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Production milestone at Chinese coalbed methane concession

World Coal,

AAG Energy Ltd (AAG) is a leading independent coalbed methane (CBM) producer in China, focusing on the development and value optimisation of unconventional gas resources to supply clean energy to the Chinese economy. The company has recently announced that the gross daily CBM production from its Panzhuang concession exceeded 50 million ft3/d on 24 December 2014. The company is also pleased to announce that the average gross daily CBM production rate for the 49 horizontal wells currently in service in Panzhuang, surpassed the rate of 1 million ft3/d per well. These 49 horizontal wells have been in production from between approximately 8 years to 1 year and have an average of 3.1 years in service.

The Panzhuang concession is the most developed CBM concession in China and remains the only Sino-foreign CBM production sharing contract (PSC) to have obtained overall development plan (ODP) approval from the NDRC to enter full-scale commercial development. This continued ramp-up in production will likely allow Panzhuang to reach its ODP-designed commercial capacity of 17.5 billion ft3 in 2015, marking another significant milestone for CBM development in China.

“CBM resource potential of ~1,300 trillion ft3 (Tcf) in China has attracted considerable global attention due to China’s significant demand for natural gas,” said Steve Zou, Founder Chairman and CEO of AAG. “AAG is a leader in CBM commercialisation and, to our knowledge, this announcement today represents the first time an entire field of 49 horizontal CBM wells has reached a single well daily production average exceeding 1 million ft3/day per well.”

“This is a milestone to celebrate and our highly skilled operations team continues to advance CBM development in China,” Zou continued. “Furthermore, together with our Chinese partner CUCBM, our sales team has secured off-take agreements through gas trunk pipelines and local LNG facilities, allowing AAG to fully monetise these world-class CBM flow rates.”

“In the face of falling global oil prices, we continue to see a steady rise natural gas prices in China continue. This is due to China’s strong demand for natural gas, which is supported by the Chinese government as a way to increase natural gas usage in the primary energy mix and because of the environmentally friendly nature of CBM development,” Zou added.

Carl Lakey, COO, commented: “China is known globally for having impressive coal resources and AAG is fortunate to have some of these high quality coals within its Panzhuang concession. The coal at Panzhuang is proving to be very responsive to modern extraction techniques. In 2014, virtually all of the production uplift at Panzhuang has been due to enhancements in surface gathering infrastructure improvements with existing wells. Furthermore, the surface infrastructure enhancements are not yet fully completed, and will also include more new horizontal wells in 2015 and beyond, which should allow Panzhuang to continue its steady production increase. I expect that AAG will continue to improve both field production rates and average gas rates per well as the company moves forward from these noteworthy milestones.”

Alongside the Panzhuang concession, AAG is also focusing on the Mabi concession. Both are located in China’s coal-rich Shanxi Province in the Qinshui Basin, currently the most established area for China’s CBM activities. 

Adapted from press release by Sam Dodson

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