Sino Gas & Energy Signs First Gas Sales Deal

Sino Gas & Energy has signed its first gas sales agreement for its Linxing PSC, allowing pilot production to commence as early as December 2013.

The sales agreement is with China United Coalbed Methane (CUCBM), who holds a 30% interest in the Linxing PSC located in Ordos Basin, Shanxi province. Gas supplied under the agreement will be sold to the industrial gas market in Shanxi Province through existing pipeline infrastructure.

Initially seven wells are planned to be connected to a central gathering station located on the western portion of Linxing. Additional wells are expected to be put online as wells are drilled and gathering facilities are expanded, the company said.

After the first year, sales volumes can go up to 1,000,000 m3/day (35MMscf/day) under the contract. Any incremental volumes beyond this amount are dependent upon well performance and further negotiations.

An initial price of approximately $7/Mscf (thousand standard cubic feet) will apply during the first year, and will be adjusted on an annual basis by reference to Shanxi Province market prices and applicable government policies. Subject to the approval of Chinese Reserve Report, Overall Development Plan and other licensing requirements for the gas production, the gas sales contract is valid over the life of the Linxing PSC.