Far East Energy Reports 7 Tcf of CBM Gas in Shouyang Block

Shouyang Block
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Far East Energy reported the results of an independent engineering report prepared by Netherland, Sewell & Associates estimating the total coalbed methane Original Gas-in-Place (OGIP) in Far East Energy's Shouyang Block situated in Shanxi Province, China.

The report covers three target coal seams (the Nos. 3, 9 and 15) and concludes with a best estimate of Original Gas-in-Place of 7.0 trillion cubic feet (Tcf) of coalbed methane (CBM) gas and a high estimate of 8.5 Tcf covering the 487,000 acres under the company's Shouyang Production Sharing Contract (PSC). This is the first time the entire Shouyang Block has been assessed by a third-party engineering firm.

"We are pleased to receive this report on Original Gas-in-Place for the Shouyang PSC," said Michael R. McElwrath, CEO and President of Far East Energy. "This report is a clear indicator of increased potential of the Shouyang Block, and we are excited about the results. As previously announced, this NSAI Original Gas-in-Place report will be followed, subsequent to year-end, by a report covering SEC reserves in the Shouyang Block calculated as of December 31, 2010, and gas sales are expected to begin at that time, as we continue to tick off milestones. All of this comes at a time when, based on current exchange rates, the pricing of our natural gas in China is approximately $6.00 to $6.45 per Mcf, which includes enacted and announced government subsidies and compares quite favorably to the November 3 Henry Hub US natural gas price of $3.35 per Mcf."

Far East Energy previously received data in 2003 from ConocoPhillips for the northern 204,000 acres of the Shouyang Block estimating Original Gas-in-Place at a low of 3.9 Tcf, a median of 4.8 Tcf, and a high of 6.1 Tcf. The current NSAI report estimates OGIP at a low of 5.4 Tcf, a best estimate of 7.0 Tcf and a high of 8.5 Tcf


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