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Sino Oil and Gas Holdings Ltd. is preparing for coalbed methane (CBM) commercial production and piped sales in the second half of 2012 to drive revenue growth, a company news release stated.
Through its wholly-owned subsidiary Orion Energy International Inc., the group has entered a production-sharing contract (PSC) with its partner in the PRC, China National Petroleum Corp. (PetroChina), covering exploration, exploitation, and production at a CBM field in the Sanjiao block located in Shanxi and Shaanxi provinces. The group owns a 70% interest in the PSC.
The formulation of the overall development program of the Sanjiao CBM project was completed and submitted to the National Energy Administration (NEA) of the National Development and Reform Commission in May 2012. On Aug. 16, a letter of reply was received from NEA, giving consent on the work for the development of the methane reserve in the Sanjiao region. The granting of the reply letter represents NEA’s official acceptance of the application to have the Sanjiao CBM project proceeding from exploration to production phase.
Currently, the Sanjiao block has a total of nine vertical and directional wells, and 36 sets of multi-lateral horizontal wells, and is equipped with a compressed natural gas (CNG) head station with daily compression capacity of 150,000 cu m, a ground pipeline network of approximately 7 km (4 miles), inter-well pipelines of approximately 12 km (7 miles), and outbound pipelines of approximately 7 km (4 miles), the company said.
There is also a completed grid system of approximately 8.5 km (5 miles) exclusive for Sanjiao block. The drilling of 21 vertical and directional wells and multi-lateral horizontal wells are due for completion soon.
Designated pipelines are under construction to connect the Sanjiao block to the local natural gas pipeline network in Shanxi Province for industrial CBM users. A total of 25 wells within the Sanjiao block have already been connected to the pipeline network, which is expected to be commissioned in the 4Q of this year, initiating the group’s piped CBM sales.