Far East moves forward on massive Chinese CBM project

Far East Energy Corp is moving ahead with the development of the 1,058,000-acre Dragon Project after meeting a US$1 million payment as part of its farmin agreement with ConocoPhillips.

The Houston-based firm can now begin conducting an evaluation and work program to test two existing wells on the project, which has the potential to be China’s largest CBM project.

In a statement Far East Chairman and CEO Mike McElwrath said, “This will be another key development as Far East moves toward its goal of becoming a key player in the development of coalbed methane in China. We are anxious to start testing these wells in the Dragon Project in order to confirm the initial data collected by ConocoPhillips, which is very positive.”

Should the two-well program prove successful, Far East may drill and test China’s first horizontal drilling well for CBM production to satisfy contractual requirements. However, the company has to post another surety bond/guarantee of US$900,000 before it can proceed with the drilling.

McElwrath is unfazed by the surety and believes horizontal drilling will prove to be a revelation in China. According to McElwrath, “Horizontal drilling technology has yielded impressive results in coalbed methane applications in the United States. Far East Energy plans to leverage that technology for the benefit of coalbed methane production in China.”

Far East Energy’s final working interest in the project can vary from 40% to 100%, depending upon how China’s CUCBM and ConocoPhillips choose to take their participating interest in the project.