The FEEC properties are world class in size and potential. Through its unique coalbed methane (CBM) projects in China, Far East Energy can exploit original gas in place (OGIP) which is estimated to be around 20 trillion cubic feet (Tcf). This estimate includes coalbed methane projects granted under three production sharing contracts (PSCs) in the Shanxi and Yunnan Provinces. Comparing Far East Energy's projects to some of the major CBM producing areas in the U.S. shows favorable potential based on gas count per ton and size. From an overall technical and economic viewpoint the potential on these three PSCs is very encouraging.
Shouyang Production Sharing Contract
The Shouyang field is the cornerstone for growth at Far East Energy; it is where we are deploying the majority of our technical expertise and capital spending. The Shouyang coals exhibit both high permeability and high gas content-- traits that are consistent with the most commercially successful CBM basins around the world.
We are a party of the Shouyang PSC with CUCBM, which provides for an operating interest in approximately 288,569 acres (1,167.8 square kilometers) in the Shanxi Province, which includes approximately 15,988 acres, or approximately 64.7 square kilometers, (Area A) in the 1H Pilot Area for which the CBM resources have been certified by the MLR to support the request for a long-term development license and in which we hold a 100% participation interest. As of December 31, 2013, we received our independent, third party reserve reports prepared by RISC ("Shouyang US SEC Reserves as at 31 December 2013") which provided an estimate of our proved, probable and possible reserves as of December 31, 2013.We also have our (“RISC PRMS Reserve Report for Shouyang CBM Block as at 31 December 2013”) available. Both reports can be accessed by clicking the report name links. In addition, the SEC reserve report can be found under the SEC filings tab.
There is exceptional infrastructure already in place at the Shouyang field offering complete market access. Far East completed a 20 year pipeline sales agreement for the gas we are producing from Shouyang. Effective January 1, 2014, the contract price is 1.7 RMB per cubic meter, and the price received by CUCBM and FEEB, including subsidies for gas sales, is 1.95 RMB per cubic meter. The total price received at the wellhead is approximately $8.90 per Mcf after taxes.
Far East Energy is the operator under the Shouyang PSC to develop the Shouyang block in Shanxi Province. The term of the Shouyang PSC consists of an exploration period, a development period and a production period. During the exploration period, we hold a 100% participating interest in the properties, and we must bear all exploration costs for discovering and evaluating CBM-bearing areas. We have negotiated and signed multiple amendments with our Chinese partner companies to extend the exploration period under our PSCs. The exploration period of Area A (approximately 15,988 acres or 64.7 square kilometers) of the Shouyang PSC does not expire; while the Exploration Period of Area B (approximately 272,581 acres or 1,103.1 square kilometers) of the Shouyang PSC does not expire until June 30, 2016. Pursuant to the provisions of the Fifth Modification Agreement of the Shouyang PSC, the exploration period for Area A will automatically be extended on the original expiration date of June 30, 2015, as we have submitted a report detailing CBM resources to CUCBM that reasonably complies with the Chinese CBM resource standards. The Shouyang PSC expires on July 1, 2032 unless extended. For complete updated details please see our quarterly SEC filings.
Qinnan Production Sharing Contract
Far East Energy is the operator under the PSC with China National Petroleum Company (CNPC), the successor to CUCBM, to develop the Qinnan Block in the Shanxi Province. The term of the Qinnan PSC consists of an exploration period, a development period and a production period. During the exploration period we hold a 100% participating interest and must bear all the costs related to discovering and evaluating CBM-bearing areas.
Although the Qinnan PSC does not expire until July 31, 2032, the stated ending date for the exploration period for the Qinnan PSC occurred on June 30, 2009. We continue to pursue an extension of the exploration period of the Qinnan PSC, but we cannot be optimistic at this time. The Company believes the underlying exploration period should be extended due to events beyond its reasonable control, primarily the lengthy transfer of rights taking place between CUCBM to CNPC.
For complete updated details please see our quarterly SEC filings.
Yunnan Production Sharing Contract
Far East Energy entered into one PSC with CUCBM to develop two areas in the Yunnan Province: (1) the Enhong area, which covers approximately 145,198 acres and (2) the Laochang area, which covers approximately 119,772 acres. We are the operator under the PSC. The term of the PSC with CUCBM consists of an exploration period, a development period and a production period. The exploration period is divided into two phases, Phase I and Phase II. We have completed Phase I and are operating in Phase II. During the third quarter of 2009 the MOC approved a modification agreement to extend Phase II of the exploration period for the Enhong-Laochang PSC to June 30, 2011 from June 30, 2009. During the fourth quarter of 2011, we signed a modification agreement to the Yunnan PSC which was approved by MofCom on June 15, 2012 and extended the exploration period until December 31, 2013, in exchange for the relinquishment of the 145,198 acres (587.6 square kilometers) in the Enhong part of the Yunnan PSC contract area. Under the Yunnan Modification Agreement, following expiration of the extended exploration period, we may elect to continue the process of trying to transition CBM Fields into the ODP process for certain areas that are in the final stages of the Chinese reserve certification process for submission of an ODP application for governmental approval. Any acreage that is not at or past the stage of submittal of a reserves report to CUCBM that reasonably meets the criteria for MLR reserve certification will be relinquished unless the parties otherwise agree. Our agreement with CUCBM expires on January 1, 2033.