supply helps to increase overall operating efficiency. For power generating equipment with the same overall power output, it will be found that the construction/installation costs increase with the number of engine units installed.

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6) Efficient Use of Energy ResourcesAs has already been pointed out in Chapter 1, the Ukraine has currently a shortage of energy resources. It is therefore essential and important for the Ukraine to utilize its energy resources effectively. Coal Mine gas, in particular, should be used to the greatest possible extent because it is a clean energy and an environment-friendly energy.

7) Selection of Models and Numbers of EnginesWe have taken the previously discussed aspects into full consideration and decided the most appropriate type and number for the Donbass Colliery, accordingly.a) Model: 16V22AGb) Output (kW), frequency (Hz): 1710kW/50Hzc) No. of units: 7 units

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Table 2A8.6-3 Overview of Gas Engine Specifications

Type Unit 6L22AG 8L22AG 12V22AG 16V22AG 18V22AGPo

wer

gen

erat

ing

unit Rated output kW 625 840 1275 1710 1920

Frequency Hz 50Voltage V 6000

*1 Fuel consump

tion

Gas Nm3/h 742.8 993.0 1491.3 1989.5 2234.0

Pilot oil L/h 2.7 3.6 5.4 7.2 8.1

Gas

engi

ne

Model Pilot ignition supercharger with air cooler4-stroke gas engine

No. of cylinder 6 8 12 16 18Cylinder bore diameter mm 220

Piston displacement mm 300Speed min'1 1000

Rated output kW 668.5 893.6 1342.0 1790.5 2010.5

FuelGas CMG (coal mine gas)

Pilot oil Light oil or Bunker AOverall engine weight kg 12000 15000 20000 24000 27000

Ignition system Pilot oil ignition gas engineStarting method Compressed air start (air motor)

Cooling system Secondary cooling water with radiator (Primary cooling water system and secondary cooling water system)

Lubrication Forced lubrication (by geared drive pump)

Gen

erat

or

Model Open protected, salient-pole, rotary magnetic field type, self- ventilating type

Type Three-phase A C. synchronous generator (JP20)Capacity kVA 781.2 1050.0 1593.7 2137.5 2400.0

No. of poles 6P (50Hz)Voltage kV 6.0

Power factor % 0.8 (delay)Excitation method Brushless

Efficiency % 93.5 94.0 95.0 95.5 95.5Overall generator

weight kg 9750 9750

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Hot

wat

er re

cove

ry Exha

ust g

as

boile

r

Hot water recovery volume m3/h 41.0 55.5 84.5 113.0 126.0Recovered hot

water temperature °C 95°C/105°C (At = 10°C)

Heat source Gas engine exhaust gas

Prim

ary

cool

ing

wat

er

used

as h

eat s

ourc

e

Hot water recovery volume m3/h 22.0 29.5 44.3 59.0 66.0Recovered hot

water temperature °C 65°C/75°C (At = 10°C)

Heat source Primary cooling water of gas engine

Note 1: Fuel consumption and hot water volume data are subject to a variation margin of ±10%.

Note 2: When NOx < 85ppm (converted values with 02 = 0), this is the value after the de-NOx outlet.

Note 3: Low-level heat value of fuel gas: 10800kJ/Nm3 (2580kcal/Nm3), with CH4 concentration taken as 30%.

2.4.9 Conceptual Study of Power Generating Equipment

(1) Design Conditions Installation site: Ambient temperature

Altitude:Average humidity: Fuel used:Pilot ignition oil: Operating conditions:

Indoors, non-explosionproof area (indoor temperature):

-5°C ~ +40°C (Equipment design temperature: 30°C)210m above seal level85%Gas - Coal mine gas (LHV =% 10,800kJ/Nm3)Light oilOperating in series with ordinary commercial power supply

Auxiliary power supply for engine start shall be supplied from commercial power supply. The temperature in the power generating station shall be maintained at (-5 ~ +40°C) using hot water.

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(2) Equipment OutlineFig. 2.4.9.2-1 “System Flow Schematic” gives an outline of a system flow schematic of the power generating equipment and Fig. 2A9.2-2 “Detailed System Flow Chart” a more detailed view of the system flow.

As can be seen in these figures, the plant consists of the following systems:- Fuel gas system- Pilot oil system- Primary cooling water system- Secondary cooling water system- Starting air system- Instrument air system- Exhaust system- Power generating unit and electrical parts.

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Fig. 2.4.9.2-1 System

Flow Schematic

Exhaust gas outlet

Hot water

Gas supply

Hot water boiler

Pilot fuel oil supply

Lube oil supply

Exhaust gas silencer

Instrument air supply

Starting air supply

Generator

Heat-exchanger(Future)

Pilot injection gas engine

Combustion & Ventilation air

Jacket water supply (Engine cooling)

Raw water supply (Cooling flower line)

Generating set

Control panel

Dryer(c)-®

[instrument air line! Outdoor

Instrument air comp guffgr tank

a i

(^y~®

Back-up line

Starting air compW

Air tank [Starting air line |

Solenoid valve

Supply

Valve HCs3KHk8C]|-| A -4XXH v —IX1HCXC3

—1^841 —‘ Shut-off valve

Solenoid valve box

Mist separator

0^2^) Mist blower

GK>Instrument air comp

rr —ICXCO

inRed. unit

Exhaust gas silencer H-

Injection nozzle

HINxQlXH

Pump unitHX

4C3I-

Urea tank (35%) Smoke sampling nozzle

—mu---------

-insup Hot water boiler HlXSUh

i-'

De-NOx Device [Exhaust gas line]

M. Valve

Expansion tank(with cap)

'rL“ tXICCCSI—

ceDamper

CCOH

[Gen, set

unit JPurge fun

[Jacket water line!

\TH Fuel gas line

Gas comp VVGas receiver

—icSLhShSi-- I(fo)HCXC0I<|—l Regyjgtor. .Shut-off valve

Drain

Pilot injection gas engine

171OkW 16V22AG l,50Hz 1790.5kW/1000mm1

IIC3I-

Ventilation (cumbustion air)

Elec, heater H[ EH [H

TCV L—iQi—icroMiSJacket water pump

(eng. driven)

Jacket water line

l—f

IRaw water Uriel€—e

Electric equipHube oil line ^Sludge

zt/ checker

S’a81

T

2. Cumbustion air C^>

JT.C.V

____T

H • T L • T

' I—irSZ-i

C^> Cumbustion air

0

T.C.V Raw water pump4X1

4MIFilter

T T4X_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Feed pump

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - f- - - - - - - - irli?ni—=*—i

[Hot water line | Y TCV

_Hot_water (return)

1050

TCV

I51 Feed pump

Heat exchanger (Plate type)

0 0 J I Initial feed line

Expansion tank(with cap)EL Initial feed line

JZFRadiator

Ambient temp. 30C

750|^waterjsupply)

650

^X-F-ate4Lr-um)

hf.s_upp!l

Fig. 2.4.9.2-2 Detailed System Flow Chart11-117

1) Outline of Electrical EquipmentFor the electric system of the generator set, the power generated by means of the generator is to be supplied to the cubicle at 6kV, where the power is distributed to the electric equipment of the site. Also, when starting the gas engine generator, the power is supplied from the substation of the site.

The system should be protected so that troubles of the generator set in the connection of the system do not affect the generator set on the upstream side, and so that when troubles happen on the upstream the safety of the generator set can be protected.

For the design for protection of the system, it should be designed based on the system safety manual of Donetsk Coal Field and the power company, and it should be confirmed sufficiently in advance.

Described hereunder is the electrical system equipment to be installed on the generator side.

When starting the generator, the power is received from the substation through the incoming cable to drive the auxiliary equipment of the gas engine generator of machine No. 1 so that the gas engine generator is started. In total, seven generator sets are to be installed. When one generator is started, the power generated is reduced to 400V using the transformer in the generator set of 500kVA, and the power is used to start the auxiliary equipment of machine No. 2 and others and in consequence to start the generators sequentially.

The generator set should provide the automatic voltage regulator (AYR) and automatic synchronizer (AUTO Sync) to make frequency constant for synchronizing with the voltage and frequency on the upstream side. The power generated is sent to the common bus. If the power flows in the reverse direction from the bus to the generator side, it is detected using the reverse power relay (RPR) so that the bus and generator are disconnected by means of the vacuum breaker.

Using two lines, the power is supplied from the common bus to the cubicle at the substation in the area through the 6kV cable.

In anticipation of the occurrence of shorting of the generator, over current relay (OCR) and under voltage relay (UVR) are installed so that the lines connecting the substation

11-119

cubicles at the area can be disconnected by means of the vacuum circuit breaker (VCB).

When over current relay (OCR), directional ground relay (DGR) and over voltage ground relay (OVG) are installed to detect the shorting in the system, the system is disconnected by means of the vacuum circuit breaker (VCB).

Further, the DC power unit is to be provided for the power for instrumentation. Provided also are electrical system, voltmeter, frequency meter and ammeter.

Fig. 2.4.9.2-S shows the one-line wiring diagram of the generator set.

II -120

II - 121

Receiving power from existing distribution network

A To distribution line 1 A To distribution line 2

Note 1: To be designed as the isolated system.2: Breaking current, 12.5 kA 3: Adjust manually the power at the time of parallel

operation with the existing system (generator).

Symbol NameAUTO Sync Automatic synchronizerAVR Automatic voltage regulatorSVA Static voltage setterVT Voltage TransformerGVT Grounding Voltage TransformerCT Current transformerOCR Over current relayOVR Over voltage relayUVR Under voltage relayRPR Reverse power relayDGR Ground directional relayOVG Ground over voltage relayZCT Zero phase current transformerCLR Current limiting resistorVCB Vacuum circuit breakerSRP Speed relayALBO Automatic load Balanceregulator

GE/G Gas engine generator

Low voltage panel Auxiliary equipment panel

1710kW 6 OkV 50Hz6P 10OOmin'1 0 8PF

Fig.2.4.9.2-3 One-line Wiring Diagram of the Generator Set

(3)

1)

Specifications for the Equipment Gas EngineType:Quantity:

16V22AG 7 units

Principal particulars: See the list of gas engine specifications in Table 2.4.8.6-3.

2) GeneratorQuantity: 7 unitsPrincipal particulars: See the list of gas engine specifications in Table 2.4.S.6-3.

* The gas engine and generator are to be connected directly and assembled on the common base floor and installed on the concrete foundation. (See the Fig. 2.4.9.3-1 Gas Engine Generator Set Equipment Diagram.)

II - 122

X97096003

SPECIFICATIONSGAS ENGINE A.C. GENERATOR

MFD. BY NIIGAIABamboo.. LTD. MFD. BY

MODEL 16V22AG TYPERATED OUTPUT 1790.5 kW CAPACITY 1710 kWCYL. BORE 220mm POWER FACTOR 0.8PISTON STROKE 300mm VOLTAGE 6000 VNO. OF CYLS 16 AMPERE 205.7 ARATED SPEED lOOOmirf1 FREQUENCY 50 HZTURBOCHARGER NR /R NO. OF POLES 6 PENG. WEIGHT 24000 kg GEN. WEIGHT 9750 kgTOTAL WEIGHT (DRY) APPROX. 39350 kg

/INCLUDING COMMON BASE \( PLATE, FLYWHEEL AND )V TURBOCHARGER J

8735TURBO CHARGER

No.8 THROW CENTER No . 1 THROW CENTER3400

GOVERNORGENERATOR

C J C J L J L l l l L:iY

AIR COOLER

lubricating

OIL PUMP

1295 7000

COMMON BASE PLATE7000WITH LUBE OIL SUMP TANK

oc hf-

30-48DRILL

1064.4

0.1—0

<oo

UJQCL

II - 123Fig.2.4.9.3-1 Gas Engine Generator Set Equipment Diagram

UID= GROUP=DE'< USER=NSO 0WG=X97096003 0000 DATE=01/01/15

(4) Electrical Parts ListOf the equipment considered in the equipment for each system, etc., Table 2.4.9.5-1 shows the electrical parts list of the auxiliary motor, control power unit and so on for one gas engine generator set.

11-125

II- 126

Table 2.4.9.5-1 Electrical Parts ListShown below are quantities in one generator set, 16V22AG, 1710KW, 50Hz.

No. Name of auxiliary machine

Operationalsection • : Shows the auxiliary equipment that should be necessarily operated before starting the gas engine.

Normal Intermittent Rated capacity of the motor. Q’ty Remarks

1 Air compressor o 5.5kW,AC4OOV,30,5OHz 1 Automatic operation in which the pressure switch (2.45Mpa ON/2.94Mpa OFF) of the air tank is used.

2 Air compressor for instrumentation o 2.2kW,AC4OOV,30,50Hz 3* Automatic operation in which the air pressure switch (0.46Mpa ON/0.8Mpa OFF) of

instrumentation is used.3 Fuel gas booster • 215kW,AC4OOV,30,5OHz 1 Operation by start command and stop by stop command. Engine interlocking operation.

4 Lubricating oil priming pump • 3.7kW,AC4OOV,30,5OHz 1

Starts before the engine starts and stops at the specified speed of the engine. Interlocking operation with the lubricating oil heater and stops 30 minutes after the start when the engine stops (cooling operation).

5 Lubricating oil heater o 15.0kW,AC400V,3 0,50Hz 1 Automatic operation and stop using the oil temperature switch (20°C ON/40°C OFF) during the engine stop.

6 Exhaust gas purge fan o 2.2kW,AC4OOV,30,5OHz 1 Operates only in the limited time just after the engine stops to purge the residual gas in the exhaust pipe. At this time, the damper is “CLOSED”.

7 Mist blower e O.75kW,AC4OOV,30 ,50Hz 1 Starts before the engine starts and stops 30 seconds after the engine stops.

8 Secondary cooling water pump e 7.5kW,AC400V, 30,50Hz 1 Starts before the engine starts and stops 30 seconds after the engine stops.

9 Radiator o 30 kW,AC4OOV,30,5OHz 1 Automatic operation and stop according to the secondary cooling water temperature.

10 Hot water circulating pump (primary water) o O.4kW,AC4OOV,30,50Hz 1

Automatic operation and stop using the primary cooling water temperature (20°C ON/40°C OFF) switch, and stops 30 minutes after the start when the engine stops (cooling operation).

11 Primary cooling water heater o 15kW,AC400V,30,50Hz 1 Operates in the same way as lubricating heater No. 5.

12 Nox removal equipment o 8kW,AC4OOV,30,5OHz 1

13 Hot water circulating pump o 18.5kW,AC400V,3 0,50Hz 1 The hot water is recovered from the exhaust gas.

14 Hot water pump o 11 kW,AC400V,3 0,50Hz 1 The hot water is recovered from the engine primary water.

15 Total Normal 291 kW, intermittent 44kW 1

16 Instrumentation and control ft) 600VA 1 Pressure oscillator, thermal oscillator, etc.

17 Control DC24V.34A 1 For control of the gas engine control panel, and generator panel

Note: * The air compressor for No.2 instrumentation should be common to the plant, and 3 units of them are to be delivered against 7 engines.

2.4.10 Consideration of the Waste Heat Recovery Equipment

(1) Waste Heat Recovery SystemThere are two waste heat recovery systems. Of them, the high temperature water system uses the waste gas from the engine after combustion to recover the waste heat by means of the hot water boiler and supplies it as the heat source for air conditioning in the form of hot water of 105°C. The low temperature water system uses the hot water of 75 °C to recover the waste heat from the primary cooling water, which was used for cooling the main body of the engine (cylinder, etc.) mentioned in the previous section, and uses it for air conditioning of offices and so on. The waste heat recovery is used mainly when there is a big demand for the heat in winter. In other seasons, the waste heat recovery from exhaust gas uses the damper to discharge directly the exhaust gas into the atmosphere. The waste heat recovery from the primary cooling water cools the primary cooling water by means of the radiator to discharge the waste heat into the atmosphere.

Since the equipment for the low temperature water system has been described in the above paragraph of the primary cooling water system, described below is the high temperature water system that uses the engine exhaust gas for the waste heat recovery.

(2) Gas Engine Waste Heat Recovery EquipmentThe return water from the heat load of the air conditioning in the coal mine has the temperature of about 95°C and the pressure of about 0.3Mpa, and this water is pressurized to 0.7Mpa by means of the hot water circulating pump and sent to the exhaust gas hot water boiler. The temperature of the water is then raised to 105°C using the waste gas of about 400°C to make the process hot water, and the water is supplied to the hot water system of the coal mine. After passing the boiler, the waste gas temperature drops to 125°C.

The volume of hot water produced by means of the waste heat recovery boiler using the gas engine exhaust gas is 113.0m3/h per machine.

For instance the amount of hot water of 75°C from the primary cooling water is 59.0m3/h per machine.

Fig. 2.4.10-1 shows the outline flow per one unit of the gas engine.

11-127

Hot water supply Temperature: 105°C Pressure: 0.7MPa

Return water: 95°C Pressure: 0.3Mpa

Heatexchanger

Exhaust gas tower

Exhaust gas from the gas engine

Fig. 2.4.10-1 Outline Flow of Waste Heat Recovery

Described below are the specifications for the waste heat recovery boilers.- Exhaust gas hot water boiler

Type: Water pipe boiler (the boiler to which the Labor Standards Act applies) Volume of hot water recovered: 113m3/h Hot water temperature: 95/105°C (At=10°C)Quantity: 7 sets

Hot water circulating pumpType: Centrifugal (motor driven)Discharge: 113m3/hHead: 40mH2OCapacity of motor: 25kW, AC400V, 3<j), 50HzQuantity: 7 sets

2.4.11 Energy Balance

This paragraph considers the hot water to be recovered from the gas engine generation, exhaust air and primary cooling water. Fig. 2.4.11-1 shows the outline of heat balance, as the summary result of the consideration, and Fig. 2.4.11-2 shows the detailed heat balance.

II - 128

Fig. 2.4.11-1 O

utline of Heat B

alance

Coal methane gas-flow 1989.5 Nm3/h

Total calorific value 21487.4 MJ/h

Electric : 1710kW (28.65%)Electric

Pilot injection gas engine1 6 v 2 2 A G Total efficiency

Temp. : 95°C/105°C1 7 1 0 kW / 5 0 Hz Hot water (Exhaust gas)/ Efficiency : 22.2%

Flow : 59.0m3/h Temp. : 65°C/75°C Efficiency : 11.5%

Hot water (J. water)

[Future]

Net calorific value 10800kJ/Nm3 (2580 kcal/Nm3)

Fig. 2.4.11-2 D

etailed Heat B

alance 16V

22AG

171 OkW

, 50Hz

1 . Net Calorific Value : 10800kJ/Nm3(2580kcal/Nm3) 2. Coal Methane Gas Flow : With tolerance +10%

2.4.12 Layout Plan

(1) Building Layout PlanThe building layout plan has been considered on the basis of the conditions below.• Since the outside air temperature is less than -20°C in the winter season, the

generator set is kept at the temperature of more than 0°C to prevent the piping, etc. from being damaged due to freezing.

• Heating is performed to facilitate maintenance in the winter season.• The equipment layout should be made compact so that building space can be used

efficiently, and maintenance space is provided for easy maintenance. The maintenance space is provided on both sides of equipment (layout) (2 units in total) taking into consideration the 7 gas engines to be installed.

• The hoist is installed so that equipment and materials can be moved easily to the maintenance space when disassembling or repairing them.

• The door is provided so that equipment and materials can be taken easily into the maintenance room.

• The sound-proof control room for site operation is to be provided.• The engine room is to be provided with the fan for preventing cooling and the

residence of methane gas.

Fig. 2.4.12.1-1 Building Layout Plan Diagram shows the result of the layout plannedbased on the conditions described above.

11-131

t7Z.

096T

Z.6X

B

585006500 6500 6500 6500 6500 65006500

CONTROL ROOM

(li) (i;

No . DESCRIPTION Q’TY REMARKS

1 GAS ENGINE 7 16V22AG2 A. C. GENERATOR 7 1710KW3 GAS ENGINE CONTROL PANEL 74 SYNCHRO-PANEL 1 COMMON USE5 JACKET WATER EXPANSION TANK 76 RAW WATER EXPANSION TANK 77 RAW WATER PUMP 7a RADIATOR 79 AUXILIARIES UNIT 710 MIST BLOWER 7ii FUEL GAS COMPRESSOR 712 RECEIVER TANK (FOR FUEL GAS) 713 PILOT FUEL TANK 4 5500L (COMMON USE)14 EXHAUST GAS SILENCER 715 HOT WATER BOILER 716 D.C. PANEL 117 TRANSFORMER 1 COMMON USE18 GENERATOR CONTROL PANEL 719 FEEDER PANEL 1 COMMON USE20 DE-NOx DEVICE 7

565006500 65006500 6500 6500 6500 6500 6500

BC-C

OVERHEAD CRANE(OUT OF SCOPE) \

(CAPACITY: MIN lton)

VENTILATION /^7a EXHAUST GAS OUTLET(OUT OF SCOPE)

80001500, .2000

115004000, 1000025500 3500

3200 3200THESE DIMENSIONS REGARDING'

6500 65009750 6500 6500 97506500 6500THE FOUNDATIONMAY BE CHANGED SUBJECT TOTHE SOIL CONDITIONS.

58500

Fig. 2.4.12.1-1 Building Layout Plan Diagram 11-133

UID= GROUP=DEK USER=NSO DWG=X97196074 0000 DATE=01/01/15

(2) Total Layout PlanThe major equipment making up the project is the gas engine generator set. Considerations are given to the most appropriate layout of generator set in the coal mine site and how the pipeline and cable should be planned on the basis of the requirements described below.

1) Requirement for Consideration of the Layout Plana) Secure the space required for the gas generator setThe building for the generator set has the area of 58.5m x 25.5m but when considering the related equipment around the building the area of 65m x 35m is required. The required place should be even, and at least 50m far from the ventilation fun facility for safety.

b) Coal mine gas pipe lineThe coal mine gas is sent to each vacuum pump station through the air shaft at two places. At present, the methane gas from main air shaft is used only partially in winter, and the rest is abandoned, so it is necessary to send the gas to the gas engine generator set building through the pipe line. Two gas stations are about 3km apart.

c) Power cableThe power generated at the generator set is sent to the newly installed cubicle at the power receiving station through the power cable to be newly laid. It is advantageous to use the existing buried pit for the cable, so the location of the existing pit is indicated.

d) Hot water lineThe main of the hot water line runs in the facility from the boiler room, and this line should also be connected to the hot water from the waste heat recovery of the generator set.

e) Exhaust airThe use of the exhaust air, which contains 0.3% methane gas, as the intake gas of the gas engine, that is, the use of 0.3% methane gas is effective for reduction of greenhouse gas. However, the duct pipe diameter will become great, 1400mm, so the shorter the distance from the main fan room the better for the place for constructing the building.

11-135

f) AccessibilityThe gas engine generator set is a heavy article, which has the dimensions of width of about 2m, length of 9m, height of 3m, and weight of about 30 tons. Therefore, an appropriate location should be even and close to roads.

2) Consideration ResultSupposing that the cost of the hot water pipe is 1, the construction costs of the air vent pipe, methane gas pipe, power cable and hot water pipe are as shown below.

Air vent pipe

Methane gas pipe Power cable Hot water

(underground pit)Hot water

(ground rack)5.8 1.6 3.3 1.3 1

From the comparison described above, the air vent pipe should be made shortest. That is, it is learned that it is economical to install the generator set close to the main fan. Geography around the main fan was checked to find the required space, and the layout plan was determined considering the distance of 50m from the air venting equipment. Fig. 2.4.12.3-1 shows the gas engine generator system layout and piping plan diagram.

11-136

Gas engine generator system building

35m x 65m

Methane gas pipeMain fan room

Drinking water tank

Vacuum pump station Chemical laboratory

Spares storage Fire defense staff room

Coal refuse loading pointOperating water reservoirPower-receivingstation Wx Truck scale

No.3 Reloading stationLoading bunker ..

Incoming coal hopperMagnesite store Servicing crew room (

Main shaftNo. 2 Loading station

Coal cleaningWashing room

Auxiliary shaftBoiler room

Pump station

Canteen Drying areaOfficeCooling tower j j

11

Hot water pipe fBus station

Legend----- Pipeline----- Cable line

No. 2 Methane gas recovery

system

Fig. 2.4.12.3-1 Gas Engine Generator System Layout and Piping Plan Diagram

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2.5 Range of the Funds, Equipment, and Services to be Offered by Each Side When Implementing the Project

2.5.1 Funds

The funds for implementing the project are to be procured in the following ways when divided largely (for the details on the planned method of procurement, see 3.1.2 Method of procurement.)

• Free of charge• Fund on hand• Credit in yen• Export credit• Project finance

In the future, discussions with Ukraine will continue while the work is divided into the following shares.

• Japan will submit to Ukraine this survey report, necessary related documents, materials and so on when necessary.

• The Ukraine side, mainly the Ministry of Economy will decide the source of fund that the Ukrainian Government will utilize.

• If the source of fund to be used should be free of charge or credit in yen, Ukraine will submit the application for ODA to the Japanese government.

• At the same time, Ukraine will declare that they will give the right to discharge.

2.5.2 Equipment, Services, etc.

In this project, Japan and Ukraine will jointly introduce and operate the gas recovery and utilization equipment.

For the sharing of the work, Japan will carry out the planning, designing, management, and technical guidance.

Ukraine will carry out the introduction of equipment, construction, operation and offering utility.

The responsibilities allotted to Japan and Ukraine are shown below.

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(Responsibilities allotted to Japan)(1) Proj ect Management

• Set up the business plan• Summarize the project• Supervise the local construction• Install and manage the gas recovery and utilization equipment

(2) Project Support• Fund procurement support• Equipment procurement support• Support for obtaining the license and approval• Give information

(Responsibilities allotted to Ukraine)(1) Detailed Survey, Design

• Coal production plan• Outlook for emission of gas• Detailed design

(2) Gas Recovery and Utilization Equipment• Drilling equipment• Gas conducting equipment• Sealing equipment• Centralized monitoring equipment• Gas engine• Motor• Control and auxiliary equipment

(3) Construction, etc.• Offer a site• Foundation work (building and equipment)• Building (engine generation and accommodation) and a set of building related

construction• A set of building outside pipe line construction (including piping materials,

heating construction, and painting)• Construction for laying the electric cable outside the building (including cable

materials)• Installation and assembling work

II -140

(4) Equipment Operation• Equipment operation• Maintenance and management• Technology transfer

(5) Offering the Existing Equipment• Gas pipe line inside and outside the coal mine• Power transmission and distribution equipment, communication line• Feed and drain pipe

(6) Offering the Utility• Electricity• Water• Air

(7) License and Approval in Ukraine

(8) Application for the Fund

2.6 Preconditions for and Problems on Implementation of the Project

Under the social and economical conditions of current Ukraine, the major problems in implementing on the commercial basis are shown below.

• Positioning as the joint project. The Ministry of Fuels and Energy has agreed to the points.

• Official development aid (ODA). Use of the funding cooperation free of charge or credit in yen without giving a financing burden.

2.7 Project Implementation Schedule

Described is the project implementation schedule including the schedule for establishing the implementation system including the discussion with Ukraine on financing toward the project implementation, and the concrete (detailed) implementation schedule.

11-141

2.7.1 Fund for the Project and Establishment of the Implementation System

The window of this project on the side of Ukraine is the Alternative Fuels Center (AFC), the subordinate office of the Ministry of Fuel Energy. And the window on the side of Japan is a group of Japan Coal Energy Center (JCOAL), Marubeni Energy and Chemical Project Corporation, Electric Power Development Co., Ltd., Toyo Engineering Corporation, and Toyo Energy.

The system to be set up on both Ukraine and Japan sides will be decided based on considerations on the fund to be used, desire of the Ukraine side, and the situation on the Japanese side.

First of all, mainly AFC of Ukraine will carry out the detailed FS (feasibility study) of the project and Japan will examine the technical details. After that, both sides will set the business plan on the basis of the desire of Ukraine, and discuss and study toward giving shape to the project, and start working in accordance with the schedule.

For raising funds, it will be considered in the future, and Japan will consider investment or due share, while Ukraine is calling for credit in yen or free of charge. If the project uses the credit in yen, the Ukrainian Government will ask the Japanese Government to provide the credit in yen on the basis of the detailed FS result or business plan. Then, the following will be carried as the first step of the project.

At the request of Ukraine, the related ministries and bureaus of the Japanese Government and Japanese Bank for International Cooperation (JBIC) will study and examine the project. When the project is approved by the Japanese Government, Japanese and Ukrainian Governments will exchange the official document and make a contract with JBIC so that the project can be started.

Although how long the above work requires will depend on the situation, it will be one to two years.

2.7.2 Project Implementation Schedule

The schedule for implementing the project is shown below.

1. Submission of the survey (report): May (2001)2. Consideration of the funds and means by the Ukrainian Government: June

11-142

3. The Alternative Fuels Center will make the business plan: August4. The Prime Minister of Ukraine will visit Japan: September5. The Ukrainian Government will apply for the ODA (expected to be free of

charge or credit in yen): October6. Bidding for the equipment: October (2002)

The construction process of the project is shown in the table below.

2001 1 st year 2nd year || 3rd year || 4th year || 5th yearUp to the realization of the project

Submission of the survey reportF/S by AFC ■Application by theUkrainian Government for ODAODA examination, approval

Exchange of the official document

Project schedule Gasrecovery

Survey and detailed design

Manufacturing of equipmentTransport, assembly and test runOperation

Gasutilization

Survey and detailed design

Manufacturing of equipmentTransport and assemblyBuilding and foundation ■mm

Pipe line constructionTest run l ■Operation

(1) Survey and Detailed DesignAfter the implementation of the project is decided, the project should be started as early as possible to make the effectiveness of the project greater. However, materials are so insufficient that the project cannot be implemented right away under the present situation, and it is also necessary to make an arrangement with Ukraine. Therefore, prior to the implementation of the project, it will be necessary to clarify the specifications for the equipment to be introduced, construction process, and the range of the construction to be allotted to each nation in detail with Ukraine.

Taking into consideration the current economical conditions of Ukraine and the budget execution system of Japan, it is estimated that it will take 6 to 12 months to design in detail.

II - 143

(2) Period of Time for Manufacturing the EquipmentIf possible, the standard products will be introduced taking into consideration the reliability of the equipment and ease in maintenance. However, most of the equipment are custom-made, so the plan has been set up on the premise that 6 to 12 months are required for manufacturing the equipment. It is estimated that it will take 2 months to ship the equipment from Japan to Donbass Colliery. It is also estimated that it will take one month for the equipment assembly after the arrival at Donbass Coal Mine, test run, and training of engineers for handling the equipment.

(3) Gas Recovery ConstructionAs considered in the “2.4.2 Gas Recovery Plan at the L4 Seam of the Donbass Colliery”, the period of time required for coal mining of long wall face (one side length 1,500m) from the start to the end is about 26 months. Drilling gas drain boreholes will start 1.5 months before starting coal mining. Although moving to another face on the way is carried out, drilling will require 21 months from the start to the end. As soon as borehole drilling is started, gas conducting will start from the hole that was drilled and continue until the long wall coal mining is finished. Therefore, gas conducting and withdrawn gas monitoring will require 27.5 months.

When constructing the sealed structure using fly ash, it will take a long time resulting in less effective gas recovery. Therefore, it was determined that the panel other than the said coal mining face would be used in the plan. Further, it will take 1.5 months to construct the sealed structure.

The schedule for gas recovery construction is shown below.1st year Survey and detailed design2nd year Manufacturing and transport of equipment

Drilling gas drain borehole, gas conducting, start of the withdrawn gas monitoringConstruction of sealed model, start of the gas recovery from seals

3rd and 4th year Drilling gas drain borehole, gas conducting, withdrawn gas monitoring will continue

5th year Gas conducting, withdrawn gas monitoring

II - 144

(4) Technology Transfer PlanThe recovery technology transfer to Ukrainian engineers is carried out in accordance with “training on assembling and handling of the equipment”, “dispatch of engineers” and “acceptance and training of engineers from Ukraine”.

1) Training on Assembling and Handling of the EquipmentWhen the equipment introduced, engineers will be given training on the construction of the equipment, assembling and disassembling method, and handling method.

2) Dispatch of EngineersAfter starting the construction using the equipment, engineers will be dispatched to give technical advice so that the technology can be settled.

3) TrainingUkraine engineers will be invited to see the gas recovery status of the coal mine so that technology transfer can be promoted. Further, every year, two engineers are invited at one time for training for 12 days.

11-145

3. Embodiment of the Financing Plan

3.1 Financing Plan in Implementing the Project (Amount of Required Fund)

3.1.1 Amount of Fund Required

The required fund is shown below. The required fund includes taxes, forwarding charges, expenses for installation and test run, insurance fee, and management cost.

A. Gas Recovery Management ProjectRequired fund can be divided into “expenses for detailed design”, “equipment introduction expenses”, and “technology transfer cost”. Further, the expenses for the gas recovery are required even when the project is not implemented, so the “expense for operating the equipment” is excluded from the fund for this project.

The required fund is calculated in accordance with the standard below.

Expenses for introducing the equipment:Gas recovery and utilization equipment

Technology transfer cost:Expenses related to the dispatch of engineers for training on assembling and handling of the equipment, and acceptance of the engineers to be trained from Ukraine.

Expenses for detailed design:Expenses for survey and detailed design

The estimate of required fund is shown below.

Required fund:Expenses for introducing the equipment Expenses for technology transfer Expenses for detailed design

34312734

Total 504 million yen

B. Gas Utilization ProjectRequired fund is divided into the “cost of generator set” and “expenses for the building outside construction”. The total amount required is estimated at about 3,000 million yen.

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Required fund:Cost of generator setExepenses for building outside construction

2,740260

Total 3,000 million yen

3.1.2 Method of Payment, etc.

In the future, the policy of the Ukrainian Government is decided in accordance withthe schedule described below.

• After receiving the survey, the Ministry of Economy will adjust and unite the view of the Ukrainian Government relating to the method of implementing this project with the Office of the Prime Minister, the Ministry of Fuels and Energy and the Ministry of Environment.

• In the financial status of Ukraine in which they are now negotiating for carrying over the public debt, the most realistic way is the use of “free of charge” or “credit in yen”. The Ministry of Economy will decide the method of funding being conscious about the schedule of the trip to Japan of Prime Minister, Yushenko.

• When this survey report and the report mentioned above are available, mainly the Ministry of Economy will submit the request for “free of charge” or “credit in yen” to the Japanese government.

The diagram below shows the scheme in a case where the fund is procured by “free ofcharge” or “credit in yen” and the equipment to be manufactured in Japan are used.

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1) Free of charge

Request

Technology, equipment

Donbass

JapaneseGovernment

UkrainianGovernment

Marubeni Energy and Chemical Project Corporation

Toyo Engineering Corporation

2) Credit in yen

Ukrainian Government —► Request for the credit in yen—► Japanese Government Donbass —► Implementation plan ^

Approval

Credit in yen

Payment Payment

Equipment

JBIG Ministry of Finance

DonbassMarubeni Energy and Chemical

Project Corporation Toyo Engineering Corporation

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3.2 The Outlook for Funding (Person Who is Entrusted with Survey on Funding and Implementation Plan of the Execution Site (Companies))

The economic environment surrounding Ukraine is extremely severe. Customers themselves do not seem to have sufficient fund, and project financing is not possible with the low power charges at present. For the introduction of the credit through the export credit, the guarantee for the repayment by the government, which directly leads to the increase in the external debt, is not issued easily. Therefore, the realistic method of funding is the free of charge funding cooperation (as a series of technological cooperation for coal mine safety).

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4. Matters Related to the Conditions for Joint Execution

4.1 Setting the Conditions for Project Execution on the Basis of the Actual Situation of the Project Site and Matters on Adjustment with the Other Party Nations for Realization of the Joint Execution such as Sharing the Work

It is necessary to adjust and confirm the following to make sure with the Ukrainian Government that this case is the joint project.

(1) Donbass CollieryFor Donbass Colliery, an urgent theme is to take measures for methane gas so that the safety of coal mine workers can be secured. Thus, they have declared that possible cooperation will be offered as long as the gas problem is solved by clarifying that the coal mine is the site for the joint project.

(2) DonetskDonetsk has the largest scale coal field of the old Russia and think that they can jointly scrap and build the coal industry to use it as a means to solve the energy and environmental problems. They will appeal to the Ministry of Economy and Ministry of Fuel and Energy for this purpose.

(3) Ministry of Economy, Ministry of Fuel and EnergyIt is recognized that the promotion of the joint work is an effective way of solving the problems as the government offices that control the various energy problems.

4.2 A Possibility of Agreement that the Said Project is Carried Out Jointly

Both the Ministry of Economy and Ministry of Fuel and Energy have currently declared that they will “offer all the rights to discharge, which may come into existence in this case, if the project is carried out free of charge or by credit through the economical cooperation with the Japanese Government”. Therefore, there is every possibility that the Ukrainian Government will agree to the joint project of this case.

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Chapter III

Project Effect

This Chapter presents the technical evidence for the manifestation of an alternative energy effect, the baseline that forms the basis for the calculation of the alternative energy effect, the concrete quantities involved, the period of the continuation of alternative fuel effect, the cumulative quantities, the specific validation methods. And this Chapter presents the technical evidences for the manifestation of a greenhouse gas emission reduction effect, the baseline that forms the basis for the calculation of the reduction effect, the specific quantities associated with the reduction effect, the period of continuation of greenhouse gas reduction effect, the cumulative quantities, and the monitoring methods.

1. Alternative Energy Effect

1.1 Technical Evidence for the Manifestation of an Alternative Energy Effect

This Project is planned to make use of the coal mine gas. that is currently being discharged into the atmosphere, for power generation by using it as a fuel for a gas engine to generate electricity. The plan is to utilize the electricity generated in this manner as part of the electricity currently used in the Donbass Colliery.

The entire power currently used in the Donbass Colliery is transmitted from the Ukrainian Power System and supplied to Donbass. Electricity in the Ukraine is supplied from nuclear power plants, hydroelectric plants and thermal power facilities such as natural gas, coal, and petroleum fired thermal power stations.

In petroleum-fired thermal power plant, for instance, petroleum is used as the fuel for the boilers to generate (heat) steam and the steam power is used to operate the steam turbines and drive the generators to generate electricity. In other words, petroleum energy is used to generate electricity.

In contrast, the present Project will use the coal mine gas as the fuel for the gas engine to generate electric power. It is therefore possible to save the amount of petroleum required as the fuel for producing, in the thermal power plant, the same amount of electricity as that generated by the gas engine. It is thus possible to achieve an alternative energy effect in that methane gas is used instead of petroleum to produce the same amount of electricity.

The Donbass Colliery also generates the steam/hot water used for heat supply and heats the boiler water to produce this hot water/steam by using petroleum as the fuel. This heat supply can be obtained by utilizing the waste heat of the gas engine which uses coal mine methane. Consequently, coal methane gas becomes the substitute for coal as the boiler fuel.

This can be summarized as followings. The electric power and heat energy (hot water) supplied to the Donbass Colliery prior to project implementation has been produced by using petroleum and coal as the fuel in the power plant and boiler plant. After project implementation, power generator will be operated using coal mine gas which had previously been wasted and electricity power and waste heat will be recovered through operating. Consequently, it will be possible to save the amount of fuel previously used

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in the existing power generating plant and the boiler facility for producing the same amount of electricity and recovering the same amount of heat. In other words, an alternative energy effect is achieved since this fuel is replaced by coal mine methane.

1.2 Baseline Forming the Basis for the Calculation of the Alternative Energy Effect

1.2.1 The Idea of the Baseline

At present, the Donbass Colliery practices gas recovery solely for mine safety reasons, and practically all of the methane gas that is recovered is discharged into the atmosphere. The Donbass Colliery plans to continue coal production for a long time. In connection with this coal production, methane gas will continue to be discharged into the atmosphere without being put to effective use. On the other hand, however, Donbass will continue to be supplied with electricity from the power system and use coal for its heat supply.

The baseline assumes that the product is not implemented and because the Project is not implemented the alternative energy effect will be nil (0).

1.2.2 Calculation of the Baseline

It is clear from 1.2.1. that the baseline is nil (0).

1.2.3 Interpretation of the Effect

In the present situation prior to the implementation of the Project, the Donbass Colliery buys electricity from the power companies and supplies heat from its thermal boilers. After project implementation, however, it will use coal mine methane (CCM) gas (for alternative energy) for generating electric power and supplying heat from its gas engine generator and heat supply facilities.

In terms of the effect, the amount of the alternative energy effect obtained after project implementation by using the coal mine gas (alternative energy) will be equal to the difference remaining after deducting the diesel oil energy used for pilot ignition (amount by which the alternative energy effect is reduced) from the electric energy generated with the gas engine and supplied heat energy.

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1.2.4 Method of Calculating the Effects

We have calculated the effects in terms of electric power, heat and diesel fuel.

1.2.4.1 Method of Calculating the Effect on Electricity Use

In order to calculate the quantity of the effect on electricity use we have determined how much electricity can be generated from the gas-operated electric power generating equipment by using coal mine gas. We have then calculated the energy (toe/y) required for generating the same amount of electricity with the existing generating plant. The result gives us the quantity of the effect on electricity use.

The calculation procedure is to determine the amount of gas that can be used for gas- operated power generation first. Using this value, we then calculate the quantity of power generated from the gas engine/generator. By determining the amount of internal power use we can calculate the net amount of power generation. The quantitative effect on power use can now be calculated by computing the energy (toe/y) required in case this amount of electric power were generated with the existing generating facilities.

(1) Amount of Fuel Gas Used in the Gas-Operated Power Generating Facilities We have already discussed, in the previous chapter, the amount of methane gas recovered from the Donbass Colliery. It is estimated that as of the year 2003, 33.25Mm3/year will be available for use every year. We have already pointed that that this amount may vary to some extent according to season. The economic effect of the fuel can be enhanced by making use of the underground ventilation exhaust air which contains 0.3% of methane. The gas engine generating system is designed with a roughly 10% extra capacity over and above its average annual output so that it can make up for these seasonal variations. Even in the months, it is possible to use the entire amount of gas recovered from the mine by operating seven gas engine-generators to full (100%) capacity. On the other hand, during the months with a low gas recovery rate, one or two of the gas engine-generators may be stopped and the time can be utilized for carrying out alternate maintenance on the gas engines. The entire amount of gas recovered from the coal mine can therefore be utilized. Although the amount of methane gas recovered from the mine shows a slightly increasing tendency we have here assumed that the amount of gas available for use in the gas engine-generator facilities will not change. We have therefore added the ventilation exhaust volume available for use from the ventilation system to the methane gas recovered from the mine to obtain a total gas availability of 35,340,000m3(normal)/y.

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(2) Net Total Amount of Electricity Obtained from the Gas Engine (Transmitted power)

Clearly, it is not possible to utilize the entire amount of electricity generated from the gas engine-generator systems internally in the coal mine. The amount of electricity (transmitted power) corresponding to the difference of the amount of electricity that is generated (with the gas engine systems) (that is, the generated power) less the amount of electricity used for the auxiliary equipment to the generator facilities (in other words, equipment such as the fuel gas compressors and lubricant pumps) is the net available electricity. Let us first determine the generated power produced by the gas engine- generators first.

a) Generated Power Produced by the Gas Engine Generators Total amount of electricity generated= Total amount of methane gas used (converted to pure methane, Nm3/year)

4- 0.367Nm3/h.kW** Methane consumption per kWh from gas engines, as described in the previous

chapterTotal amount of electricity = 35,340,000 0.367= 96,300MWh/y.

b) Auxiliary PowerAs we have already seen in the previous chapter, the gas engine-generators required various auxiliary equipment to produce electricity. The main auxiliary units include the fuel gas compressors which raise the pressure of the fuel gas and the primary/secondary cooling water pumps. Their total power requirement is 233kW/each.

The gas engine has an average utilization factor (availability) of 92%. The utility power required internally for the auxiliary equipment is thus:

Internally required total utility powe:r= 233(kW) x 7 (units) x (24 hours) x 365 (days) x 0.92 (availability)= 13,100MWh/year.

c) Net Power (Transmitted Power)In view of the above, the total net power will be:= 96,300 - 13,100MWh/year = 83,200M Wh/year.

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The energy required for producing lkWh of electric energy in a thermal power plant is 2,646kcal/kWh when we convert the electric power to the heat equivalent, using the value given in the IPCC Guideline. The Guidelines gives a value of 10,000kcal/kg as the heat equivalent of petroleum. If we use this conversion value, the amount of petroleum required for producing lkWh of electric power can be calculated as:

= 2,646kcal/kWh T- 10,000kcal/kg = 0.2646kgoe/kWh.

The amount of electric power generated with the gas engine generator facilities under the present Project is therefore 83,200MWh/year. This is the actual value of the alternative energy effect for this project. The value obtained by multiplication with the above result of 0.2646kgoe gives us the quantity of the alternative energy effect for electricity. In other words, the substituted energy for generating electricity after project implementation (quantitative value of the effect) will be:

= 83,200MWh/y x 0.2646kg/kWh = 22,000toe/y so that the quantitative value of the effect associated with the use of the electricity under this Project will therefore be 22,000toe/y.

1.2.4.2 Method of Calculating the Quantitative Value of the Effect in Terms of Heat Utilization

The quantitative value of the effect associated with the use of heat can be determined by calculating the amount of heat supplied by using the waste heat from the gas engine- generator facilities and the energy consumed by the existing boiler plant to supply the same amount of energy.

Based on the conditions under which the heat is supplied for use in the Donbass Colliery, we have calculated how much heat can be recovered by utilizing the waste heat of the gas engine-generator system. We have also determined the amount of fuel energy (toe/y) that would be required to obtain this amount of heat from the existing boiler plant.

(1) Amount of Use of Recovered HeatThe waste heat obtained from the gas engine-generator units is supplied in two forms: either as high-temperature or as low-temperature hot water. The high-temperature and low-temperature hot water conditions and the amounts of hot water supply at the Donbass Colliery are as follows.

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High-temperature Hot Water Low-temperature Hot Water

Supply temperature 105°C Supply temperature 75°C

AT 10°C AT 10°C

Pressure 0.7MPa Pressure 0.2MPa

Supply volume 113m7h Supply volume 59m7h

(2) Existing BoilerAs stated in the previous chapter, the above volumes of hot water are currently supplied mainly from the eight coal-fired boilers. The hot water supply is used primarily for heating the underground ventilation air and for heating the offices at Donbass in the winter. There is almost no hot water used in the summer. In reality, therefore, hot water is supplied for only six months in the year. This means that the boilers have only a 50% availability through the year.

The boilers have a total heat supply amount of 160MWh.The coal used in these boilers has a low calorific value and a high moisture content. According to what we were told by the boiler management staff, the present thermal efficiency of the boiler is only around 50%.

(3) Boiler Energy ConsumptionWe have now calculated the hot water recovered from the gas generator plant and the equivalent energy in case of producing the same amount of hot water with the existing boiler plant.

Total Heat Supply for Power Generating Plant:= Hot water supply volume/hour x A T x Hours/year x Generator availability x

Availability of waste heat recovery equipment = (113+59)t/h x 10°C x 7 units x 24 hours x 365 days x 0.92 x 0.5 = 203,000GJ/y (48,400Gcal/y)

The energy required for supplying the same amount of hot water with the existing boilers is:

= Total hot water supply volume Thermal efficiency of plant = 48,400Gcal/y T- 0.5 = 40,500GJ/y (9,700Gcal/y).

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Converting this to petroleum gives us the petroleum equivalent:= 9,700Gcal/y -r- 10,000kcal/kg = 9,700toe/y.

Thus, the quantitative value of the project effect in terms of hot water supply is 9,700toe/y.

(4) Amount of Reduction of Alternative Energy EffectFor generating power with the gas engines in accordance with this Project it is necessary to use a certain amount of pilot (diesel) oil. The alternative energy effect is therefore reduced by this amount.

The amounts of pilot oil required for power generation with the gas engine can be calculated by the following computational procedure:

The amount of pilot oil is 1% of the fuel gas energy. The total fuel energy, in turn, can be calculated from the total volume of methane gas recovered from the mine:

Total fuel energy= 35,340,000 (converted to pure methane, m3(normal)/year) x 35.6GJ

(8,500kcal/m3)= 1,260,000TJ (300,000Gcal)

The pilot oil volume amounts to 1% of the total heat amount. Since the pilot oil has a calorific value of 10,000kcal/kg, we can calculate the pilot oil requirement as follows:

= 300,000Gcal/y -F (100 x 10,000)kcal/kg = 300toe/y

(5) Total Effect QuantityThe total effect quantity is the difference of alternative electric energy amount and the alternative thermal energy amount less the amount of reduction of the alternative energy effect due to the use of pilot (diesel) oil. The alternative electric energy amount has been determined in the previous section as being 22,000toe/y, and the alternative thermal energy as 9,700toe/y. The amount by which the alternative energy effect is reduced due to the use of pilot diesel fuel is 300toe/y. Consequently, the total effect amount is 31,400toe/y.

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1.3 Concrete Alternative Energy Effect Quantities, the Period of the Continuation of Alternative Fuel Effect, and Cumulative Quantities

1.3.1 Concrete Alternative Energy Effect Quantities

The concrete value of the alternative energy effect can be determined by subtracting the pre-project value (“baseline” value) from the post-project value.

If we take the pre-project value as nil (0) and the post-project value as 31,400toe/y, the concrete value for the alternative energy effect will be:

= 31,400toe/y - Otoe/y = 31,400toe/y.

1.3.2 The Period of the Continuation of Alternative Fuel Effect

The Donbass Colliery has an expected operational life during which coal can be mined of 30 years or longer. Coal mine gas will be recovered from the mine on a continuous basis throughout this life span of the mine. Provided that proper maintenance is carried out, the gas engines will be capable of operation for 30 years or more. In our calculations, we have taken the period over which mine gas recovery and utilization will be maintained as 25 years.

1.3.3 Cumulative Quantities of Alternative Energy Effect

The cumulative quantities of the alternative energy effect can be calculated by multiplying the concrete value for the alternative energy effect per year with the operational life of the Project (in years). We therefore have:

Cumulative quantities of alternative energy effect= Concrete amount of the alternative energy effect per year (converted to coal) x

Number of years of availability of this effect (years)= 31,400toe/y x 25 y.Thus, the cumulative amount over 25 years is 785,000toe.

1.4 Specific Method of Verifying the Alternative Energy Effect

The alternative energy effect can be verified by the following specific method:(1) Amount of energy generated from the gas enginesThe procedure is to install an integrating power meter on the transmission side of the gas engine-generator facilities to check their cumulative power generation value.

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(2) Pilot oil consumptionThe procedure is to install an integrating flow meter on the line connecting the pilot oil storage tank with the engine to check the oil supply volume.

(3) Amount of hot water productionThe procedure is to install a thermometer and a flow meter on the hot water supply lines to check the temperature and flow volume of the hot water supplies.

By verifying and calculating these values it is possible to check the alternative energy effect in a quantitative manner.

2. Greenhouse Gas Emission Reduction Effect

2.1 Technical Evidence for the Emergence of a Greenhouse Gas Emission Reduction Effect

In accordance with the Project, the methane gas from the coal mine that is currently emitted into the atmosphere will be used as the fuel for the gas engine-generators to produce electricity and recover heat. In this process, however, methane is converted to carbon dioxide. The rationale by which the utilization of the coal mine gas produces a greenhouse gas reduction effect is due to the fact that a reduction is achieved by eliminating the methane gas and converting it to carbon dioxide and that the carbon dioxide that has so far been released in the process of generating electricity/heat with the existing generator/boiler plant will be no longer produced.

2.1.1 Greenhouse Effect of Methane (Details will be discussed below.)

The value generally used for evaluating the global warming effect of a given type of gas is the global warming potential (GWP) of that particular gas. Thus, the GWP is a gas- specific constant that can be used for determining the global warming effect that a given gas has for the same amount as that of carbon dioxide. As shown in the following equation, this value varies in accordance with the evaluation period (i.e., the time after greenhouse gas emission). Generally the global warming potential for a given gas j can be expressed as follows:

GWP (j) =J* cLco2Cco2(lt

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where: aj is the heat radiation potential per unit concentration of the respective gas j used for comparison and c,- the concentration of the this gas j. dt is the time that has elapsed since the gas j was released, n is the number of years after the gas’s emission.

We have the corresponding value for the carbon dioxide used as the reference gas in the denominator.

The following values are obtained when we determine the GWP of methane gas by using the number of years elapsed after its release (into the atmosphere) as the parameter:

Number of years since emission

GWP

20 years 63100 years 21500 years 9

We should note that these values include an uncertainty factor of ±35%.

The IPCC Manual uses the GWP 100 Year value. Although there is some disagreement among the experts in the field use on the number of years to be used the general practice today is to use the IPCC value. We have adopted this general practice and used the GWP 100 Year value for methane in this Report document. This value is 21.

2.1.2 Rationale for Greenhouse Gas Reduction due to the Combustion of Methane Gas

The combustion of coal mine gas in the gas engine leads to the formation of a mol number of carbon dioxide equivalent to that of methane, as can be seen from the following equation:

CH4 + 202=C02 + 2H20

It can be seen that the combustion of methane eliminates the greenhouse gas methane which has a 21-fold global warming potential compared to carbon dioxide and give rise to an equivalent mol number of carbon dioxide with only a 1-fold global warming potential, instead. As a net result, it is possible to reduce the global warming effect to a large degree.

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This effect could be achieved by simply burning the methane gas from the Donbass Colliery. Yet, the present project does not limit itself to the mere combustion of the coal mine gas. Rather, its purport is to utilize the methane gas from the mine for power generation and waste heat recovery. It is thus an alternative to the existing power generating facilities and boiler plant which it replaces. In this sense, it therefore leads to a reduction in carbon dioxide which would otherwise be emitted from the existing power generating and boiler plant.

Furthermore, the gas engine uses pilot oil fuel as the liquid fuel (light oil/diesel) required for igniting the gas engine, and the amount of light oil use is equivalent to 1% of the total methane fuel energy. Consequently, the carbon dioxide generated from the combustion of this pilot oil amount has to be added to the greenhouse gases that are produced in the process. The process as a whole can be shown in the form of the following schematic.

Prior to project implementation (Baseline)

After Project Implementation

Total GHG 1. GHG emission level due 1. Elimination of CMM.reduction = to release of CMM into - 2. C02 generated in theamount the atmosphere. combustion of CMM.

2. C02 emission level from 3. C02 generated in thethermal power station in combustion of pilotcase of generation of the oil fuel.same amount of (GHG = Greenhouseelectricity as after project gas. CMM = Coalimplementation. mine gas.)

3. C02 emission level fromexisting boiler plant orthe same amount of heatas after projectimplementation.

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2.2 Baseline Forming the Basis for Calculation the Greenhouse Gas Emission Reduction Effect

2.2.1 The Concept of the Baseline

The carbon dioxide generated from the existing power generating and boiler plant used for supplying the electric power and heat required in the nine prior to project implementation and the mine-derived greenhouse gas (converted to pure methane) wasted into the atmosphere are the baseline.

2.2.2 Method of Calculating the Baseline

As discussed in the previous section, the baseline on which the greenhouse gas reduction effect is calculated consists of the total obtained by adding together the following amounts:(1) Amount of greenhouse gas emission due to the release of coal mine gas into the

atmosphere;(2) Amount of carbon dioxide gas produced in the existing thermal power plant

generating the same amount of electricity as after project implementation;(3) Amount of carbon dioxide gas produced in the existing boiler plant generating the

same amount of heat as after project implementation.Each of these emission levels and their respective numerical values will be discussed individually.

(1) Amount of greenhouse gas emission due to the release of coal mine gas into the atmosphereThe coal mine gas used as the fuel in the present project is the currently being discharged into the atmosphere. These methane quantities are as follows:Coal mine gas is discharged on a scale of 35.34Mm1 * 3 (normal) a year. The weight of INm3 of methane gas is 0.555kg/m3 (normal) and the global wanning potential (GWP) factor of the gas is 21. Thus the amount of greenhouse gas methane released from the mine conesponds to the following carbon dioxide equivalent.

= 35.34Mm3 (normally x 0.555kg/m3 (normal) x 21 = 412ktC02/y

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(2) Amount of carbon dioxide gas produced in the existing thermal power plant generating the same amount of electricity as after project implementation

It is supposed that the electric power currently used at the coal mine will be met by the power generated from the gas engines run on coal mine gas after project implementation. On this assumption, we will determine the carbon dioxide emission volume produced in the case of generating the same amount of electricity with the existing power generator plant as that which will be generated with the gas engine after the project.

The amount of electricity that will be generated with the generating facilities using coal mine gas is 83,200MWh, as has been stated in the previous chapter. The electric heat equivalent of is given as 2,646kcal/kWh in the IPCC Guideline. The Carbon Emission Factor of coal is given as 25.8tC/TJ. This value is quoted in the IPCC Guidelines in Table 1-1 Carbon Emission Factor - Other BIT Coal. On this basis, we can calculate the carbon dioxide emission level from the existing power generating plant as follows: Carbon dioxide emission volume:

= 83,200MWh x 2,646 (kcal/kWh) x 4,185.5 (J/kcal) x 25.8 x 1012tC/J = 23.8ktC/y.

This carbon amount can be converted to the equivalent carbon dioxide emission by multiplying it with the C02/C molecular weight ratio of 3.67 to obtain the C02 equivalent:

= 87.2ktC02/y.

(3) Carbon dioxide emission from the existing boiler plantWe have calculated the carbon dioxide amount generated in the case of supplying from the existing boiler the hot water that can be recovered by using the waste heat from the gas engine-generators run on coal mine gas.

The waste heat recovered from the gas engines is 48,400Gcal/y and the boiler plant has a heat efficiency of 50%. For the calculation, we also use the carbon emission factor of coal which is 25.8tC/TJ and the C/C02 (carbon/carbon dioxide) molecular weight ration which is 3.67.

The carbon dioxide emission volume from the boiler plant is:= 48,400 Gcal/y x 10" x 4,185.5 (J/kcal) x 25.8 x 10^2tC/J x 3.67 4- 0.5 = 38.4ktC02/y.

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(4) Total Baseline AmountThe baseline amount is the sum total of the carbon dioxide emissions determined by the above calculations.

Baseline amount:= 412ktC02/y + 87.2ktC02/y + 38.4ktC02/y = 537.6ktC02/y.This, the total baseline amount is 537.6ktC02/y.

2.2.3 Calculation of Effect

2.2.3.1 Principle for Calculating the Effect

Principle for Calculating the Effect(1) Carbon dioxide gas generated in the combustion of methane gas(2) Carbon dioxide gas generated in the combustion of pilot oil fuel.

2.2.3.2 Method of calculating the effect

(1) Carbon dioxide gas generated in the combustion of methane gasThe combustion of coal mine gas leads to the formation of an equimolar quantity of carbon dioxide to the amount of methane combusted. As a result, we can calculated the amount of carbon dioxide generated as follows. Given that the amount of methane mine gas used in the gas engine generators is 35.34Mm2 3 (normal) per year and that carbon dioxide has a density of 1.53kg/m3 (normal) we can calculate the weight of the carbon dioxide generated in the combustion of coal mine gas as follows:

= C02 volume (volume equivalent to that of methane) x C02 concentration = 35.34Mm3 (normal) x 1.523kg/m3 (normal)= 54.0ktCO2/y.

(2) Carbon dioxide gas generated in the combustion of pilot oil fuel.The carbon dioxide gas produced as a result of the combustion of the pilot oil fuel can be calculated as follows on the basis of the annual pilot oil consumption rate of 300t/y and by using the heat conversion value of the oil which is 10,000kcal/kg, the oil’s carbon emission factor which is 20.0tC/TJ, the Joule/calorie conversion factor which is 4.185J/cal, and the C/C02 (carbon/carbon dioxide) molecular weight ratio for converting C to C02 which is 3.67. Thus, we have:

= 300t/y 4- 10,000kcal/kg x 4.185J/cal x 20tC/TJ x 3.67 = 0.9ktCO2/y.

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(3) Total amount of carbon dioxide gas produced after project implementation From the above calculations we arrive at the following total amount of carbon dioxide gas emission after project implementation:

= 54.0ktCO2/y + 0.9ktCO2/y = 54.9ktC02/y

2.3 Concrete Greenhouse Gas Reduction Effect Quantities, the Period of Continuation of Greenhouse Gas Reduction Effect, and Cumulative Quantities

2.3.1 Concrete Greenhouse Gas Reduction Effect Quantities

The concrete value of the amount of greenhouse gas reduction can be determined as the difference between the baseline value from the post-project greenhouse gas emission amount.

If we take the baseline value as 573.6ktC02/y and the post-project greenhouse gas emission amount as 54.9ktC02/y we have:

= 537.6 ktC02/y - 54.9 ktC02/y = 482 ktC02/y.

Consequently, the annual emission reduction amounts is 482 ktC02/y.

2.3.2 The Period of Continuation of Greenhouse Gas Reduction Effect and Cumulative Quantities

1) The period of continuation of greenhouse gas reduction effectThe Donbass Colliery has an expected operational life during which coal can be mined of 30 years or longer. Provided that proper maintenance is carried out, the gas engines will be capable of operation for around 25 years or more. In our calculations, we have taken the period over which operation is continued, in other words, the period over which the greenhouse gas emission reduction effect will be available as 25 years. 2

2) Cumulative quantities of greenhouse gas reduction effectThe cumulative quantities of the greenhouse gas reduction effect can be calculated by multiplying the concrete value for the greenhouse gas reduction effect per year with the operational life of the Project (in years). We therefore have the following equation:

= 482kt/y x 25 y = 12,050ktC02/y

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The cumulative value for the amount of carbon dioxide reduction is therefore 12 million tons.

2.4 Specific Method of Verifying the Greenhouse Gas Reduction Effect (Monitoring Procedure)

2.4.1 Underlying Principle Applicable to Monitoring

As the essence of the Project is to use the methane gas recovered from the mine, the monitoring procedure is only a matter of measuring the volume of gas recovered by draining the methane exhaust volume from the total exhaust volume at the pit mouth in the underground mine and by then measuring the methane gas amount at the inlet of the plant using the methane gas. The principle is, therefore, extremely easy. From these measurements, it is also possible to determine the gas leak volume from the pipeline connecting the recovery side and the use side.

The following items are monitored on the recovery side.

Monitoring data Method of data collection Monitoring intervalGas flow rate (Caution: Flow velocity distribution)Gas PressureGas temperatureGas analysis

Output and integration ofthe measurement valuesappearing on the centralized monitoring and control system andrecorded values.

Essentially on a monthly report basis. Instantaneous values are integrated andrecorded.

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The following items are monitored on the use side.

Monitoring data Method of data collection Monitoring intervalaVIG Amount and Composition

CMG input amount into plant

Integrating flowmeter (with built-in temperature and pressure correction)

Totaled up with each hour, totaled up each day, totaled up each month

Composition of CMG input amount into plant

On-line CH4 analyzer and in-situ analysis

Three time a day

Amount of CMG inputthat is used as fuel

Integrating flowmeter (with built-in temperature and pressure correction)


Generated ElectricityGenerated electricity Log book with daily

operating records of power plant


The ideas of the baseline which has to be fixed first is of paramount importance for assessing how much the greenhouse gas emission reducing effect achieved by using the recovered methane as an alternative energy to coal can contribute to the prevention of global warming. In fixing the baseline we need data for various cases, assuming that the methane has not been used. Thus, for example, we may suppose that a coal-fired boiler is used for power generation or that coal or a briquette stove is used for city gas. In fixing the baseline, it is necessary to give full consideration to the changes in gas release when the load conditions change.

2.4.2 Monitoring in Recovery

The important aspect for monitoring on the recovery side is to assess the amount of gas generated from the underground mine and the recovered gas amount. The following explanations describe the method of monitoring the gas recovery.

(1) Monitoring the Amount of Gas Release in the Coal MineThe greenhouse gas released from the coal mine is methane, the main component of the coal seam gas. The plan for the present project has been established on the basis of the systems used in Japanese coal mines in which underground methane monitoring takes place for each gas discharge path.

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(2) Discharge Paths for Coal Mine GasThe gases released from the underground working mine can be divided into the following three types according to their origin and discharge path.1) Gases released through the main air blowers into the atmosphere from the

ventilation shafts, including the air stream contained in the exhaust gases.2) Gases conducted from the underground gas drainage boreholes and from the goaf

seals and recovered in the underground gas blower stations. (This also includes gases that are discharged into the atmosphere without being used.)

3) Gases carried out from the underground mine while still retained in the coal extracted underground.

With regard to the third of these three types of gas, namely, the gas retained in the coal, it can be assumed that most of the gas contained in the extracted coal will have been released since a considerable amount of gas is drained off from the coal due to be extracted before it is mined and this gas is released into the underground mind also during mining. Gas also escapes from the coal while it is being transported outside. As a result, the amount of this third type of gas is likely to be much smaller that the amounts of gas types 1 and 2. Consequently, the monitoring of the gas volumes discharged from the mine will be limited to paths 1) and 2) only.

(3) Monitoring in the Ventilation Shafts (Main Blower Seats)The most important data for the gas collected in the main blower seat are as follows.

1) Methane concentration, 2) Air flow rate, 3) Vacuum pressure, 4) Air volume, 5) Air stream temperature, 6) Moisture, 7) Temperature in main blower room, 8) Angle of apertures of main blower vanes, 9) Current of main blower motor

All of these data are sent via cables to the centralized control room for processing, computation and recording.• The vacuum meter readings on the main blower seating are as main data to the

centralized monitoring room.• A flow meter is installed in front of the main blower seating and the meter readings

are sent as sub-data to the centralized monitoring room.• A methane concentration meter is installed in front of the main blower seating and

the readings (data) are sent to the centralized monitoring room.

To the above data are added temperature and moisture data for theoretical correction by the computer. In this manner, the released gas volume is calculated in real-time at all

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times. In addition, the ventilation officers in the mine will carry out measurements to check the ventilation pressure and roadway cross-section as appropriate, and once a month the entire ventilation system is investigated in the mine as a whole.

(4) Monitoring of Drained and Withdrawn Gas Amount (Recovered Gas Amount)The total volume of drained gas that has been withdrawn from the underground mine to the surface through mine gas discharge pipes can be picked up by monitoring in the gas blower station above ground. It is essential, however, to have a clear picture of the gas emission conditions and gas recovery situation at each coal face, and each mining site and for each gas draining method. This is vital for developing a ventilation plan that is consistent with the mine’s production plans and also for the gas draining and gas utilization plans. In reality, gas measurements have to be performed at all main points of the underground gas discharge pipe.

1) Determining the Measurement Pointsa. Surface blower stationb. In front of gas discharge pipe junctions (divisions)c. At the starting ends (mouths) of gas draining boreholes and seals

To carry out the measurements it is necessary to determine the measurement location (test points) in such a manner that data can be obtained for each pipe circuit system of the gas discharge piping. It is also necessary to install the test points in such a manner that data can be picked up for each coal face and road driving location in each mining site.

2) Observation MethodPractically all of the gas measurements made at these test points take place as part of an integrated operating and observation process within a centralized monitoring system using a comprehensive range of explosionproof sensors. To visualize the monitoring data, a display showing the gas discharge pipe system chart superimposed upon the underground mine diagram appears on the monitoring computer screen. This display gives a full picture of the gas draining conditions and the changes in gas drainage at all main points of the gas draining system.

a. Data transmissionAll data are centrally acquired, processed, computed, and recorded in the centralized monitoring room using the following electronic transmission systems.

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• Monitoring data (measurement data) from the end-point sensors are transmitted as analog signals in the form of a current to the transformer substation in the underground mine.

• In the underground transformer substation, the signals are A/D-converted and then transmitted as optical signals through optic fiber cables to the centralized monitoring room using multiplexing transmission for the various data.

b. Measurement dataThe measurement data picked up at the end points of the gas discharge piping consist of the methane concentration, CO concentration, drained gas flow rate, and vacuum pressure inside the piping. The CO concentration serves as a tell-tale for early signs of spontaneous ignition in the mine.

(5) Monitoring Management Organization1) Management OrganizationDaily maintenance of all measuring equipment at the end points of the piping system and of the sensors is the responsibility of the Ventilation Section.The hardware from the data transmission system onward is the responsibility of the Engineering and Mechanical-Electrical Engineering Sections.The centralized monitoring room and issuing instructions are the responsibility of the Planning Section.

2) Monitoring IntervalsAlthough monitoring takes place on a continuous basis samplings (data acquisition) are made at 30 second intervals. A mainframe computer is used for data storage and once every week the data are backed up from this computer onto an optical disk. In this manner, it is possible to have a complete record of past values, present data, and mine gas trends (time-scale changes) for reference at any time.

2.4.3 Monitoring of Gas Utilization

It is much easier to monitor coal mine gas than any of the other greenhouse gases. The point is that methane gas can be checked by measuring the volume of methane gas that is being used, the electricity output, and the heat output and etc.

1) Methane Gas MeasurementThe methane gas that is recovered from the coal mine and sent to the gas engine generator system is continuously measured. For this purpose, both a flow meter with a

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built-in temperature and pressure correction function and a continuous methane gas concentration meter are installed on the methane gas pipe. The measurements are sent as electronic data to the centralized monitoring room.

2) Generated Power Output MeasurementThe generated power is continuously measured by installing a power meter and integrating power meter on the transmission cable of the Central Power Room of the generating facility. The measurements are sent as electronic data to the centralized monitoring room.

3) Measurement of Heat Supply AmountA thermometer is installed on the hot water pipe of the waster heat recovery unit of the gas-operated power generating system. Also installed on this hot water pipe is a flow meter for measuring the flow rate of the hot water. The measurements are sent as electronic data to the centralized monitoring room.

4) Centralized Monitoring RoomIt is possible to check the amount of greenhouse gas emission reduction in the centralized monitoring room which receives, in the form of electronic data, the methane gas consumption, power transmission, and total hot water heat content measurements results for calculation on the computer and recording.

3. Effect on Productivity

Productivity and safety are very closely related in underground mine operation. Let us take mine gas as an example. Coal mine gas is the major cause of gas explosion and gas burst-outs. Once an accident of this nature has occurred, mine operation as a whole has to be stopped until mine safety has been fully restored and confirmed. In some cases, the consequences may be even more serious in that far-reaching changes are required to the mining district and a pit closure may be inevitable. It is therefore one of the most fundamental rules for mine management as it proceeds to increasingly greater depths to prevent disasters due to mine gases by making every effort to reduce the amount of gas emission into the gateways and the amount of methane gas contained in the coal seam.

Increasing amounts of gas breaking out into the roadways will inevitably lead to a discontinuation of mining and driving operation although the gas volumes may not be large enough to cause a disaster. The result of such a stoppage will be a drop in productivity. Apart from this, an increase in the volume of gas emission into the

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roadways has to be met with an increase in ventilation air flow to ensure mine safety and dilute the methane gas in the air to a safe concentration. For this purpose it is necessary to reinforce the ventilation equipment or drive new ventilation roads.

In the Ukrainian mines where most of the road development takes place in deep mine areas, it is therefore of paramount importance to reduce gas emission volumes into the roadways by improving the mine gas recovery rate. This is essential not only for ensuring mine safety but also for enhancing productivity.

We have tentatively calculated the effect that would be achieved by improving the mine gas recovery rate from the present 10% to 25% through the introduction of Japanese gas draining technology and equipment. The results would be as follows:

Effect of using Japanese gas draining technology and equipment (2003)• Methane gas concentration in the exhaust air of main fan

- Without the use of new technology/equipment: 0.34%- With the use of new technology/equipment: 0.29%

• Amount of reduction of methane gas concentration at the longwall coal working face (Present methane gas concentration at the face: 0.7 -1.0%)- With the use of new technology/equipment: 0.2 - 0.3% reduction

The terms of the present power supply agreement are that in the peak household demand time slots at around 8a.m. and around 8p.m., Donbass can only use 13,200kW of electricity. The real demand, however, is an average power supply of around 20,000kW. Because of the supply restriction, Donbass is not able to utilize its production facilities effectively. Under this project, it would be possible for the Donbass Colliery to have an adequate power supply by utilizing its coal mine gas for power generation. In this manner it would be able to improve the productivity of its current production facilities through the implementation of streamlined production plans. Since the Project will give Donbass a surplus margin in its electricity supply it will be able to introduce more powerful road driving equipment to expand the scale of its mining operation.

In terms of safety considerations, it will be found that even in a power failure due to the breakage of the power transmission cable from the electricity company, it would be possible to keep the exhaust fans and gas draining vacuum pumps operational to maintain mine safety and permit the immediate resumption of production after the power supply has been restored.

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Chapter IV

Profitability

This chapter gives the profitability calculation base and a cost/benefit analysis for the project with regard to project profitability, the project’s alternative energy effect and its greenhouse gas emission reduction effect.

1. Economic Return on Investment Effect

1.1 Profitability Calculation Base

1.1.1 Project Condition

(1) Coal Mine GasThe coal mine gas that is currently discharged into the atmosphere will be available without cost after the project. Also available as a free energy will be the methane gas contained in the ventilation exhaust gas.

(2) Power Selling PriceElectric power and hot water will be supplied to the Donbass Coal Field. The selling price will be the current purchase price charged by the electric power company. Hot water will have a price 25% that of electric power.

(3) ScheduleThe project schedule allows for two years for the construction work, including detailed design, equipment fabrication, transport, and assembly. It envisages an operational life of 25 years after the completion of the construction work.

1.1.2 Finance Plan

(1) Construction and Equipment CostsTotal construction costs will be 3,000,000 thousand yen as stated in the previous chapter and including the fabrication, installation, and trial operation of the gas engines and generator units, and heat recovery boilers with auxiliary equipment, as well as sheds, piping and electric works.

The equipment required for recovering mine gas from the underground mine is treated in the accounting procedures for Coal Mining Companies as essential for maintaining the safety of coal mining operation. As a result, these construction and operating costs are included in the coal production costs. For this reason, we have evaluated, in this study, the project’s profitability by confining ourselves to the project utilizing mine gas for power generation.

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(2) Finance PlanThe total construction cost value is to be covered by loan funds.

(3) Payment PlanAn amount of 50% each shall be payable at the end of each year during the two-year construction period.

(4) ProfitsProfits will accrue to the Donbass Colliery from the Project in the form of the profit earnings made on the sale of power and hot water supplied by Donbass. The charges levied by Donbass on the sale of electric power will be 3.36 yen per kWh. The charge for its heat supply will be 0.60 yen per kWh. The profits arising from the power and heat sales will be 313 million yen a year.

1.1.3 Operating Costs

(1) Variable Costs 1) Fuel Costs(a) Coal mine gasCoal mine gas is drained from the underground mine as part of the safety work required for ensuring the safety of mine operation. At present, the coal mine gas is discharged into the atmosphere almost in its entirety. Thus, the costs (of extracting coal mine gas) will be zero.

(b) Pilot oilPilot oil required on a scale of 300 tons a year will be purchased by tank lorry loads. Its price is 40 yen/kg.

(2) Fixed Costs1) Manpower CostsPersonnel required for operating the power generating equipment consists of one manager, three engineers and eight operators. The personnel costs and incidental social security costs and charges amount to 2,200 thousand yen a year.

2) Maintenance CostsMaintenance costs will be 2.0% of 80% of the total construction costs.

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3) Fixed Property Tax and Fire Insurance PremiumsThe total of fixed property tax and fire insurance premiums will be 0.5% of 80% of the total construction costs.

4) General Administrative CostsGeneral administrative costs will be 50% of the personnel costs.

(3) Repayment of Loan Funds1) InterestInterest will be charged at a rate of 0.75%.

2) Period of PaymentAfter a ten-year period of grace, the loan funds shall be repayable over a period of 30 years.

1.2 Project Profitability

1.2.1 Essential Conditions on which Calculations are Based

Apart from the operating costs, the essential conditions on which the profitability calculations are based are as follows.

(1) Tax1) Corporation Tax and Local Taxes or RatesTax on profits is levied at 30% plus an additional 4.5%, making a total of 34.5% levied by way of corporation tax. Since the authorities will declare the project mine eligible for the preferential investment in new energies, the mine will benefit from a five-year exemption from corporation tax. After this five-year exemption period, profit tax will be levied at only half the full rate for a further period of five years. This value will not be used for pre-tax evaluation.

2) Value-added TaxThe value-added tax rate amounts to 20%. Since power is generated by way of in- house generation it will not attract any value-added tax.

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(2) Depreciation CostsEighty percent of the total construction costs are depreciable. The equipment will be depreciated over a period of 15 years.

1.2.2 Method of Evaluating the Project’s Economic Viability

There are various methods of evaluating the economic viability of a project. We have used the Return on Asset (ROA) and the Internal Rate of Return on Project Cost (IRR on P.C.) for evaluation.

1) Return of Asset (ROA)ROA gives the profit return on the total project assets. ROA can be expressed as follows:

After-tax profitsDf)A —-----------------------c--------------

Total project assets

Thus, we have the total investment costs of the project in the denominator and the after-tax profits, with the costs subtracted from sales. ROA is a reflection of the conditions prevailing in the project target country and is therefore considered a more realistic economic indicator. Sales in the context of this project are the revenues from the sale of electricity and heat. The costs are variable and fixed costs as well as the paid-in capital (principal) and interests. After-sales profits vary each year after the completion of construction. On the basis of a 25 year project implementation period, the ROA for the present project can be calculated as:

ROA = 2.9%.

2) Internal Rate of Return on Project Cost (IRR on P.C.)Apart from the ROA method of project viability evaluation, it is also possible to assess the economic feasibility of a project on the basis of the Internal Rate of Return on Project Cost (IRR on P.C.). Since the interest rates on borrowings for projects and the tax rate vary from country to country, the IRR on P.C. method of evaluation offers a greater degree of objectivity as it eliminates the influence of these variables.

The internal rate of return (IRR) is expressed in terms of the yield or return at which the sum total of yearly benefits in the form of sales - in other words, the present value

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of all incoming moneys - is equal to the sum total of all annual costs - in other words, the present value of all outgoing moneys. The yearly pre-tax revenues correspond to the yearly benefits while the variable and fixed costs correspond to the costs, without including interests. The reason for not including interests is inherent in the definition of IRR. Because the IRR is calculated on the basis of a value that does include tax, we can calculate the project’s IRR as:

IRR = 6.5% on the basis of a 25 year project implementation period.

3) Summing Up of Economic Feasibility EvaluationThe return on asset (ROA) and the internal rate of return on project costs (IRR on P.C.) are as follows:

Return on Asset (ROA: After Tax) 2.9%Internal Rate of Return on Project Cost (IRR on P.C.: Before Tax)

6.5%

The electricity tariff in the Ukraine is extremely low, amounting to only one third of the Japanese tariff. Normally, the ROA should be negative, In this case, however, it is positive because it is possible in this project to utilize as a fuel the coal mine gas that is currently being emitted into the atmosphere.

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2. Cost/Benefit (Project Effect) (Alternative Energy Effect, Greenhouse Gas Emission Reducing Effect)

We have calculated the cost/benefit ratio (cost/project effect ratio) that shows to what extent it is possible to reduce the emission of greenhouse gases or to what extent it is possible to use alternative energies in relation to the initial investment costs.

The initial investment costs for this project are 3,000 million yen.

2.1 Alternative Energy Effect

The alternative energy effect per million yen project costs is as follows. Since the total alternative energy effect is 31,400toe/year it follows that the alternative energy effect per million yen investment cost and per year is: Alternative energy effect per million yen investment cost and per year:

= 10.5toe/Million yen-year.

2.2 Greenhouse Gas Reduction Effect

We can calculate the greenhouse gas reduction effect (converted to C02) per million yen of construction investment costs. The amount by which greenhouse gas emissions are reduced (converted to C02) is 482,500tC02/y. Since the total costs are 3,000 million yen, it follows that the annual greenhouse gas emission reduction effect (converted to C02) per million yen of project construction costs is:

= 161tC02/million yen-year.

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Chapter V

Verification of Dissemination Effect

This chapter refers to the possibility of dissemination of the technology introduced under this Project in the respective country and discusses the increase in the drained gas volume associated with, and resulting from, the wider use of gas draining and an improvement in coal face production. The chapter also deals with the alternative energy effect allowing for the potential of the gas resources, the scope of the project’s dissemination and its actual dissemination. A further topic presented in the chapter is the project’s greenhouse gas emission reducing effect.

1. Dissemination Potential of the Technology to be Introduced under this Project in the Target Country

1.1 Level of Diffusion of Gas Drainage

1.1.1 The Donetsk Coal Field as a Whole

In 1998, the Ukraine registered a coal production output of 77 million tons, with 90% of this quantity having been produced in the Donetsk Basin. Throughout the Coal Field, coal is mined in underground mines which are worked at considerable depth. In the future, mining activities will spread into even deeper strata. This move to greater depths is anticipated to lead to increasingly larger volumes of mine gas breakout. While mine disasters are occurring in this Coal Field as a result of mine gas, the anticipated increase in the volume of gas breakouts will necessitate efforts to improve the gas recovery rate by introducing effective gas recovery systems capable of coping with the increasing gas breakout volume so as to enhance mine safety.

Practically all collieries are experiencing a worsening in their mining conditions and growing plant and equipment obsolescence and aging with the distressing result of low profitability and high equipment costs. The Ukrainian government, for its part, has announced a scrap and build policy for the nation’s mining industry. Because of the major effect the coal mining sector has on regional employment, education and welfare, and on the close bond between the coal mines and the local communities, however, this policy is making tardy progress or none at all. The introduction of effective mine gas draining systems will help to prevent a decline in productivity due to gas breakouts. The collieries will also need to reduce their production costs by reducing gas draining costs and increasing profits through the use of the recovered mine gas.

1.1.2 Ukraine as a Whole

Apart from the Donetsk Basin, there are two more coal fields that are of great importance as coal mining areas: the Lviv Volyn and Dnieper Coal Fields. These two coal fields account for 10% of the Ukraine’s coal production. The Lviv Volyn coal field produces from its underground mines coal grads from subbituminous to anthracite coal and the Dnieper produces lignite coal partly from open-cut and partly from underground mines.

Mining conditions at the Lviv Volyn coal fields are believed to be quite similar to those in the Donetsk Basin, although there are many areas of uncertainty in our understanding

V-l

of Lviv Volyn. It is therefore clear that Lviv Volyn has a very promising potential for the dissemination of effective gas recovery systems in its coal mines. In contrast, the Dnieper coal field recorded a low production output of only 3 million tons in 1998. It also has a relatively shallow depth and the volume of mine gas are presumably also small. As a result, this coal field offers a low diffusion potential for the use of gas recovery systems in its mining operations.

1.2 Dissemination Potential as a Whole

As has been pointed out above, the Donetsk and Lviv Volyn offer a high potential for the extensive use of gas recovery systems in their collieries. We have tried to calculate the amount of mine methane gas that could be recovered if gas recovery efficiency were improved through the wide use of the recovery system according to the present project. We have calculated based on the data available for 1998 and the results are as follows.

Calculation of the Amount of Recovered Gas (Converted to Pure Methane)

In case of Wider

Coal production (Million tons)1998 Data

76.8System Use

76.8outputMine gas Contained in exhaust air 1,791.85 1,454.41

of main fan (Million m3) Recovered gas volume 147.56 485.00(Million m3)Total breakout volume 1,939.41 1,939.41(Million m3)Recovery rate (%) 7.6 25.0

2. Effect Derived from Dissemination

We have first calculated to what extent it would be possible to achieve an alternative energy effect and a greenhouse gas emission reducing effect per million m3/year (converted to pure methane) at the Donbass Colliery by using the recovered mine gas. We have then calculated the size of the alternative energy and greenhouse gas reduction effects for the whole of the Ukraine on the basis that the estimated Ukraine-wide mine methane gas volume capable of being recovered in 485Mm3(normal)/year. The results of these calculations are as follows.

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2.1 Alternative Energy Effect

The amount of mine methane gas used at the Donbass Colliery was taken as 35.3Mm3(normal)/year and the corresponding alternative energy effect as 31,400toe/year. It can be calculated from these figures that for every Mm3(normal)/year of mine methane gas used, the alternative energy amounts is 888toe/year.

In accordance with the previous section, the methane gas volume recoverable Ukrainewide can be estimated at 485Mm3(normal)/year. The wider penetration of the gas engine could therefore produce an alternative energy effect of 431,000toe/y.

2.2 Greenhouse Gas Emission Reducing Effect

Similarly to the previous section, we have tried to calculate the greenhouse gas reduction volume for every Mm3(normal)/year of mine methane gas used. The result shows that the greenhouse gas reduction volume is 13,650tCO2. Based on this value, we have then calculated the reduction potential due to the wider spread of mine gas utilization for the Ukraine as a whole. The result is 6,620,000tCO2/year.

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Chapter VI

Spin-off Effects

In this Chapter, we will discuss the socioeconomic and environmental effects of this project.

1. Socioeconomic Effects

The Ukraine is poor in energy resources other than coal. It therefore has to depend on Russia for almost all its energy needs, including natural gas. As a result, the Ukraine has a chronic deficit in its international balance of trade due to the country’s need to import energy. Amidst the Ukraine’s inability to resolve this problem, energy self-sufficiency will remain a fundamental national issue. In the context of the country’ future efforts to develop the coal sector, the utilization of mine methane gas that has so far been considered an evil as a new energy resource will have the significance of “catching two birds with one stone” for the nation.

2. Environmental Effects

The Donetsk district (oblast), the target area of the present project, is one of the Ukraine’s leading industrial areas. Yet, industrial development leads to pollution and environmental destruction and has a serious impact on the communities living in the area. In this context, atmospheric pollution poses a major social problem, a problem resulting from the poor performance and low availability of the existing anti-pollution systems at factories and aggravated by the lag in the development of automobile exhaust gas and sewage treatment facilities. The present project relates to the effective recovery of mine methane gas which is a powerful greenhouse gas with a greenhouse effect 21 times that of carbon dioxide when released into the atmosphere, and the use of a gas engine for power generation using the recovered mine methane gas. The system according to this project is also provided with state-of-the-art environmental technology capable of contributing to a reduction in sulfur oxide (SOx), dust and nitrogen oxide (NOx) emissions. For the Ukraine facing, as it does, serious environmental problems, this project can and will have a major impact also as an environmental model project. We have thus calculated the reduction amount in smoke (sulfur oxide (SOx), nitrogen oxide (NOx) and dust emissions) to demonstrate the environmental effect of the present project.

2.1 Calculation Conditions

To determine the reduction effect on smoke emissions, we have calculated the fuel input quantities (based on 100% coal) required for the existing generator and the internal steam boiler plants to produce a unit of electric power (lkWh) and a unit of heat supply (lkWh = 860kcal). From this, we have then calculated the emission levels of sulfur oxide (SOx), nitrogen oxide (NOx), and dust from the sulfur, nitrogen and ash contents of the coal. We have thereupon made a comparison between these emission levels and

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the smoke emissions discharged from the gas engine-generator plant according to the present project.

Table 2.1-1 Calculation Conditions for Determining the Smoke Emission Levels ofthe Existing Plant

Item ConditionGenerating efficiency of existing generator plant Approx. 30%Efficiency of internal steam boiler Approx. 50%Heat value of coal Average 24.3MJ/kg

(approx. 5,800kcal/kg)Sulfur content of coal Average 2%Nitrogen content of coal Average 1%Ash content of coal Average 15%

Using the values given in Table 2.1-1 for the generating efficiency of the generator plant, the efficiency of the steam boiler plant, and the calorific value of the coal, we have calculated the energy input required for the existing generator plant to produce lkWh as 3.33kWh (12MJ) and the energy input required for the internal steam boiler plant to produce lkWh of energy as 2kWh (7.2MJ). Table 2.1-2 gives the smoke emission levels generated from the combustion of the coal required as the necessary energy input.

Table 2.1-2 Smoke Emission Levels per Unit of Energy from the Existing Plant

ItemPer lkWh of electric

energyPer lkWh of heat

supplySulfur oxides (SOx) (m3 (normal)/h) 6.9 X10"3 4.1X103Nitrogen oxide (NOx) (m3 (normal)/h) 7.9X103 4.7X103Dust* (g/h) 70 38* The dust discharged from the stack accounts for 85% of the total ash amount.

Table 2.1-3 gives the design smoke emission levels of the new gas engine-generator plant.

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Table 2.1-3 Smoke Emission Data from New Gas Engine-generator Plant

Item Design valueGas engine’s generating capacity 1710kWh each

(generation)Exhaust volume per gas engine 233m3 (normal)/minNOx concentration of exhaust gas (at de-NOx system outlet) 150mg/m3(normal)SOx and dust concentration of exhaust gas Below detection limit

Table 2.1-4 gives the smoke emission levels per unit of electricity generated and per unit of heat supply.

Table 2.1-4 Smoke Emission Level from New Gas Engine-generator Plant


energyPer lkWh of heat supply

Sulfur oxides (SOx)(m3 (normal)/h)

Below detection limit Included in figures on the left because heat is supplied by recovering the heat of the exhaust gases of the gas engines.

Nitrogen oxide (NOx)(m3 (normal)/h)

0.6X1Q-3

Dust (g/h) Below detection limit

Consequently, the reduction in smoke emission will be as shown in Table 2.1-4. It can be seen that a major reduction effect can be achieved as compared with the existing coal-fueled plant. It may be added, that for an annual power generating output of 83,200MWh and heat supply of 56,290MWh, it is possible to achieve a reduction of approximately 800,000m3 in sulfur oxides, of approximately 720,000m3 in nitrogen oxides and of approximately 8,000 tons in dust.

Table 2.1-5 Reduction in Smoke Emission


energyPer lkWh of heat

supplySulfur oxides (SOx) (m3 (normal)/h) 6.9X10-3 4.1 X Id3Nitrogen oxide (NOx) (m3 (normal)/h) 7.0X103 2.5X10-3Dust (g/h) 70 38

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Conclusion

1. Summary of Study Findings

1.1 Gas Recovery Management Project

The current practice at the Donbass Colliery in the Donetsk Coal Field is to recover mine gas by drilling gas draining boreholes (length of boreholes: 30 - 60m) in the roof rocks.

If the Donbass introduced the new gas draining technique the most effective method would be a gas recoverying system consisting of a combination of (1) gas borehole drilling with roof rock collapse (borehole length: 300m), (2) gas withdrawal from the borehole mouth, (3) measurement inside the gas conduction pipe and (4) gas withdrawal from the fly-ash sealings.

In 1999, the gas recovery volume at Donbass was ll,558,000Nm3 (converted to pure methane). The gas recovery rate was 9.0% and the methane concentration of the recovered gas 30.0%. The gas volume in the exhaust air of main fans was 116,815,000Nm3 (converted to pure methane). After the introduction of the new gas recovery system, the volume of recovered gas will be 33,250,000Nm3 (converted to pure methane) in 2003. The recovery rate will be 25.0% and the methane concentration of the recovered gas 30.0%. The gas volume in the exhaust air of main fans can be estimated at 99,750,000Nm3 (converted to pure methane). Consequently, there will be in increase in the recovered gas volume and a decrease in the gas content present in the exhaust air of the main fans. This will contribute to an improvement in both safety and productivity.

1.2 Gas Utilization Project

The Donetsk Coal Field has a low mine gas recovery rate, with practically all of the recovered gas being discharged into the atmosphere. The present project will lead to a significant increase in the recovery rate of mine gases, and the entire volume of recovered methane gas of 35.3Mm3 (normal) will be used as the fuel for power generation. With this recovered gas it will be possible to operate seven gas engine- generators with built-on waste heat recovery boiler. The gas engines have a power output capacity of l,710kW each. As a result, the output of these engines will be able to meet roughly 50% (approximately 10MW) of power demand and roughly 10% (approximately 12Gcal/h) of heat demand at Donbass Colliery. At the same time it will be possible to achieve an approximately 480,000 ton reduction in the emission of

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greenhouse gases (converted to carbon dioxide) which have so far been released into the atmosphere.

The implementation of this project thus offers a large number of merits, including an improvement in mine safety and productivity, the effective utilization of the Ukraine’s own energy resources, an enhancement in the level of Ukraine’s technology and the creation of employment opportunities.

The Project is also capable of reducing the level of air polluting emissions such as sulfur oxides and improving the environmental conditions in the areas around the coal mine.

1.3 Project Effect

One of the project effects is the alternative energy effect which, when converted to the annual coal equivalent, will amount to 31,000 tons/year. Another effect of the project will the its greenhouse gas reduction effect which will amount to 480,000 ton a year.

The alternative energy effect per million yen of initial investment costs for the project will be 10.5 ton/year when converted to petroleum and, similarly, the greenhouse gas emission reducing effect will be 160 ton/year.

1.4 Dissemination Effect

It is estimated that the mine methane gas volume capable of being recovered in the Ukraine as a whole is 485Mm3(normal)/year. If the use of gas engine co-generator would penetrate on a larger scale the alternative energy effect would be 431,000toe/year and the greenhouse gas emission reducing effect 6,620,000tCO2/year.

2. Discussion

The Ukraine is a major coal producing country which, at one time, produced 80% of the former Soviet Union’s total coal output. The Donetsk Basin is the largest coal field in the country. Due to its importance and partly also because of the large variety of geological conditions in the area, there has been a considerable number of coal research institutions carrying out research and development work on coal production and safety technology. In this sense, the Donetsk Basis played an important role both as a coal producing area in the former Soviet Union and as a center of coal research.

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As the shallow coal seams with favorable mining conditions have now been exhausted, the collieries in the area had to shift to much deeper strata at depths of more than 1,000m even in the existing mines. Despite its short history, the Donbass Colliery which is the target of the present project, has also started development at depths below 700m in its existing coal mining areas, with the coal seams to be mined being rather thin at only around lm thickness.

Under these conditions, it is difficult to mechanize and automate coal production on a major scale, with coal production costs inevitably increasing. Yet, coal is the Ukraine’s most important energy resource and the coal sector employs a large number of mine workers. It is thus not easy to adopt the scrap and build approach.

The effective recovery and utilization of the mine methane gas generated in the course of mining operation in the Donetsk coal field would not only lead to an improvement in mine safety and an increase in productivity. It would also mean that the mine gas could be used as a clean energy. The Project could thereby become a target for greenhouse gas emissions trading and has the potential of making a major contribution to a structural improvement of the (Ukrainian) coal industry.

The gradual or stepwise implementation of the Project holds great promise of a spread of the technology to other coal mines and to the transfer of the technology on a wider scale. The Ukrainian government for its part is also looking from some concrete project on condition that such a project can provide safety measures for the coal industry, structural improvement and a basis for emissions trading. In view of this, the prospects are most favorable for implementing this Project with a greater sense of commitment under government guidance.

It can therefore be expected that there will be a greater potential for recovering the initial project investment costs in the future than at present once the effect of emission trading will materialize. A decision on the precise timing for the actual joint implementation scheme will thus definitely come.

3. Future Problems

3.1 Technical Development

The Ukraine with its undoubted industrial potent commands a high level of coal mining technology in the world. In the transition from the socialist era to the free market

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economy, however, the situation is that despite the country’s industrial capability it is extremely short of financial resources. This is the reason why plant investments have been significantly delayed. Furthermore, the power sector is still in the hands of state- run power enterprises so that there is no need for in-house generating facilities and there are no clear standards for connecting self-generated power to the system of the power enterprises. The implementation of the project can thus help to upgrade the Ukraine’s level of technology provided that the necessary investigations are made and the facilities can be built and operated in a smooth manner. If, in the future, similar project are implemented at the various other mines it will be possible for the Ukraine to develop and manufacture its own gas engines - an area in which development is currently lagging behind - on the basis of Japanese-Ukrainian cooperation.

3.2 Joint Implementation Scheme

The Kyoto Mechanism allows for three measures to provide flexibility. The present project does have a very high practical industrialization potential if conducted as a Japan-Ukraine project designed to curb global warming through the use of the joint implementation and emissions trading schemes.

3.3 Toward Project Execution

In view of the findings of this study, the Japan Coal Energy Center (JCOAL) will consult and coordinate with the Ukrainian side on the finance procurement plan, the establishment of an implementation organization, and the concrete schedule for project implementation with a view to the execution of the project.

The Ukrainian Alternative Fuels Center (AFC) will play a key role in carrying out a detailed feasibility study of the project. The Japanese side will prepare the project plans, including technical details and fund procurement. Both sides will proceed with the work in accordance with the schedule.

The nature of the organization that will be established by the Ukrainian and Japanese sides for project implementation will need to be examined in the light of the fund requirements, the wishes or expectations of the Ukrainian side, and the conditions for the Japanese side.

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Similarly, the Japanese side will cooperate also on the issue of fund procurement for the Ukrainian side to permit the execution of the project. This may include grant aid or a yen loan from Japan.

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Appendix Materials

Appendix Materials

1. List of Reference Materials

• Donbass Komsomol Colliery The Ukrainian Alternative FuelsCenter, 2000

• Dobass Geology and EnvironmentalData on the Donetsk Oblast

The Ukrainian Alternative FuelsCenter, 2000

• Coal Mine Named after Bazhanov, Kholodnaya Coal Mine

The Ukrainian Alternative FuelsCenter, 2000

• Coal Mine Named after Skochinski The Ukrainian Alternative FuelsCenter, 2000

• Coal Information 1998 IEA, 1999

• Coal Research 1993 IEA

• Coal in Ukraine IEA Coal Research

• Major Coal Field of the World IEA Coal Research

• Energy Statistics of Non OECD Country1996 - 1997

IEA

• Survey of Energy Resources 1998 World Energy Council, 1998

• Coal Mine Methane Recovery inUkraine

Ukraine EPA, 200

• Donbass Experience in Degassing CoalField

Valentin Konarev

• Opportunities for the Development andUtilization of Coalbed Methane in ThreeBasins in Russia and Ukraine

U.S. Geological SocietyNo. 109,1996

. Electricity Restructuring in Ukraine Helene Ryding, 1998

Appendix - 1

2. Local Survey Report

First Local Survey (Preliminary Survey)

1. Period of Visit: August 13 - August 20, 20002. Purpose of Visit: Detailed discussions on survey contents and

coordination of main survey3. Visiting Staff: Mr. Ryozo Hirai (General, Joint Implementation)

Mr. Hiroaki Hirasawa (Gas Recovery System)Mr. Akira Takahara (Gas Utilization System)

4. Schedule and Destinations Visited:Aug. 12 (Saturday) Departure from Narita

Stopover in FrankfurtAug. 13 (Sunday) Departure from Frankfurt

Arrival in KievVisit to the Marubeni Kiev Office

Aug. 14 (Monday) Visit to Ministry of Fuel and Energy, theUkrainian Alternative Fuels Center

Aug. 15 (Tuesday) Departure from KievArrival in DonietskVisit to Skochinski Coal Mine

Aug. 16 (Wednesday) Visit to Donbass CollieryAug. 17 (Thursday) Visit to the District (Oblast) Government

Departure from DonietskArrival in Kiev

Aug. 18 (Friday) Visit to the Japanese Embassy, the UkrainianAlternative Fuels CenterDeparture from KievArrival in Frankfurt

Aug. 19 (Saturday) Departure from Frankfurt (13:50)Aug. 20 (Sunday) Arrival in Narita (07:45)

Appendix - 2

5. Details of Survey:Discussions with the organizations concerned on the details and method of the survey, the members of the following main survey, schedule, destinations to be visited, items to be surveyed, and on mutual task-sharing between the two sides. Also the data and materials necessary for the main survey were explained and requested. A presentation was made concerning the gas recovery and utilization system under consideration with a closer study of this system with the Ukrainian side.Explanations on the purpose and contents of the survey were given to the Coal Mine, the District (Oblast) Government, and the Japanese Embassy, with a request for the cooperation in the survey.

Appendix - 3

Second Local Survey (Main Survey)

1. Period of Visit: September 25 (Monday) - October 5 (Thursday),2000

2. Purpose of Visit: Route survey and interview survey3. Visiting Staff: Mr. Hiroaki Hirasawa (General)

Mr. Kazuhiko Furukawa (Gas Recovery System) Mr. Akira Takahara (Evaluation of GreenhouseGas Reduction Effect - Evaluation of EconomicViability of Project)Mr. Yusaku Yokoyama (Environmental Impact Assessment)Mr. Masayuki Ezawa (Power Transmission and Distribution System)Mr. Masayoshi Uchida (Gas Power Generation System)

4. Schedule and Destinations Visited:Sept. 25 (Monday) Departure from Narita

Stopover in FrankfurtSept. 26 (Tuesday) Departure from Frankfurt

Arrival in KievVisit to the Marubeni Kiev Office and theUkrainian Alternative Fuels Center (AFC)

Sept. 27 (Wednesday) Departure from Kiev. Via DonetskArrival at DonbassDonbass Colliery

Sept. 28 (Thursday) Donbass CollierySept. 29 (Friday) Dobass Colliery

Electric Power CompanyDistrict (Oblast) GovernmentDonetsk Coal Research InstituteDeparture from DonbassArrival in Donetsk

Sept. 30 (Saturday) Departure from DonetskArrival in Kiev

Oct. 1 (Sunday) Ordering and filing documents

Appendix - 4

Oct. 2 (Monday) Visit to the Ministry of Fuel and EnergyAFCMinistry of Economic Affairs

Oct. 3 (Tuesday) Visit to the Japanese EmbassyDeparture from KievArrival in Frankfurt

Oct. 4 (Wednesday) Departure from FrankfurtOct. 5 (Thursday) Arrival in Narita

5. Details of Survey:In accordance with the purpose, details and method agreed in the course of the previous survey, interview studies were conducted at the Coal Mines, Electric Power Companies, District (Oblast) Government, and the Coal Research Center. At the Coal Mine, an on-the-spot survey was conducted underground and ground facilities and the colliery surrounds were inspected. The contents of the interviews and the data and materials obtained were studied and analyzed.The local survey findings were explained to the Ukrainian Ministry of Fuel and Energy, the Ministry of Economic Affairs and the Japanese Embassy. Discussions were held on the future work schedule and on the schedule for the next finalsurvey.

Appendix - 5

Third Local Survey (Final Survey)

1. Period of Visit: February 18 (Sunday) - February 24 (Saturday),2001

2. Purpose of Visit: Explanations concerning the contents of the Draft Report and Technical Examination

3. Visiting Staff: Mr. Hiroaki Hirasawa (General)Mr. Kazuhiko Furukawa (Gas Recovery System) Mr. Akira Takahara (Evaluation of GreenhouseGas Reduction Effect - Evaluation of EconomicViability of Project)Mr. Naotaka Minesaki (Possibility of Joint Implementation, Concrete Definition of Project)

4. Schedule and Destinations Visited:Feb. 18 (Sunday) Departure from Narita

Arrival in FrankfurtFeb. 19 (Monday) Departure from Frankfurt

Arrival in KievVisit to the Marubeni Kiev Office

Feb. 20 (Tuesday) Visit to the Ukrainian Alternative Fuels Center(AFC)

Feb. 21 (Wednesday) Visit to the Ministry of Fuel and Energy and AFCFeb. 22 (Thursday) Visit to the Ministry of Economic Affairs and to

the Japanese EmbassyDeparture from KievArrival in Frankfurt

Feb. 23 (Friday) Departure from FrankfurtFeb. 24 (Saturday) Arrival in Narita

5. Details of Survey:A presentation of the general outline of the Draft Report was made to the organizations concerned with a question and answer sessions. Discussions were conducted on the task-sharing arrangements for both sides and on the concrete way in which the project is to be advanced from now on, including the method of finance procurement.

Appendix - 6

Any part or a whole of the report shall not be disclosed without prior consent of International Cooperation Center, NEDO

Tel.: 03(3987)9466 Fax: 03(3987)5103

Documents

) at Donetsk Coal Field - OSTI.GOV