The Shanxi project in full development could sustain an estimated
3,000 horizontal gas wells, giving it the potential to become
one of the largest CBM projects in the world.
FAR EAST ENERGY’S PROJECTS
Through its coalbed methane (CBM) projects in China, Far East Energy
can exploit total gas-in-place estimated to be 18.3 to 24.9 trillion
cubic feet (Tcf). By using an internal estimated recovery rate of
50%, recoverable CBM resources are potentially 9.2 Tcf to 12.5 Tcf
(FEEC’s share is 4.8 Tcf to 6.9 Tcf depending upon CUCBM and
Far East’s partners are ConocoPhillips and China United Coalbed
Methane Company (China United). China United is China’s leading
coalbed methane company.
FEEC properties are world class in size and potential.
The Far East projects potentially contain recoverable CBM resources
of 9.20 Tcf to 12.5 Tcf.
• Shanxi 6.55 – 9.8 TCF of recoverable CBM resources
• Enhong 1.10 TCF of recoverable CBM resources
• Laochang 1.55 TCF of recoverable CBM resources
ConocoPhillips has extensive and encouraging information on the
Shanxi project. Enhong and Laochang, Far East Energy’s other
CBM projects have had extensive coal exploration with drill holes
mapping out two world-class CBM prospects. Between these two projects,
1,561 drill holes have been completed, 30 technical reports written,
21 core analyses completed and over 300 other reports on gas concentrations.
The bottom line from a technical and economic viewpoint on these
three properties is very encouraging:
Shanxi Project – Far East partnering
with ConocoPhillips and China United
• Approximately 20 billion tons of coal reserves
• Estimated 13.1 to 19.6 trillion cu. ft. of total gas-in-place,
with potentially 6.55 to 9.8 Tcf of recoverable CBM resources
• 50%-65% recovery possible
• 60 feet of total coalbed thickness
• Four seams average 9 feet thick each
• 40% - 70% interest potential for FEEC
Internal ConocoPhillips documents state the "coal was well
cleated and coal samples have high gas contents."
The Shanxi project in full development could sustain an estimated 3000
horizontal gas wells. It could be one of the largest CBM projects
in the world.
Far East could be a 66.5% owner of this project if ConocoPhillips decides to participate only on an overriding royalty basis. Far East would retain a 40% interest
elects to participate, but would only have to put up 40% of the development costs.
Core recovery tests by ConocoPhillips indicate high levels of cleating
(a very good sign) and friability (brittle and fragmented coal)
and the tests also show good gas content.
Enhong & Laochang – Far East partnering
with China United
264,863 acres of property
• Estimated 5.3 trillion cu. ft. of total gas-in-place with
potentially 2.65 Tcf of recoverable CBM resources
• 50%-65% recovery possible
• 11-13 mineable coal beds
• 55-62 feet thickness of coal beds
• 60% interest for FEEC
If all goes well, Far East could place hundreds of
horizontal gas wells on each of the two blocks. Tests show the amount
of gas per ton of coal is 200-500 cu. ft.
Far East Energy’s projects appear to have excellent potential
if the permeability is favorable. The Far East technical team feels
relatively confident that this will be the case considering the
extensive information already available regarding the fracturing
and cleat system of the coal beds. Also, with over 80%
of Far East’s coal seams less than 1,500 meters from surface,
well completion costs should be reasonable.
World Class CBM Basins and Far East Energy
Comparing Far East Energy’s projects to some of the major
CBM producing areas in the U.S. shows favorable economic potential
of Far East’s projects based on gas content per ton and size.
The Yunnan Coal Geological Bureau and ConocoPhillips have accumulated
substantial data addressing three of the four most important factors
for successful CBM production in the Far East projects: size of
the coal deposit, gas content and thickness of the coal seams are
all favorable. For the fourth factor, permeability, the technical information and preliminary tests are uncertain but appear to be somewhat tight.
Far East plans to use horizontal drilling technology ("HDT")
to enhance the value of its properties in China. HDT has been shown
to have a positive impact on CBM development in the United States, particularly in Arkoma and Appalachia.
The advantages of HDT are in the ability to stay in the desired
zone, control over the direction of the wellbore, limited fluid
invasion in the formation, less surface facilities, well productivity
exceeding that of vertical well capacity, ability to add additional
zones with confidence and less formation damage due to less pressure
drop. Although the cost of a horizontal well is expected to exceed
the cost of a vertical well, Far East believes that the overall
benefits are worth the higher cost per well.