Energy

TWE, PetroChina conduct CBM exploration

By Chen Jialu (China Daily)
Updated: 2010-10-26 13:40

TWE experts and PetroChina operation team meet at the site of Liuhuanggou project in Xinjiang. [Photo/China Daily]

URUMQI - In the isolated desert of southern Junggar Basin, a group of foreign energy investors gazed into an open seam containing coalbed methane (CBM), a form of unconventional natural gas these investment veterans now bet on.

The reserve, adjacent to the landmark " heart of Asia" - the geometrical center of Asian continent, covers an area of 653 square kilometers, and is said to hold an estimated 1.95 trillion cubic meters of CBM, the third largest deposit of its kind in China.

Up to 10 wells have been drilled in the region called Liuhuanggou, immediately outside Urumqi, capital of Northwest China's Xinjiang Uygur autonomous region.

The project is currently operated under a production sharing contract, between TerraWest Energy Corp and PetroChina.

The delegation, consisting of investment bankers with global leading financial institutions and energy analysts across the world, were shown to see two wells where test drilling began last month.

TerreWest (TWE) said they will initiate pilot production as early as next year, and commercial production will follow afterwards.

The methane drilled from the wells will be sold locally and and also transmitted into the West-East natural gas pipeline which stretches across the Liuhuanggou area.

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The coalbed methane pioneer and TWE's shareholder with controlling stake, Enviro Energy, said it believes Xinjiang's CBM exploration project is one of the most attractive in China, based on the company's evaluation of the region's high quality of coal resources and mature infrastructure, Enviro Energy Chairman Kenny W Chan told China Daily during the tour.

TWE holds the first and only fully approved CBM production sharing contract in Xinjiang to date.

Enviro Energy, initially listed on the growth enterprises market of the Hong Kong Stock Exchange, proposed a transfer to the mainboard of the stock exchange last month to improve its stock trading liquidity for capital raising, said a company statement.

Xinjiang is no stranger to energy euphoria. In 1950s, China's first oil field Kelamayi, a unit of PetroChina, was also found in this Junggar Basin.

Now it is learning to manage its latest windfall.

Xue Lie, an oil exploitation expert with PetroChina Xinjiang Oilfield Company Exploitation Institute, said oil specialists are working around the clock to dislodge gas at Liuhuanggou's first test drilling well.

Drilling sites are operated by Chinese service providers and overseen by Canadian and American CBM experts from TWE.