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Controversy surrounds coalbed methane contract in China

World Coal,

Controversy has flared up around a coalbed methane (CBM) production sharing contract (PSC) between TerraWest Energy Corp. and China National Petroleum Corp (CNPC)

TerraWest Energy has declared a dispute with CNPC in relation to its Liuhuanggou CBM PSC in China. The company has cited breaches of the PSC on behalf of CNPC, including the breakdown in the relationship between the two companies, as well as the reduction of the CBM exploration area as previously reported and the scale of ongoing coal mining activities. TerraWest also claim the CBM project is no longer financially or operationally viable.

TerraWest holds a 47% interest in as in the operator of the first and currently the only foreign-operated CBM PSC in the Junggar Basin of Xinjiang, China.

TWE pioneered CBM operations in the Xinjiang region of China and since the PSC came into force in 2006, the project has reported independently evaluated discovered CBM resources and natural gas resources in-place. To date, these are the only independently evaluated CBM resources (including substantial natural gas in other rocks) reported in the Junggar Basin. These reported results, estimated based on drilling results according to international resource-reporting standards, reflect the substantial resource value for both TWE and CNPC, in-place within the total PSC area.

The CBM PSC at Liuhuanggou covered an area of 653.718 km2. However, TeraWest has now taken actions to terminate the PSC, potentially bringing an end to any potential CBM project in the area. 

Edited from various sources by Sam Dodson

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