Bright Future for CBM Project in Sanjiao Block
Shaanxi Provinces through Orion Energy International Inc. owns a 70% interest in the Coal-Bed Methane project pursuant to a production-sharing contract entered into with the Chinese partner, PetroChina Company Limited.
The total gross 2P reserve of the Sanjiao Block as per the Competent Person's Report is 356.6 Bcf.
According to the PRC standards, the proven reserve of CBM of 43.5 billion cubic meters of the Sanjiao Block has been subsequently reviewed and recognized by the Expert Review Group of the State Reserve Committee of the PRC.
Accordingly, the Company is in the process of preparing and reporting the overall development project plan of the Sanjiao Project, which is expected to obtain the approval of the National Development and Reform Commission during the year.
As of December 2010, Orion had completed 17 multi-lateral horizontal wells in the Sanjiao Block, with an annual handling capacity of 130 million cubic meters of CBM. The Chinese partner, PetroChina, has established and commenced the operation of a compressed natural gas head station with a daily compression capacity of 30,000 cubic meters.
The project is ready to run external trial sales of CBM. The Group expects that CBM production will enter into a formal production phase in the second quarter of 2011, which will bring a contribution to the Group's revenues.
Mr. King added: "With the completion of the acquisition of Orion, the contribution from our CBM business will gradually be reflected in 2011. As Sanjiao Block is one of the best CBM fields in China, we are confident that, upon the commencement of production in the first half of this year, Sanjiao Block will become a large-scale CBM field within the next three years with annual output exceeding 1 billion cubic meters."
The Government of Shanxi Province has planned three gas pipelines and a liquefied natural gas plant in Sanjiao and its surrounding areas, which were completed and put into operation in succession in early 2011. The CBM produced from Sanjiao Block will be transported primarily through these newly constructed facilities to the central and western parts of Shanxi Province where industrial natural gas consumption is concentrated. The Group believes that the CBM project in Sanjiao Block will be the key driver of growth in the future bringing considerable long-term return on investment to the shareholders.
Source: Sino Oil and Gas Holdings Limited