Dart Energy (ASX: DTE) has signed agreements to establish 4 coal seam gas and 1 shale gas production sharing contracts in China, a major expansion of its business in the country.
It said some of these potential new licences could hold multiple trillion cubic feet of gas resources while the shale gas play would make it one of the first foreign companies in the sector.
Under the letter of intent with Henan CBM (HCBM) and Hong Kong Prosperous Clean Energy Company (HPEC), the three companies will negotiate exclusively, and seek relevant Government approvals for PSCs covering assets held by Henan.
These consist of the 4 CSG blocks covering 2000 square kilometres in Henan Province and the 2038 square kilometre shale block in Sichuan Province that was awarded to HCBM in the first shale gas open-bidding round in China, which was open only to domestic companies.
Dart will immediately start a technical evaluation of the various areas, and associated due diligence.
Once this is completed to Dart’s satisfaction, the parties will negotiate exclusively and seek to agree foreign cooperation PSCs in respect of any one or more areas within six months.
Work program commitments will be negotiated and set out in the PSCs.
The parties intend for the PSCs to be approved in 4Q 2012, allowing exploration to start before the end of this year.
Separately, Dart has reached a Memorandum of Understanding with HPEC that sets out key commercial terms for a 80/20 joint venture that will hold the foreign equity interest in the PSCs and set up a separate consortium to build, own and operate associated downstream assets.
The agreements are in line with Dart’s plan to acquire 3-5 new licences this year and entering into shale gas plays with a low-entry cost.
HCBM is a Chinese state-owned enterprise and one of only four companies approved to enter into foreign cooperation PSCs for coal seam gas in China (the others being PetroChina, China United Coal Bed Methane, and Sinopec).
HPEC is a substantial privately-owned company which primarily focuses on clean energy in Henan Province, including operation of liquefied petroleum gas and compressed natural gas stations and other natural gas facilities.
Source:proactiveinvestors