HOUSTON, November 30 /PRNewswire/ -- Far East Energy Corporation announced today that gas production from its Shouyang Block in Shanxi Province, China continues to increase steadily and has achieved another milestone, now surpassing 400,000 cubic feet, or 400 Mcf per day. The rate of increase in produced gas volumes is becoming more pronounced as critical desorption pressure is reached across an expanding area.
This is precisely what we want to see, and exactly what we were expecting, said Garry Ward, Senior Vice President of Engineering. Once you have enough wells drilled to properly dewater a high perm area, you expect to see more and more wells ramping up in gas production and new wells coming on line with gas as the dewatering lowers pressure and allows more and more gas to desorb off the coal. We are now preparing to extend our development to the west, utilizing five drilling rigs. We expect the existing wells to continue their increases as we accelerate the dewatering of this area and expand the development.
Last week, Far East signed contracts with Beijing China Coal Dadi Technology Development Company to provide four drilling rigs, and with Henan Yu Zhong Geology Exploration Engineering Company to provide one rig to significantly ramp up the drilling program in Shouyang. All five rigs are scheduled to begin drilling new wells on or about December 15. Far East plans to drill and fracture (frac) nine new wells before the Chinese New Year, which will occur in mid-February 2010, and also to frac its existing P4 parameter well. Eight of the new wells will continue the westward expansion of the high permeability field, and one will be a new parameter well drilled several kilometers to the west to continue to delineate the geographic extent of the high permeability/high gas content area.
Additionally, Far East announced that Shanxi CBM and Natural Gas Gathering and Transmission Company (Shanxi Gathering) has made a request to enter into negotiations with China United Coalbed Methane Co. Ltd. (CUCBM) and Far East for the purchase of Far East's Shouyang gas production. Under the terms of the Production Sharing Contract covering the Shouyang Block, gas produced by Far East and its partner, CUCBM, is sold by CUCBM on behalf of Far East. Shanxi Gathering is commissioned to build a pipeline that currently is planned to be routed through the Far East field, or just to the south of it, with construction scheduled to begin early in 2010 and with completion expected by July 2010. Shanxi Gathering has indicated its intent to accept the gas produced by Far East regardless of volume. Previously, on October 26, 2009, Far East announced that a Letter of Intent had been signed for the sale of gas produced from its Shouyang Project; with the gas to be transported via a pipeline to be built by Shanxi International Energy Co. Ltd to the area of Far East's current Shouyang gas production. There are now two pipelines and one local distribution/compressed natural gas company that have indicated a desire to purchase the gas produced from the Shouyang Block.
Far East Energy Corporation
Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan City, China, Far East Energy Corporation is focused on CBM exploration and development in China.
Statements contained in this press release that state the intentions, hopes, beliefs, anticipations, expectations or predictions of the future of Far East Energy Corporation and its management are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. It is important to note that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those projected in such forward-looking statements include: the pipelines mentioned may not be constructed or their routes may differ from those mentioned; the pipeline and local distribution/CNG companies may decline to purchase or take our gas; the gas produced at our wells may not increase to commercially viable quantities or may decrease; we may have insufficient capital to develop the Shouyang field; weather may significantly delay the planned drilling program; wells may be damaged or adversely impacted during the production process, resulting in decreases in the amount of gas produced, or that can be produced; certain proposed transactions with Arrow may not close on a timely basis or at all, including due to a failure to satisfy closing conditions or otherwise; the anticipated benefits to us of transactions with Arrow may not be realized; the final amounts received by us from Arrow may be different than anticipated; Chinese Ministry of Commerce (MOFCOM) may not approve the extensions of the Qinnan Production Sharing Contract (Qinnan PSC) on a timely basis or at all; PetroChina or MOFCOM may require certain changes to the terms and conditions of the Qinnan PSC in conjunction with their approval of any extension; our lack of operating history; limited and potentially inadequate management of our cash resources; risk and uncertainties associated with exploration, development and production of CBM; expropriation and other risks associated with foreign operations; disruptions in capital markets effecting fundraising; matters affecting the energy industry generally; lack of availability of oil and gas field goods and services; environmental risks; drilling and production risks; changes in laws or regulations affecting our operations, as well as other risks described in our Annual Report on Form 10-K for 2008 and subsequent filings with the Securities and Exchange Commission.
SOURCE: Far East Energy Corporation
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