China: Sino Gas Reports Strong Initial Gas Flow on TB06 Gas Discovery Well

Sino Gas and Energy Holdings Limited continues to make progress towards development of its substantial gas resources in China.

 Commenting on the pace of progress, Sino Gas’s Managing Director, Stephen Lyons noted that:

 “On its seismic program, Sino Gas has shot ~ 245 km’s of seismic lines passing 60% of the total and is on track to complete the program by the end of August 2011. The data collected in the seismic program is expected to lead to the definition of well locations for drilling later in the year and assist in evaluating the potential for high impact horizontal wells during the development phase.

Similarly building on the success of its TB07 well (gas flow rate of 2,900,000 scf/day) during 2010, Sino Gas has so far achieved a significant commercial well rate on its TB09 well (gas flow rate of 1,150,500 scf/day), and commercial well rates on the TB03 well (gas flow rate of 326,500 scf/day) and the TB08 well (gas flow rate of 300,000 scf/day @ 140psi THP). A strong initial gas flow and has also been achieved on its TB06 gas discovery well”, said Mr Lyons.

Sino Gas also continues to strengthen the organisation as it moves towards development, and is pleased to advise that it has appointed Mr Colin Heseltine as a Strategic Consultant to the Board.

Colin has a 40 year career with distinguished service as Australian Ambassador to the Republic of Korea from 2001 to 2005, director of the Australian Commerce and Industry Office in Taiwan from 1992 to 1997 and two extensive periods, between 1982 and 1992, as Deputy Head of Mission at the Australian Embassy in Beijing.

His many senior positions include heading the Asia Pacific Economic Cooperation (APEC) Secretariat in Singapore during Australia’s host APEC year in 2007.

Mr Heseltine will assist the Company at Board level as it moves towards ODP approvals.

In a move that further underwrites Sino Gas’s intention to move towards development of its substantial gas assets, China is in the process of finalizing its 12th 5-year plans for the development of the Coal Bed Methane industry which is expected to call for a doubling of coal bed methane output by 2015.

In addition, media statements from senior industry sources indicate that China is planning to double the subsidy for coal bed methane gas prices which would have the effect of increasing well head prices by ~ 15% (an increase of ~US$0.90 M/scf).

Seismic Program on Track

Sino Gas is currently undertaking an extensive seismic acquisition program on its Sanjiaobei PSC which, in a success case, is expected to expand Sino Gas’s potential reserve area from the current 70km2 to more than 400km2.

As of 08:00 hours, Thursday, 21 July 2011, BGP Seismic Corporation Company, Sino Gas’s seismic contractor, has completed ~ 60% of the work program with 245 km of seismic lines having been recorded.

Strong initial gas flow on TB06 Gas Discovery Well

Sino Gas’s testing contractor CCDC Changqing Downhole Service Company (CCDC) has completed the perforation of an upper gas pay zone, one of seven (7) potential pay zones identified within the TB06 well.

Following the perforation, the well flowed back quickly and achieved a flow rate estimated by site personnel at around 1 million scf/day under 200psi tubing head pressure.

However, following this strong response an increasing amount of water was observed and this eventually extinguished the flare.

Sino Gas’s initial evaluation is that a poor cement bond around the well casing has allowed water from an upper zone to enter the target pay zone.

Commenting on the TB06 test, Sino Gas Managing Director, Stephen Lyons, said that whilst it is disappointing that the test has not been completed as intended, the strong gas response has confirmed Sino Gas’s initial interpretation of the pay zone.

“TB06 is also ~ 20 km’s North of the TB07/TB09 well locations where substantial commercial gas flow rates have been achieved. To have established that there appears to be similar ‘high potential’ pay zones significantly North of TB07/TB09 is potentially very exciting,” said Mr Lyons.

Various attempts have been made to complete the test and other options are under review including a well work over in future operations .

Sino Gas is also currently evaluating locations for additional wells on the Linxing PSC and given the significance of the test may locate one of these wells in close proximity to TB06.

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Source:Sino Gas , July 22, 2011;