Sino’s Gas Payments to Resume

Australia-listed Sino Gas and Energy Holdings’ joint venture SGE has agreed its Chinese Linxing Production Sharing Contract (PSC) cost sharing principles with partner China United Coalbed Methane (CUCBM), Sino Gas said May 9.

The agreement allows for the resumption of Linxing gas sales proceeds and the JV expects to start receiving them before the end of the month, the company said.

Sino Gas also agreed to fund CUCBM’s share of development costs up until the point it obtains full project investment committee approval from CUCBM’s parent China National Offshore Oil Corporation (Cnooc), expected mid-2019, Sino said.

“Working collaboratively with CUCBM, we are pleased to have successfully completed the Linxing development phase cost allocation principles in advance of the first Linxing ODP [overall development plan],” Sino Gas’ managing director Glenn Corrie said.

RBC Capital Markets analyst Ben Wilson said: “Post CNOOC approval CUCBM is then expected to in turn pay SGE’s share of development costs until the carried amount is repaid in full. The carried amounts will also be subject to a deemed 9% interest in line with the terms of the PSC”.

He said that the silver lining is that Cnooc approval is expected to cover the whole field rather than just the first Linxing ODP so it will make subsequent development approvals quicker.

“Despite the current bump in the road we continue to see Sino Gas as one of the most compelling, deeply discounted, big resource plays in our coverage universe,” he said.

Sino is the operator of the Chinese Linxing and Sanjiaobei production sharing contracts (PSC) in the Ordos Basin, China’s largest gas producing basin. The company’s current interest in the Linxing PSC with CUCBM is 70% and 49% of the Sanjiaobei PSC held with PetrolChina subsidiary PCCBM.