Far East Energy Obtains Extended Exploration Periods And Expands Drilling Program
Houston, TX - Far East Energy Corporation announced that it has received the final approval by the Ministry of Commerce in China of three Modification Agreements that extend by two years the exploration periods of each of its three Production Sharing Contracts ("PSC").
Two Modification Agreements with China United Coalbed Methane Corporation Ltd. ("CUCBM") and ConocoPhillips China, Inc. ("ConocoPhillips") relate to the Company's PSCs for the Shouyang Area and the Qinnan Area of the Shanxi Province and, among other things, extend the exploration period under each PSC until June 30, 2009. The third Modification Agreement with CUCBM relates to the Company's PSC in the Enhong and Laochang Area in Yunnan Province and, among other things, extends the exploration period under that PSC until June 30, 2009.
"While exploration period extensions have generally been granted in China to coalbed methane companies with active drilling programs, we are happy to have formally procured extensions allowing us time to further expand exploration efforts to maximize the areas tested for CBM production," said Michael R. McElwrath CEO and President of Far East. "That expanded exploration has begun in earnest, as we have just spudded our first long-reach horizontal well in the Qinnan Block."
Far East Energy plans to drill the Qinnan horizontal well to a length of approximately 3000 meters in the Number 3 coal seam. The Qinnan Block contains approximately 500,000 acres and is located in close proximity to the West-East Pipeline to Shanghai. At an estimated cost of $1.2M, the well should continue a trend of declining well costs as Far East Energy expands its exploration efforts.
"As previously disclosed, a report recently released by Netherland Sewell and Associates, Inc. has confirmed the potential revealed by our first wells in Shouyang. We will use the extended exploration periods to further expand exploration in Shouyang, and to begin to explore the potential of our equally large Qinnan Block," said McElwrath. "If we can uncover potential in Qinnan similar to that in Shouyang, we would then have two areas of high potential in near proximity to two of the largest pipelines in China running to two of the largest cities in China, namely Beijing and Shanghai."
Far East Energy's Production Sharing Contracts for the Shouyang and Qinnan Blocks in Shanxi Province, have 30 year terms and cover 1,057,650 acre (4,280 square kilometers) under farmouts from ConocoPhillips. The Production Sharing Contract in Yunnan Province covers a 264,863 acre (1,072 square kilometers) project in Yunnan Province. Thus, the CBM concessions of Far East Energy contain a land mass slightly larger than the State of Delaware. The Shanxi properties are strategically located in near proximity to China's two largest pipelines leading to the industrial centers of Shanghai and Beijing.
SOURCE: Far East Energy Corporation