AAG Reaches Production Milestones at Panzhuang CBM Concession in Shanxi

AAG Energy Limited (AAG), a leading independent Coalbed Methane (CBM) producer in China, focusing on the development and value optimization of unconventional gas resources to supply energy to the Chinese economy, reported Monday that the gross daily CBM production from its Panzhuang concession exceeded 50 million cubic feet per day (MMcf/d) Dec. 24, 2014. The company is also pleased to announce that the average gross daily CBM production rate for the 49 horizontal wells currently in service in Panzhuang service, surpassed the rate of 1 MMcf/d per well per well Dec. 24, 2014. The 49 horizontal wells have been in production from between approximately 8 years to 1 year and have an average of 3.1 years in service as of Dec. 24, 2014.

The Panzhuang concession is the most developed CBM concession in China and remains the only Sino-foreign CBM Production Sharing Contract (PSC) to have obtained Overall Development Plan (ODP) approval from the NDRC to enter full-scale commercial development. This continued ramp-up in production will likely allow Panzhuang to reach its ODP-designed commercial capacity of 17.5 billion cubic feet (Bcf) in 2015, marking yet another significant milestone for CBM development in China.

“CBM resource potential of ~1,300 trillion cubic feet (Tcf) in China has attracted considerable global attention due to China’s significant demand for natural gas. AAG is a leader in CBM commercialization and to our knowledge this announcement today represents the first time an entire field of 49 horizontal CBM wells has reached a single well daily production average exceeding 1 MMcf/d per well. This is a milestone to celebrate and our highly skilled operations team continues to advance CBM development in China. Furthermore, together with our Chinese partner CUCBM, our sales team has secured off-take agreements through gas trunk pipelines and local LNG facilities allowing AAG to fully monetize these world-class CBM flow rates. In the face of falling global oil prices we continue to see a steady rise natural gas prices in China continue. This is due to China’s strong demand for natural gas, which is supported by the Chinese government as a way to increase natural gas usage in the primary energy mix and because of the environmentally friendly nature of CBM development,” said Steve Zou, founder, chairman, and CEO.

Carl Lakey, chief operating officer commented: “China is known globally for having impressive coal resources and AAG is fortunate to have some of these high quality coals within its Panzhuang concession. The coal at Panzhuang is proving to be very responsive to modern extraction techniques. In 2014, virtually all of  the production uplift at Panzhuang has been due to enhancements in surface gathering infrastructure improvements with existing wells.  Furthermore, the surface infrastructure enhancements are not yet fully completed, and will also include more new  horizontal wells in 2015, and beyond, which should allow Panzhuang to continue its steady production increase. I expect that AAG will continue to improve both field production rates and average gas rates per well as the Company moves forward from these noteworthy milestones”.


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