Far East Energy spuds CBM well in China

Houston-based Far East Energy Corp. recently spudded its first coalbed methane exploration well under a 30-year production-sharing contract (PSC) in the Enhong-Laochang blocks in the Yunnan Province of southern China.

Nov. 18, 2003

2 min read

By OGJ editors

HOUSTON, Nov. 18 -- Houston-based Far East Energy Corp. recently spudded its first coalbed methane exploration well under a 30-year production-sharing contract (PSC) in the Enhong-Laochang blocks in the Yunnan Province of southern China.

It is the first of five exploration wells that the company expects to drill and complete by next spring. If successful, Far East Energy then plans to drill eight wells to test production before beginning development of the property. This first well is expected to be drilled to a TD of 2,600 ft.

Based on data gathered from 1,561 coal exploration drill holes and more than 30 geological reports over the past 30 years, the Yunnan Provincial Coal Geology Bureau estimated the 264,863 acres covered by the contract contain 5.24 tcf of gas in place, making it a world-class prospect, officials said.

Far East Energy has 60% working interest in the production-sharing contract with the remaining 40% owned by China United Coalbed Methane Corp. Ltd., which has exclusive state authority to form joint ventures to develop CBM in China.

Far East Energy also initiated a PSC with China United Coalbed Methane Corp. Ltd. (CUCBM) for the Zhaotong block in northeast Yunnan. In northern China's Shanxi Province, Far East Energy signed a farmout agreement with ConocoPhillips for two PSCs, with CUCBM again being the Chinese partner. All three contacts are in the process of final approval by the Ministry of Commerce.

Far East Energy's current total interests are estimated at more than 9.6 tcf of CBM, with at least 4.8 tcf potentially recoverable.

Natural gas consumption is rising rapidly in China, fueled by an unprecedented economic boom. China has embarked on a major expansion of its natural gas infrastructure, including the 3,800 km West-to-East Pipeline that is the largest pipeline project in the world. It recently announced plans for natural gas to replace coal as the major fuel for generating electricity in Beijing by the time of the 2008 Olympics.