Far East Energy Corp. is focused on exploring and developing some of the largest coal bed methane gas projects in China. The company is doing this through its agreements with ConocoPhillips (COP) and China United Coalbed Methane Company, Ltd. Coalbed methane, a form of natural gas, is a clean-burning fuel that China intends to use to supply part of its enormous domestic energy needs.
Far East Energy announced today that it has achieved critical desorption pressure (CDP) in a portion of the 1H pilot area in its Shouyang Block in Shanxi Province, China. Gas production in this block has been increasing almost daily since January 1, rising almost 300% in the past three months.
Production for the 1H area is now over 200,000 cubic feet (200 Mcf) per day. Far East believes that the quantity of gas being produced in the field is sufficient to begin discussions with its partner, China United Coalbed Methane (CUCBM), regarding a gas marketing agreement that would allow Far East to jointly market its gas with China United through a gas sales facility.
Far East believes that any initial gas sales facility would initially be a compressed natural gas (CNG) facility and would likely have a capacity of 1 to 3 million cubic feet per day. The sales facility would be constructed to allow for growth in the event the area of desorption grows and more gas is produced and gathered for sale.
Far East CEO, Michael R. McElwrath, said, â€œThis is the news we have anxiously been awaiting. Reaching CDP removes any doubt that the coals in the pilot area can be dewatered; and CDP must be reached to produce gas. More importantly, now that we have achieved production in excess of 200 Mcf per day, we can enter into discussions with CUCBM concerning gas sales and revenue generationâ€.
Far East expects additional wells in the pilot area to reach CDP and begin to produce large quantities of gas. The company also plans in the near future to expand their drilling outside of the pilot area and into other regions of the Shouyang block.