Greka executes four coalbed methane PSCs in China

Jan. 24, 2003
Greka Energy (International) BV, a wholly owned subsidiary of Greka Energy Corp., New York City, has signed four 30-year production-sharing contracts with China United Coalbed Methane Corp. Ltd.

By OGJ editors

HOUSTON, Jan. 24 -- Greka Energy (International) BV, a wholly owned subsidiary of Greka Energy Corp., New York City, has signed four 30-year production-sharing contracts (PSCs) with China United Coalbed Methane Corp. Ltd. (CUCBM) for the exploitation of coalbed methane resources in Shanxi and Anhui provinces, China. Greka previously had secured a PSC for the Fengcheng Block in Jiangxi Province.

Greka will serve as operator of the five blocks with a 60% working interest in all PSCs except the Fengcheng Block in which it has a 49% working interest. CUCBM will own the remaining working interests. The combined total contract area is 1.7 million acres, with average coalbed thickness of 16.5 ft and potential reserves of 34.5 tcf, Greka said. Three of the blocks are near the West-East natural gas pipeline that is expected to provide immediate access to CBM markets.

China has a population greater than 1 billion and estimated CBM reserves of 1,059-1,236 tcf within a depth of 6,560 ft. Although these reserves are among the top five largest in the world, China has not yet sold commercial CBM production, Greka said, because traditional development requires extensive vertical wells and high capital expenditures in surface facilities. Greka Chairman and CEO Randeep S. Grewal said the company will use its horizontal drilling technology to deplete the reservoirs, investing less capital expenditure in fewer required surface facilities..

Block details
Fengcheng Block in Jiangxi Province consists of 308,667 acres. There are proven CBM reserves of 112 bcf and probable reserves of 1,168 bcf, and this block is considered one of the better potential CBM exploitation areas in China. It is well serviced by rail and highways, and the consumption potential is supported by a population of 10 million in the vicinity. Greka plans to drill and evaluate a pilot well this year.

Shizhuang Block South in Shanxi Province is the most advanced CBM reserve in China and where CUCBM has invested most of its development capital over the last 5 years. This contract area covers 109,984 acres. Estimated proven CBM reserves of 487 bcf and probable reserves of 3,874 bcf in this block along with current production from 15 wells support Greka's plans to commence selling production this year. This block is adjacent two major cities, Taiyuan and Changzhi.

Shizhuang Block North in Shanxi Province includes 109,638 acres containing probable reserves of 4,240 bcf. This block is north of Shizhuang Block South and adjacent to it. The block is supported by geology, topography, and reservoir behavior similar to that of Shizhuang South, suggesting a similar technical and commercial potential.

Qinyuan Block also in Shanxi Province encompasses 905,498 acres. This block, with probable reserves of 19,415 bcf, contains a well-developed infrastructure providing convenient logistics and a communications network.

Panxie Block in Anhui Province, covering 142,925 acres and including probable reserves of 5,300 bcf of CBM will be strategically important within Huainan, Greka added.