Sino Gas & Energy has provided an update on upcoming work programs on its Ordos Basin projects, located in central China. The Ordos Basin is the second largest onshore oil and gas producing basin in China.
A two well fraccing program is in the final stages of planning and expected to commence in May 2010, following signing of the program contract. The contract will have options for further wells to be fracced during 2010.
Sino Gas is pursuing a strategy in China to tap the burgeoning domestic demand for energy, particularly from a cleaner energy source. The Ordos basin in China is already a significant producer of gas, with significant established transport pipeline infrastructure and nearby domestic customers and population centers.
Sino Gas is currently undertaking a Rights Issue to raise up to $31.3 million, in part to fund the planned operations program and the development of the Company's gas reserve potential. The Company balance sheet will also be significantly strengthened by the elimination of all debt and available cash resources of $11.8 million, at the minimum raising, to pursue the upcoming testing and drilling program.
Fraccing, or fracture stimulation, is the process used to unlock the gas potential of unconventional gas sources, such as the tight gas sands present in the Ordos Basin. A variety of mechanical and hydraulic methods are used to fracture the host reservoir rock, stimulating the flow of gas. Unconventional gas production accounts for a substantial portion of the output from the Ordos basin.
Sino Gas Managing Director Stephen Lyons said that the Company had received extensive input and advice in to the fraccing program from leading international companies.
"We have received input to the program from leading international companies with expertise in this area, as well as the assistance of leading local Chinese contractors who have performed thousands of fraccing programs in the Ordos basin," said Lyons.
Well heads for the flow tests are expected to be installed in the next week, following final equipment inspections.
Sino Gas has extensive resources in the Ordos Basin, with 2.7 Tcf total Contingent and Prospective resource having been independently verified. Fraccing of existing wells will assist in the Company's goal to upgrade its resources to reserves and to move towards development.
"The fraccing program is an important step to unlocking the large potential value of our gas resources in the Ordos Basin," said Lyons.
"Unconventional gas is gaining an ever increasing share of global gas production and the potential demand from nearby domestic Chinese sources is readily apparent."
In addition to the fraccing program, locations for new wells are in the process of being determined. These wells will be placed nearby to existing wells, in order to maximize potential reserves.
A program for up to 5 new wells and a number of associated fraccing programs is in the final stages of completion.
Site visits have been undertaken to determine appropriate drilling locations and tenders will be issued to local contractors in the short term, with assistance from the Company's Chinese government partner.
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