Operations
Operations
OUR PROJECTS
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 between 21.3 and 29.2 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.
The Shouyang field covers a total of 485,000 acres (1,960 square kilometers). An independent report on the field, prepared by Netherland, Sewell & Associates (NSAI) and issued in July 2011, increased OGIP estimates significantly from previous estimates. The updated report covers the Numbers 3, 9 and 15 target coal seams as of June 30, 2011; and provides a best estimate OGIP of 8.6 Tcf representing a 23% increase from earlier NSAI estimates. The most recent low estimate from NSAI was 6.7 Tcf and the high estimate was 10.4 Tcf.
There is exceptional infrastructure already in place at the Shouyang field offering complete market access. Far East recently completed a 20 year pipeline sales agreement for the gas we are producing from Shouyang. With recently enacted government subsidies taken into consideration, we expect to receive between $6.35 and $7.23 per thousand cubic feet (Mcf) of gas at the wellhead.
We are the operator of the field under the PSC entered into with China United Coal Bed Methane (CUCBM) to explore and develop the Shouyang Block. The term of the Shouyang PSC consists of an exploration period, a development period and a production period. During the exploration period FEEC holds a 100% participating interest in the properties, and we are responsible for all costs related to discovering and evaluating CBM bearing areas. Development costs for each CBM field discovered are shared by us and CUCBM in proportion to respective participating interests. We also have a gradual cost recovery mechanism that allows us to recover the share of exploration costs allocated to CUCBM. The exploration period for the Shouyang PSC expired June 30, 2011 and we are currently engaged in extension discussions. For complete updated details on our progress towards getting this extension 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 on our progress towards getting this extension 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. Following completion of Phase II of the exploration period, we may elect to continue the PSC and conduct development and production operations on any CBM discoveries. The development period as to any CBM field in the Enhong-Laochang project will begin after the approval of a development plan submitted by us with respect to that field by the State Council of the People's Republic of China and confirmed by CUCBM. Our agreement with CUCBM expires on January 1, 2033.
- 264,863 acres of property
- Estimated 5.3 trillion cu. ft. of original gas-in-place
- 50%-65% recovery possible
- 11-13 mineable coalbeds
- 55-62 feet thickness of coalbeds
- 60% interest for FEEC
