Sino Gas & Energy Holdings Provides Update on Linxing Production Sharing Contract

Sino Gas & Energy Holdings Limited announced its Joint Venture company, Sino Gas & Energy Limited, has entered into the 11th Modification Agreement with State Owned Enterprise partner China United Coalbed Methane to modify the terms of the Linxing Production Sharing Contract following confidential commercial discussions referenced in its 29 March 2018 announcement.

The modifications to the PSC include:

  1. A reduction in SGE’s natural gas participating interest from 70% to 49% (prior to the impact of the Linxing Option) to satisfy CUCBM’s stated internal requirements.
  2. An 8-year extension of the natural gas PSC to 31 August 2036; and
  3. Relinquishment of ~1,000 km2 of Linxing East exploration acreage and extension of the exploration period to 31 August 2019.

Natural Gas Interest Reduction and Contract Extension

The reduction in participating interest from 70% to 49% was required to enable CUCBM to comply with its stated internal policy of generally holding a 51% participating interest in natural gas PSCs. In return, CUCBM has agreed to an 8-year extension of the PSC.

In the event of future Linxing coalbed methane developments, the CBM participating interests remain at 70% for SGE and 30% for CUCBM, with a PSC expiry date of 31 August 2028. SGE does not currently have any CBM development projects that are considered material.

Exploration Extension and Acreage Relinquishment

The exploration period under the Linxing PSC has been extended to 31 August 2019 and as is customary for exploration extensions, ~1,000 km2 of Linxing East exploration acreage has been relinquished. The Linxing PSC now comprises 877 km2 , including 722 km2 in Linxing West and Linxing East and 155 km2 of prospective CBM acreage in Linxing East.

The Development Plan Sino Gas announced on 30 October 2017 is impacted by a reduction of ~100 km2 of the development area in Phase 1 and ~200 km2 of prospective acreage in Phase 2. As a result, the expected number of wells to be drilled in Phase 1 has been decreased by ~200 wells to a total of ~1,400 wells, resulting in a reduction of currently targeted Phase 1 plateau production from ~350 – 550 Million standard cubic feet per day (“MMscf/d”) to ~325 – 475 MMscf/d. Also, targeted Phase 2 plateau production has been decreased from up to ~750 MMscf/d to up to ~600 MMscf/d. The expected plateau production period remains unchanged at approximately six years and production from Linxing is extended for eight years as a result of the PSC extension.


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