Leyshon Starts Drilling for Gas in Ordos Basin, China

Leyshon Resources announced that the recently appointed management team at Pacific Asia Petroleum Limited (PAPL), which Leyshon acquired in July, has commenced drilling at the 708 km2 Zijinshan block located on the Eastern flank of the prolific Ordos Basin, China’s second largest and one of the world’s major gas producing basins.

The new management team, which successfully drilled and appraised the recent multi-Tcf gas discoveries on the adjacent Sanjiaobei and Linxing blocks, has designed an initial three well programme to test for gas in similar formations over a 600 metre interval to a depth of approximately 2.4 kilometres.

The first two wells are expected to be completed by the end of November with completion of the third expected early in the new year. The total cost for drilling, logging, casing, fracking and flow testing the three wells is estimated at around US$ 5 million.

The wells are located within 10 kilometres of a tie in point on the Lin-Lin pipeline which supplies the growing demand in Shanxi Province where well head contracts have recently been struck in the US$ 6 – 7.5 per mscf range.

PAPL has a 100% interest in the exploration phase of the Production Sharing Contract (PSC) with PetroChina, which has the right to buy back a 40% interest at the development stage.

The Company has A$ 47.8 million in cash (approximately A$ 19 cents per share and 12 pence per share) and has extended and expanded the on-market share buy-back up to 24 million fully paid ordinary shares in the Company over the next twelve months.

Managing Director Paul Atherley Commented: “The Ordos Basin is the beating heart of Central China, the world’s fastest growing major economy and is one of the best places in the world to be exploring for gas right now. It’s a major gas basin which has seen some spectacular recent discoveries. Any commercial gas discovery at Zijinshan will be hooked into one of the nearby pipelines and sold into one of the world’s fastest growing markets for gas.”

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LNG World News Staff, October 04, 2012; Image: IHS