HOUSTON, January 13 /PRNewswire/ -- Far East Energy Corporation announced today it has commenced a robust winter drilling program in response to the rapid increase in gas production from its Shouyang Block in Shanxi Province, China that occurred in late November and December of last year.

Far East will finance the drilling program with the net proceeds of the approximately US$4.5 million registered direct offering closed in December 2009. The goal of the program is to accelerate the dewatering in the 1H Pilot Area to lower the pressure and increase the amount of gas being produced in the Shouyang Block. As previously disclosed, Far East is in discussions with three separate third parties regarding the potential off-take and sale of gas produced from the area. Far East believes it could initiate gas sales by the third quarter of 2010.

The focus of the winter drilling program is the drilling and fracturing of eight wells by early March. The five drilling rigs being utilized are now fully operational with the first of the wells having been spudded in December. Of the eight wells, seven will expand the 1H Pilot Area to the west and one parameter well will be drilled approximately four kilometers outside of the 1H Pilot Area to the west in order to obtain further information regarding the geographic extent of the high permeability/high gas content area. In addition, the existing P4 parameter well will be fractured and the production from the #15 seam of the P2 parameter well will be temporarily suspended to accommodate the fracturing of the #9 seam using the same wellbore.

Winter is quite harsh in Shanxi Province, so December, January and February are normally months when companies cease drilling operations and evaluate results, said Michael McElwrath, CEO of Far East. Temperatures have been as low as -17C (-5F), but instead of staying dormant, we have designed a workable drilling program and chosen to drill through the extreme conditions because we are enthusiastic about the ramp up in gas production and felt that those results call for us to do everything possible to maintain such positive momentum.

Garry Ward, Senior Vice President of Engineering, added, The rapid increase in production that we experienced at the end of last year has indicated the capability of the highly permeable #15 coal seam. Although this increase is very positive, we believe that we have not yet seen the full capacity that is often associated with a coal seam that has the permeability of the #15 coal seam in the 1H Pilot Area. The winter drilling program is designed to begin to exploit this rise in gas production by increasing our water withdrawals and significantly enhancing gas production in 2010 as we seek to move this project toward gas sales and project financing.

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

CONTACT: David Nahmias, +1-901-218-7770, dnahmias@fareastenergy.com, orBruce Huff, +1-832-598-0470, bhuff@fareastenergy.com, or Catherine Gay,+1-832-598-0470, cgay@fareastenergy.com, all of Far East Energy Corporation