Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Aug. 24 -- ConocoPhillips has signed a farmin agreement with Green Dragon Gas’s Greka China subsidiary covering the development of coalbed methane reserves in three production-sharing contracts in China.
Under the agreement, ConocoPhillips will pay Greka an initial $20 million to cover costs incurred to date and will provide as much as $30 million more for the development of wells at Shizuang South, Shizuang North, and Qinyuan.
The first phase of the agreement will last until yearend 2010, when ConocoPhillips will have the option of deciding to proceed with a second development phase.
If ConocoPhillips decides to proceed with phase two, it will pay $120 million for a 50% stake in the three PSCs, with Greka remaining the operator. ConocoPhillips will also have until 2011 to decide whether to participate in Greka's midstream and downstream businesses.
In June, Green Dragon Chairman and Chief Executive Officer Randeep Grewal said demand for the firm's CBM is “undeterred and continues to be a core area of the government's incentive schemes to meet ballooning demand.”
China aims to produce 5 billion cu m (bcm) of CBM and 5 bcm of coal mine methane by 2010 and wants to raise combined volumes to 30 bcm by 2015 and more than 50 bcm by 2020.
In July, Zhang Guobao, vice-minister of China's National Development and Reform Commission and director of the State Energy Administration, said his country’s CBM development and utilization has witnessed remarkable progress.
Zhang made the comment on July 5 at a ceremony marking the completion of the first phase of China's latest CBM project, undertaken jointly by Hong Kong & China Gas Co. and Jincheng Anthracite Mining Group.
Located in Shanxi province, the project’s first phase will produce 250,000 cu m/day of liquefied CBM, while the second phase, scheduled for completion in the third quarter of 2010, will raise production to 900,000 cu m/day.
With total investment of $98 million, the completed project will be the biggest CBM liquefaction project in mainland China.
Contact Eric Watkins at [email protected].