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Far East Energy Corp.’s modification agreement, extending the exploration period of its production sharing contract for the Enhong and Laochang area in the Yunnan province, China, has received formal approval from the Ministry of Commerce of the People's Republic of China.
Under the terms of the modification agreement between Far East Energy and China United Coalbed Methane Corp., Far East Energy will relinquish the Enhong block while retaining the right to continue to explore approximately 483 sq km of the Laochang block, which it considers to hold much greater potential. Far East Energy has drilled eleven wells in the Laochang block, compared to only three in the Enhong block, and large portions of Enhong were considered to be marginal or non-prospective.
The extension moves the end of the exploration period to Dec. 31, 2013.
Michael R. McElwrath, Far East Energy’s chief executive officer and president, said, "We are delighted to have received news of approval of the modification agreement covering our coalbed methane (CBM) project in Yunnan. We now look forward to approval of the modification agreement covering our important Shouyang production sharing contract in the Shanxi province.”
McElwrath had previously stated, "This is an excellent resolution for Yunnan. For the past several years, as we focused our attention on validating Shouyang as the premier, or one of the premier CBM Blocks in China, due to its uniquely high permeability and pipeline access, we have endeavored to determine the value potential of our Yunnan blocks. After reviewing the results of the three exploration wells in the Enhong block and eleven in the Laochang block, as well as considering the very difficult topography in Enhong, we have concluded that the Laochang block has superior potential, and have elected to focus all Yunnan activities there."