Reuters News - Insight: China's coalbeds spur unconventional gas supply boom

A labourer works at the construction site of a coalbed methane power plant in Jincheng, north China's Shanxi province June 10, 2007.

Credit: Reuters/Stringer

By David Stanway

JINCHENG, China | Wed Apr 11, 2012 6:54am EDT

(Reuters) - After more than a century ripping out its insides to supply coal to the rest of the country, the heavily mined and polluted province of Shanxi in northern China is in the midst of a gas boom.

Under the spray of the Yellow River near the city of Jincheng, "nodding donkeys" bob in lines that stretch to the horizon, hitched up amidst precious farmland to feed on the gas streaming through the coal seams below.

Gleaming white storage tanks tower over the highways and dozens of drilling rigs dot the cliffs and valleys, some near the famed ancient cave settlements of Shanxi.

Gas output from the coal seams is rising fast and is set to hit 8 billion cubic meters (bcm) this year, up a half from 2011 - emerging from nowhere just six years ago to provide China with a cleaner, home-grown alternative fuel for the future.

China is investing 100 billion yuan ($16 billion) to double output again by 2015. Beijing wants coal seam gas output as high as 30 bcm by 2020, which would be 15 percent of China's total gas production, up from 5 percent of the total last year.

Beijing plans to double the share of natural gas in its energy mix by 2015 and reduce coal's role in a drive to ease pollution and slow greenhouse gas emissions. China will import more gas, but it also aims to boost output from domestic natural gas fields as well as unconventional sources such as coalbeds and shale.

Soaring coal output has powered China's growth into the world's second-largest economy. Now in Shanxi, it is the coal mines themselves that are providing the first big boost in the country's unconventional gas supplies.

British miners call it firedamp, pockets of gas that can cause deadly explosions in mines, and in China it has been one of the industry's biggest killers. Developers call it coalbed methane or CBM, and after a decade of missed targets, they say they have finally found the technologies required to bring large volumes of gas to market.

That is allowing for the rapid increase in supply from an industry which had been missing its targets. Beijing had hoped for as much as 8 bcm by 2010 from its coalbeds, but only reached 3.1 bcm.

"We have been at it for a decade, we are at a stage of maturity now, and we are optimally positioned to produce large volumes of CBM very successfully," said Randeep Grewal, founder and chief executive of Green Dragon Gas, a private CBM developer now producing gas in Shanxi.

Developers have been tweaking their rig technologies for years to try to coax the relatively low pressure gas out of unstable seams and, after two decades of experimentation, are now capable of constructing long and winding lateral wells that allow water to drain away and gas to flow out.

CBM could easily supply 15 percent of China's total gas requirements within a decade, Grewal said. Last year, CBM output was 5.3 bcm, just over 5 percent of China's total gas output of 102.5 bcm.

Producers are pumping from a myriad of coal seams in Shanxi estimated to hold as much as 10 trillion cubic meters (tcm) of gas. That is nearly four times China's proven gas reserves of 2.8 tcm. The country's total coal seam gas reserves could be much higher even than that - Beijing estimates as much as 36.8 tcm.

Within the next 10-15 years, China's CBM output could eclipse the annual output of top CBM producer the United States' of around 50 bcm, executives at companies involved in the sector say. The bulk of that output will come from Shanxi's old and perilous mines, and the estimates from developers are conservative compared to those coming from Beijing.

The increased domestic supply is a boon to China's government as it will help temper imports. Beijing is facing a rising gas bill as it builds pipelines from central Asia or liquefied natural gas (LNG) terminals along the coast to help meet its ambitious targets to increase the role of gas in fuelling China's economy.

TOXIC AREA

Coal production has turned Shanxi into one of the world's most toxic areas. The city of Linfen in the south of the province - known for its rich agriculture - is a global pollution blackspot choked by smoggy and sulfurous air.

Mining has damaged water tables in the rugged province of 36 million people and left swathes of land barren.

In Australia - which plans to drill as many as 40,000 wells - debate is raging over the risks to water supplies from exploiting coal seam gas. But Shanxi's - and China's - priority is to ease dependence on coal, the dirtiest of fossil fuels, and gas is seen as a cleaner option.

"Shanxi has become the epicenter of CBM development and it is also a province that is very short of gas, so there is plenty of long-term demand at prices that are increasing and that is an incentive for these CBM guys to keep going," said Tony Regan, expert at the Singapore-based Tri-Zen energy consultancy, which advises a number of companies in the industry.

With China's increasingly safety-conscious coal companies obliged to remove gas from their mines, exploiting CBM is also better for the environment than letting the methane - a greenhouse gas 20 times more potent than carbon dioxide - enter the atmosphere.

"It means somebody else will pay for degassing coal and will profit from it - it is a symbiotic process," said David Creedy, coal expert with Sindicatum Sustainable Resources in Beijing.

AMBITIOUS TARGETS

On one of the dozens of Green Dragon's rigs scattered across a 7,762 sq km (3,000 sq mile) concession in Shanxi, workers steer a drill made of diamond and tungsten through thin and heavily faulted seams of crumbly anthracite. Sensors mounted on the tip allow gas to be measured and logged while the drilling takes place.

Green Dragon will have a fleet of 32 rigs by May, with plans to expand by another 125. It aims to raise its output to around 500 million cubic meters per year by the end of 2013, selling 20 percent via the West-East Pipeline, which connects China's east coast to central Asia, and the rest through a local network.

Green Dragon is just one of a string of firms in Shanxi's Qinshui basin. A few kilometers away lies the Panzhuang CBM project run by another independent, Asian American Gas (AAG).

Regan of Tri-Zen said foreign operators have stolen a march on the country's state-owned giants such as PetroChina, China's biggest oil and gas producer. Foreign players got involved in the business in the early 1990s, before China restricted entry into gas development.

"It is now really down to the independents. Most of them are quietly persevering and we should see quite a significant flow starting this year and next year," Regan said.

Herds of sheep roam through the dry scrub as AAG's pumps draw low-pressure gas from the seams below. The company has been selling CBM through the city gas supplier Xin'ao for the last three years, and recently got permission to expand production at Panzhuang. It eventually aims to drill around 100 wells.

"China has been talking about CBM resources that are about twice the level of the United States," said chief executive Steve Zou. "U.S. CBM production reached 50-60 bcm so for China, double that - around 100 bcm a year - is possible."

While the independents now lead the way, their concessions are dwarfed by those held by big state-owned firms like PetroChina, which will eventually dominate the sector, Zou said.

PetroChina's president, Zhou Jiping, said last week that its second most important priority after tight gas was CBM and it aimed to have an annual production capacity of 4 bcm by 2015.

According to a 2011-2015 Chinese government industry plan, 33 coal firms will build 36 plants to process CBM, while China will also build 2,054 km of new CBM pipelines.

UNFULFILLED POTENTIAL

Regulatory issues have been partly to blame for patchy progress to date. For years, the designated industry leaders - PetroChina and the China United Coalbed Methane Corporation (CUCBM) - were divided on how the resource should be developed. Smaller firms were unable to persuade PetroChina to carry CBM through its pipelines and had to set up their own liquefying plants and retail stations. PetroChina has since made deals with individual suppliers to transport the gas.

Suppliers also had to contend with powerful coal firms, whose priority was coal, not gas. Mining firms were more interested in ensuring the safety of mines, as required by law, than whether the gas was allowed to escape or sent to market.

A lack of clarity around who has priority - the miner with the coal mine or the developer with the gas concession - has also hindered development. The government recognized resolving these problems as a priority in its five-year CBM development plan.

Technical problems have also dogged the sector. Drillers have experimented with different mining techniques including hydraulic fracturing or "fracking", vertical and horizontal wells, U-shaped wells and cluster wells. Adapting techniques to China's formations delayed development.

"While certain technologies do exist, none of them are off the shelf, and sometimes catering a technology sitting on the shelf to the geological conditions can take time," Grewal said.

CBM VS SHALE?

CBM's biggest unconventional competitor is potentially shale gas. If it were to develop quickly, China's shale gas output could price some CBM out of the market.

But for now that looks unlikely, giving CBM developers a window of opportunity. Unlike CBM, developers have yet to adapt shale gas production techniques to China's geology and there is to date no commercial shale gas production in China, even though the U.S. government estimates China sits on the world's biggest shale gas reserves.

"China faces more challenges in developing shale gas than the United States because China's geological structure is more complicated and water shortages and potential environmental impacts are also a big concern," said PetroChina's Zhou.

In the United States, where a rapid rise in shale gas output has revolutionized the energy sector, concerns have been raised about the leaking of toxic fracking fluids into water supplies. An engineer told Reuters that he "wouldn't be surprised if the technology is banned" in China given the country's geological conditions and water shortages.

Bureaucracy is also still a hurdle to shale gas development. Much of the progress in CBM has been made by independents, but China is unlikely to allow minnows to bid for shale gas wells.

"We've now got around 15 foreign partners in CBM and most of them are quietly getting on with something," said Regan. "At least a third if not half will begin production fairly soon, but they (the Chinese government) are approaching shale completely differently. They said they wanted to fast-track it but then seemed to do the opposite."

Grewal of Green Dragon said for simple technological reasons, shale gas was likely to require another decade.

"Just because you have a shale deposit doesn't mean it is commercial - it just means you have the license to spend a hell of a lot of money to sort it out."

CBM has other advantages over shale: it is far easier to find and located far closer to the surface.

ROOM FOR ALL

CBM already has considerable cost advantages over the gas piped in from Turkmenistan or shipped to LNG terminals on the east coast, even though it is selling at the same price.

"We love getting paid global international prices with domestic costs - we will do that all day long," said Grewal.

China said at the end of last year that it would link natural gas prices to the price of imported fuel rather than to domestic production costs, boosting profits of CBM producers.

The sheer size of the Chinese market means that imports from Russia or Qatar are not necessarily competitors. Deliveries from overseas will also help to create the pipeline infrastructure and downstream markets that will encourage development of CBM, said Grewal.

That same market could probably absorb a lot of shale gas in the future without making too much impact on CBM, unlike in the United States, where the shale revolution sent gas prices plummeting and made it tough for CBM developers to justify further expansion.

"In China the scale (of shale) would have to be massive to start impacting fuel prices," said Sindicatum's Creedy.

Until a more extensive pipeline network is built, local Chinese markets would also remain insulated from each other, potentially limiting the impact of large increases in supply from any gas source elsewhere, he said.

Raising the share of gas in China's total energy mix to 8 percent will already create a bigger market than the United States, and China is unlikely to stop there. For at least the next two decades, there is likely to be enough room for everyone.

"Right now China needs everything it can get - all the conventional production, all the CBM, all the shale, all the LNG and pipeline gas they can get, and that is going to continue for the foreseeable future," said Regan. ($1 = 6.2997 Chinese yuan)

(Additional reporting by Charlie Zhu in HONG KONG; Editing by Ed Davies and Simon Webb)

BBC News - Asia's rapid growth fuelling inequality, the ADB warns

Asia's rapid economic growth may undermine stability because the gap between the rich and poor is widening, the Asia Development Bank has warned.

Asia is home to some of the biggest slums and poorest regions in the world

Releasing its annual report, the bank said a key inequality measure increased to an average reading of 38 in Asia.

And while that is less than the average found in Latin America and Africa, Asia's figure is climbing as it declines in the other regions.

China, India and Indonesia have seen significant growth in inequality.

Not just bread

Speaking to the BBC, the Asia Development Bank's (ADB) chief economist Changyong Rhee explained that Asia may be seeing a long-term shift in the way the gap between rich and poor has been managed.

During the 1960s and 1970s, Asia was better at ensuring that growth did not marginalise large chunks of the region's population and was actually reducing the gap between the rich and the poor.

However, over the past decade the sudden explosion of growth and rapid enrichment of many people has seen the rich-poor divide grow. The ADB estimates that currently in most Asian countries the wealthiest 5% of the population now account for 20% of total expenditure.

At the same time, for hundreds of millions of people access to education, healthcare and housing has become more difficult and expensive.

The ADB's Mr Rhee said policy makers would have to become more responsive to the growing divide, not least because people are now more aware of being left behind.

"With technology and communications, people can see how others are living all over the world, and their desire to live more equally is increasing," he explained.

"People are asking for more. Not only are they asking for bread, but they are asking for a more even distribution of bread."

Asia is seeing the emergence of a stronger consumer class with greater aspirations

Vicious circle

The ADB uses the Gini coefficient to quantify the inequality gap, and says that the higher the figure, the bigger the problem.

In its report, the ADB said that the Gini coefficient in China had increased to 43 in 2010, from 32 in the early 1990s. For India, the figure rose to 37 from 33 during the same period. In Indonesia it jumped to 39 from 29.

"Inequality leads to a vicious circle, with unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities for families," said Mr Rhee.

Social tensions such as these can undermine governments and lead to populist politics, Mr Rhee said.

They can also see a split in national development between urban and rural areas, increasing internal instability and tensions.

Poverty shift?

However, it is not all bad news. Economic growth in developing Asia is still expected to keep growing steadily, coming in at 6.9% in 2012 and 7.3% in 2013. Inflationary pressures, one of the biggest headaches over the past 12 months, are seen moderating.

The ABD also found that the number of people living below the poverty line of $1.25 (£0.80) a day fell by 430 million between 2005 and 2010.

Going forward, the key will be ensuring the region's economic expansion is more evenly distributed, the ADB said.

"Another 240 million people could have been lifted out of poverty over the past 20 years if inequality had remained stable instead of increasing, as it has since the 1990s," Mr Rhee added.

Reuters News - Analysis - Troubled euro zone states most at risk from high oil

By Philip Blenkinsop

(Reuters) - Oil prices at record levels in euro terms are threatening to rock the euro zone's economy more than might be expected, with those countries least capable of riding out a shock being the worst hit.

Standard estimates of the impact of oil prices on the euro zone economy are that a 10 percent price hike dents annual growth by some 0.2 percent in the ensuing three years, with disagreement over whether the hit is greater at the start or at the end.

However, these projections do not take into account the euro/dollar exchange rate and may underestimate the impact at a time of widespread austerity. Nor do they reflect potential differences across euro zone countries.

In dollar terms, oil prices are still some 13 percent short of the $147.50 per barrel Brent peak hit in July 2008. However, in euro terms, oil prices surpassed all-time highs last month.

So far this year, the price of oil in euros has risen as much as 17 percent. The International Monetary Fund already projects euro zone GDP to shrink by 0.5 percent over 2012.

Italian bank UniCredit estimates that a 10 percent rise in the euro-denominated price of oil depresses euro zone growth by 0.3 percentage points over a single year - not 0.2 percent over three years.

Marco Valli, one of Unicredit's economists, says the impact on the euro zone could be even greater because of the high level of prices.

"Moving from 50 to 55 euros and from 150 to 165 euros. These are both 10 percent, but they are quite different," he said.

The International Energy Agency (IEA) said last week that the European Union, extending beyond the 17-nation euro zone, was the hardest-hit of industrialised regions and would pay $500 billion for oil this year, an increase of $30 billion from 2011.

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For a graphic on oil prices in various currencies:

link.reuters.com/wub57s

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HARDEST IMPACT IN PERIPHERY

High oil prices, meanwhile, hit different countries differently.

ING Economist Carsten Brzeski said that while high oil prices were big news in Germany they had not yet filtered through into consumer confidence there but that the worry was much bigger for consumers in peripheral countries.

"Consumers in the south are already squeezed as they lost wealth in real estate and stocks. A high oil price on top of this should again be one of the factors contributing to divergence rather than convergence in the euro zone," Brzeski said.

Thomson Reuters' Datastream shows a very close negative correlation between oil prices in euros and the annual growth rate in periphery euro zone countries - those currently struggling with unwieldy public debt and scant, if any, growth - over the past 20 years.

In simple terms, growth rates tend to decline several months after oil prices rise.

For Greece, Ireland, Portugal and Spain, the correlation coefficients range from -0.7 to -0.8 with a delay of four to eight quarters.

This is close to the absolute negative correlation value of minus 1, at which point statistically growth would always decline when oil prices rise.

For Italy and France, the link is weaker, marginally more than the euro zone as a whole, with a coefficient of -0.5. For Germany, there is barely any correlation at all.

In theory, the colder northern European countries should face a higher energy bill than the weaker debt-troubled nations in the south of the continent, where less fuel needs to be burned to heat homes and work spaces.

However, energy saving efforts, more pronounced in northern Europe, offer a counterbalance to price hikes, while southern Europeans have little to shield themselves from among the highest energy prices on the continent.

Spanish and Irish households paid the highest electricity prices in the European Union last year, after Malta and Cyprus, according to Eurostat data, while only the relatively rich Swedes and Danes pay more for their gas than do the Portuguese.

Greeks and Italians have to pay 16 and 17 percent more respectively for their gasoline, according to data from Europe's Energy Portal.

All this makes its way into overall inflation baskets.

Excluding newer eastern European euro zone members, Portugal has the heaviest weighting of energy within its basket of goods used to measure inflation, an indication that Portuguese spend more on energy than their euro zone peers.

Greece has the heaviest weighting for liquid fuels and motor fuels are significant components of inflation for both Portugal and Spain.

This does not guarantee that oil prices will lead to a severe downturn. But they are hitting at just about the worst time for an economy snuggling with recession, the burden of austere fiscal consolidation and tighter bank lending.

(Additional reporting by Robert-Jan Bartunek. Editing by Jeremy Gaunt.)

Reuters News - China swings to surprise trade surplus in March

(Reuters) - China swung to a surprise trade surplus of $$5.35 billion in March as exports grew faster than expected and import growth eased from a 13-month peak, customs data showed on Tuesday.

Import and export growth were both down sharply from February's Lunar New Year distorted surge, and within sight of the government's target of 10 percent expansion for 2012.

The data reinforced the view of most analysts that China's trade-sensitive economy is set for a soft landing, with GDP growth likely to have eased for a fifth successive quarter to 8.3 percent in the first three months of 2012 and remaining on course for its slowest year of expansion in a decade. "The trade data looks okay... it shows the global economy is recovering, albeit slowly," said Zhou Hao, an economist with ANZ Bank in shanghai.

"Given that China had a trade surplus in the first quarter versus a deficit in the Q1 last year, it indicates a positive contribution to GDP growth. We reckon Q1 GDP growth should be 8.6 percent. I think the market is a bit too pessimistic about China's economy."

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China imports and exports: link.reuters.com/ked55s

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Import growth of 5.3 percent in March compared with economists' expectations of 9.0 percent and February's 39.6 percent growth, while export growth of 8.9 percent compared with a consensus call for 7.2 percent, still a marked easing from February's 18.4 percent rate.

The two numbers left the overall trade balance in surplus, reversing February's $31.5 billion run of red ink on the balance of payments and confounding market expectations of a $1.3 billion deficit.

But despite the unexpected return to surplus, the relatively slack pace of export growth may still concern investors who believe the risks of recession in the debt-ridden European Union -- China's top export market -- could be a dangerous drag on growth in the world's number 2 economy.

March data provided the first hard economic numbers of the year not distorted by the impact of the Lunar New Year holiday that fell in January this year, causing considerable skew in comparisons with the February 2011 holiday.

China's data releases build to a crescendo through the week with first quarter GDP numbers expected to be published on Friday and forecast to show the slowest quarter of growth in nearly three years.

Inflation data published on Monday kept the government on stand-by to deliver more growth-oriented policies, with a trend of easing consumer costs in the first quarter confirmed while producer prices revealed risks to the industrial sector recovery.

The People's Bank of China has cut the proportion of deposits banks must keep as reserves by 100 basis points in two moves since autumn 2011 in a bid to keep credit growing in the face of a recent slowdown of foreign capital inflows, which had underpinned money supply growth for much of the last decade.

(Reporting by Nick Edwards; Editing by Alex Richardson)

Reuters News - Short on tools, central banks left with words

Pedestrians walk past the Federal Reserve Building in Washington April 3, 2012.

Credit: Reuters/Joshua Roberts

By Pedro da Costa

WASHINGTON | Mon Apr 9, 2012 5:01am BST

(Reuters) - Some of the world's most prominent central bankers may have to hope the pen is as mighty as the sword. With the Federal Reserve, the European Central Bank and other authorities in industrialized countries already stretching the limits of monetary policy, pressure has risen for them not go any further, and even to begin pulling back.

Top officials have had to rely increasingly on speeches - not always successfully - to convey to financial markets how they intend to manage their economies.

"A new policy regime characterized by jawboning is now here," said Eric Green, economist at TD Securities.

"Policy is more constrained and more accommodation increasingly problematic in scope and complexity."

As U.S. Treasury yields began to rise in late March on signs of an economic recovery, Fed Chairman Ben Bernanke gave a speech that focused on the weakness of the labour market. Stocks and bond markets rallied on hopes that this meant he was gearing up for a third round of quantitative easing or QE3.

The following week, the release of minutes from the Fed's March meeting painted a much more hawkish picture, with a dwindling number of voting members on the Federal Open Market Committee - just two of 10 - actively considering more stimulus.

The news prompted Vincent Reinhart, a former Fed staffer now at Morgan Stanley, to sharply revise down his forecast for the prospects of QE3 to just 1/3 from 2/3. Then, just a few days later, data showed the pace of job creation halved in March from previous months, reviving some of the bets on more Fed action.

However, economists said policy-makers would not read too much into one's month data. "This transparency thing is completely new to the Fed.

They are making it up as they go along, and they're confusing people," said Steve Wyatt, a professor of finance at Miami University's Farmer School of Business.

A string of Fed officials, including Bernanke, will speak at public appearances this week - so investors could be in for another rollercoaster.

It's not just in the United States that the effort to talk down rising interest rates is taking hold. In theeuro zone, the European Central Bank's injection of more than 1 trillion euros in loans to banks seems to be as much additional support the region's recession-threatened economy can hope for.

But ECB President Mario Draghi has made clear he will not be pressured into tightening monetary policy quickly. While at pains to assuage concerns among a German-led group of ECB policymakers about inflation, Draghi dismissed a Bundesbank push to begin preparing to reverse course.

"Any exit strategy talking for the time being is premature," he said, adding bluntly: "I think the president of the ECB is the one who has the last word on this."

Unless the global economy suffers a new shock, such as a sharp slowdown in China, policymakers may have to rely on providing verbal guidance to markets rather than resort to another round of measures such as bond purchases or loans to banks to boost liquidity.

Even the governor of a central bank that does look set to ease further, the Bank of Japan, has warned that an overreliance on bond purchases might be interpreted by financial markets as a backdoor government bailout.

Jaime Caruana, general manager of the Bank for International Settlements, echoes concerns that governments are being allowed to put off the pain of fixing their balance sheets.

"There is a serious risk of overburdening monetary policy," he said at a recent Fed conference in Washington. In the United States, the approach of November's elections could make it harder for the Fed to act even if internal support for easing were to gather momentum.

Republican candidates have openly accused Bernanke of risking an increase in inflation and jeopardizing the dollar.

Chicago Fed President Charles Evans, one of the Fed's most dovish officials, argues the central bank could squeeze more stimulus from its recent guidance that interest rates are likely to stay low until at least late 2014 if it conveyed to markets that this was more of a firm promise than just a forecast.

Others, like James Bullard of the St. Louis Fed, take the exact opposite view: "The 2014 language in effect names a date far in the future at which macroeconomic conditions are still expected to be exceptionally poor. This is an unwarranted pessimistic signal for the (Fed) to send."

The other issue is, will the markets believe the Fed's low rates guidance? And if not, does the central bank risk a loss of credibility? Wyatt of Miami University sees this as a big concern.

"They're going to have a heck of a time with that. You're seeing pretty strong evidence that the market is pricing in a move sooner, despite what the Fed says."

(Editing by Sandra Maler)

BBC News - China sets up rare earth body to streamline the sector

China has set up a rare earth association in a bid to streamline the sector's development, as it continues to face criticism over its policies.

China has been accused of pushing up rare earth prices by limiting their exports

Beijing has imposed quotas on exports of rare earth elements, a move which its critics say has pushed up prices.

Last month, the US, Japan and the European Union filed a case at the World Trade Organization, challenging China's restrictions.

China produces more than 95% of the world's rare earth elements.

Hardball?

These elements are critical components in the manufacture of various high-tech products, including DVDs, mobile phones, flatscreen TVs and hybrid batteries.

China's trading partners have alleged that Beijing has been trying to utilise its position as the world's biggest producer of rare earths to benefit domestic manufacturers.


China shot ahead after the US had stopped its rare earths excavation

They have argued that by limiting exports, Beijing has kept prices low for domestic buyers, while international firms have had to pay more.

It's also claimed that Beijing was trying to put pressure on international manufacturers to move to China.

The state new agency Xinhua said the new association was likely to help with efforts to cope with international trade frictions and disputes.

'Clean up'

China has denied these allegations and said that it imposed the restrictions to ensure that excessive mining of these elements did not cause environmental damage.

Su Bo, an industry vice minister, said Beijing is looking to further tighten its policies for the sector.

"China will continue to clean up the rare earth industry, expand rare earth environmental controls, strengthen environmental checks, and implement stricter rare earth environmental policies," Su was quoted as saying by the Xinhua news agency.

According to Xinhua, the association will have 155 members, including some of the biggest producers of rare earths, and report to the Ministry of Industry and Technology which regulates production of these 

Reuters News - U.N. peacekeeper due in Damascus for ceasefire talks

By Dominic Evans

BEIRUT | Thu Apr 5, 2012 12:06am BST

(Reuters) - A senior Norwegian U.N. peacekeeper flies into Damascus on Thursday to try to broker an agreement that will allow observers to be deployed across Syria to monitor a ceasefire demanded by an international peace plan.

Syrian President Bashar al-Assad has accepted the plan, which calls for him to withdraw heavy weapons from cities, and his ally Russia said Syrian forces had begun to pull back.

But opposition activists on Wednesday reported no let-up in Assad's crackdown on what began over a year ago as a peaceful uprising and has since turned at least partly into an armed insurgency.

They said at least 80 people, 18 of them soldiers, had been killed in the previous 24 hours. Shells rained down on Homs, the city of 1 million that has suffered most in the uprising.

"Since this morning they have been shelling Khalidiya neighbourhood, that is in its 17th day," said activist Hadi Abdullah by telephone from Homs.

Human rights group Amnesty International said it had counted 232 deaths since Syria accepted Annan's plan on March 27.

U.N.-Arab League special envoy Kofi Annan has ordered Norwegian Major-General Robert Mood, who served as head of mission of UNTSO, the U.N. peacekeeping operation in the Middle East, to take an advance team to Damascus anyway.

Mood's job is to prepare the ground for an observer mission comprising up to 250 unarmed staff, his spokesman Ahmad Fawzi said. Such a mission would require a U.N. Security Council resolution before deploying.

Annan has brokered a six-part peace plan that provides for an April 10 withdrawal of Syrian forces, to be followed by a ceasefire by rebel forces within 48 hours.

Assad's government issued its latest official death toll for the 12-month uprising. It told the United Nations that 6,044 people had been killed, of whom 2,566 were soldiers and police.

The United Nations itself says Assad's forces have killed more than 9,000 people in the past year.

TROOPS WITHDRAWING?

Assad's acceptance of a troop withdrawal has met with scepticism among the Syrian opposition and its Western and Arab supporters.

"The Syrian authorities have said they will do that by April 10," British Foreign Secretary William Hague said in London.

"There is no sign of them doing it so far. Attacks on the citizens, the civilians of their country have continued, the murder, oppression, and torture of the regime has continued ..."

But Russian Deputy Foreign Minister Gennady Gatilov said the withdrawal was already under way.

"Kofi Annan is continuing his efforts, the Syrian side has begun withdrawing forces from cities. The main thing now is for all sides to carry out Annan's proposals," Interfax news agency quoted Gatilov as saying in Moscow.

Gatilov's boss, Foreign Minister Sergei Lavrov, attacked the "Friends of Syria" group of Western and Arab nations which met at the weekend, saying it was undermining Annan's mission.

"Everyone has supported Kofi Annan's plan, but decisions at the 'Friends of Syria' group meeting aimed at arming the opposition and at new sanctions undermine peace efforts," state-run Itar-Tass quoted Lavrov as saying.

"It is clear as day that even if the opposition is armed to the teeth, it will not defeat the Syrian army, and there will simply be slaughter and mutual destruction for long, long years," he added.

Despite its pro-Assad tone, some diplomats have said Moscow has grown increasingly frustrated with Damascus and its failure to end the uprising.

"Russia believes regime change in Syria would result in an Islamist regime after a great deal of bloodshed," one senior diplomat told Reuters.

Syrian Foreign Minister Walid al-Moualem is due in Moscow for talks on April 10, Russia's Foreign Ministry said.

The opposition Syrian Observatory for Human Rights, a British-based monitor that collates reports from inside Syria, said 58 civilians and 18 soldiers had been killed on Tuesday.

In Homs province on Wednesday, seven people were killed during clashes, the Observatory reported.

Accounts of the violence could not be verified because Syria's government restricts access to independent journalists.

(Additional reporting by Erika Solomon, Oliver Holmes and Dominic Evans in Beirut, Adrian Croft in London, Steve Gutterman in Moscow, Michelle Nichols at the United Nations, and Stephanie Nebehay in Geneva; Writing by Andrew Osborn; Editing by Kevin Liffey)