Far East Energy Corp., a Houston, Texas-based energy corporation that focuses on development and exploration of coalbed methane (CBM) reserves in China, announced a rigorous new winter drilling program today. This robust new program was initiated in response to the skyrocketing gas production of its Shouyang Block in Shanxi Province.

Financing for the drilling operations will come from a $4.5M registered direct offering completed Dec 2009.

In negotiations with three individual, third party interests to sell the production from this operation, FEEC’s current objective is to speed up water removal in the 1H Pilot Area in order to reduce pressure and increase gas output in the Shouyang Block so the Company can initiate sales by 3Q 10.

With the stated goal of completing the drilling and fracturing of eight wells by March, FEEC has five rigs in full operation at the site and has already spudded (removed rock and sediment in preparation for drilling) one well in Dec 09.

Seven of the eight wells will expand the 1H Pilot Area, with the eighth being drilled 4 kilometers west of the 1H Pilot Area as a test of the geological extent of the high-permeability/high-gas content area.

Also, the extant P4 parameter well will be fractured and the P2 parameter well will temporarily halt operations on the #15 seam so that the same wellbore can be used to fracture the #9 seam.

CEO of FEEC Michael McElwrath noted the seasonal complications of drilling in the harsh winter climate of Shanxi Province, explaining that “December, January and February are normally months when companies cease drilling operations and evaluate results”.
McElwrath was proud of Far East’s ability to design a “workable drilling program”, and “drill through the extreme conditions”, spurred on by their ambition and enthusiasm to ramp up production and maintain momentum despite the hostile -17C (-5F) temperatures.

Senior V.P. of Engineering for FEEC Garry Ward pointed out that the “rapid increase in production” from the end of 09 indicated “the capability of the highly permeable #15 coal seam”, and suggested that they were nowhere near full capacity for the #15 seam.

Ward went on to say that the ambitious winter drilling program would allow FEEC to leverage the soaring gas production capacity by increasing “water withdrawals and significantly enhancing gas production in 2010” as the Company seeks “to move this project toward gas sales and project financing”.