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30 October 2007 - China United Coalbed Methane Co., Ltd. (CUCBM) and Pacific Asia Petroleum, Inc. (PAP) have agreed a deal for the exploitation of coalbed methane (CBM) resources in the Zijinshan block, which is located in the Shanxi Province in China.
The Zijinshan block covers an area of approximately 708 square kilometres and is located in the prospective Ordos Basin in the Shanxi Province. According to a study by China Petroleum & Chemical Corporation (SINOPEC), the Ordos Basin is the second largest petroleum-bearing basin in China and one of the most prolific gas reserve areas in China.
To the immediate west of the Zijinshan block are discovered gas fields estimated by CUCBM to contain gas resources of approximately 50 trillion cubic feet of gas (50 TCF). Based on seismic studies and drilling previously done on the Zijinshan block, it is estimated by CUCBM that the Zijinshan block has potential gross gas resources in excess of 3.8 TCF.
The Zijinshan block is also in close proximity to the major West-East gas pipeline, which links the gas reserves in China's western provinces to the markets of the Yangtze River Delta, including Shanghai.
Under the deal, Pacific Asia Petroleum, Ltd. is obligated to drill three exploration wells and four (4) pilot development wells during the next five years. During the development period, CUCBM will have the right to acquire a 40 per cent participating interest and work jointly to develop and produce CBM. The deal covers a 30-year relationship.
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