Australia's Arrow Energy, PetroChina sign intent on Xinjiang coal project

Australia's Arrow Energy N.L. said it has signed a letter of intent with China's largest oil and gas producer, PetroChina Co Ltd ( HK 0857), to seek an alliance on a coal bed methane (CBM) project in northwestern China's Xinjiang region.

Under the letter of intent, the two parties will negotiate a production sharing contract covering natural gas, including CBM in Xinjiang, the company said.

The CBM site is part of the Dajing Block in the Junggar basin of the Xinjiang region, it said.

The Dajing Block contains substantial coal resources estimated at over 250 bln tons, with seams of up to 70 meters thick.

Preliminary data indicated that the rank of the coal is ideal for CBM development, Arrow Energy said.

Based on preliminary geological data, the gas in-place exploration target could be as much as 35 trln cubic feet, the company said.

'This is a very important step forward in Arrow's China strategy. We have carefully selected an area that we consider to be very prospective for CBM that is close to strong local markets, including the provincial capital of Urumqi a city of over 4 mln people, and within 70 km of the East-West pipeline.' Nick Davies, Arrow's chief executive officer, said in the statement.

Following completion of the negotiations on a production sharing contract, Arrow plans to drill up to 20 exploration wells over the following eighteen months to define the reservoir extent and refine the gas in-place estimates, the statement added.