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Green Dragon Gas & CNPC Get Development Approval for Greka Chengzhuang CBM Block

Source: 9/15/2017, Location: Asia

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Green Dragon Gas, one of the largest independent companies involved in the production and sale of coal bed methane (CBM) gas in China, has announced that the China National Development and Reform Commission (NDRC) has approved a Project Code for the Overall Development Plan (ODP) on the Greka Chengzhuang Block (GCZ), confirming its final approval.

State approval of the project code means that the Company can commence the Block's ODP and further develop the acreage.

The Company has a 47% participating interest in the GCZ Block with its 53% partner,China National Petroleum Corporation (CNPC).

GCZ ODP highlights
• Contract area is 67 km˛ of which ODP covers an area of 33 km˛, with proved reserves of approximately 275 Bcf • As of date, 114 wells have been drilled on the acreage. The development plan is now being implemented by the joint management committee and includes the drilling of an additional 147 production wells to be drilled by yearend 2018. These wells will be targeting both coal seam #3 & coal seam #15

• Gross production capacity is estimated to be 6.36 Bcf per year
• The development cost for GCZ will be c.US$53.80 million over 2017 and 2018. CNPC will invest US$28.51 million according to its 53% participating interest and the Company US$25.28 million based on its 47% participating interest in the Block
• The Block is jointly operated by CNPC and the Company through a joint management team based in Jincheng, Shanxi

Furthermore, on 31 July 2017, the Company announced that NDRC has approved a Project Code for the Overall Development Plan (ODP) on the Greka Shizhuang South Zaoyuan portion of the Main Block (GSS), concluding that the ODP does not require an approval process and only needs to be registered. This results in the drilling of an additional 42 vertical wells and 47 LiFaBriC wells by 2020.

GCZ and GSS Blocks were both specifically mentioned within China's 13th Five-Year Plan as being critical to domestic production requirements.

Randeep S. Grewal, Founder and Chairman of Green Dragon Gas commented: 'We are pleased with the efficient approval procedure being implemented by the government under its new polices to stimulate new CBM developments.

The Project Code clears the last of the hurdles ahead of implementation of the ODP programme. The close cooperation between CNPC and the Company is well demonstrated by the continued timely progress of the GCZ ODP as we progress into the active development stage of the GCZ Block. This close cooperation has ensured monthly disbursements of profits between the partners from these sustainable operations. I look forward to updating the market as to its progress as we seek to increase production from this Block into 2018.'

About the Chengzhuang Block (GCZ Block)
The GCZ Block is located in the prolific Qinshui Basin with an area of 67 km˛, approx. 20 km south of the Greka Shizhuang South Main Block ('GSS Block'). Reservoir properties and geological settings are similar to those found in the GSS Block. There are two major laterally continuous shallow coal seams present throughout the GCZ Block, namely, coal seam #3 and #15. CBM in this area is imbedded in the coal formations at average depths, ranging from 300 m to 600 m. The Block has been in commercial production since 2010.

The Block is producing a stable cash flow, which is split in proportion to working interest between GDG (47%) and CNPC (53% - operator) since the completion of CNPC's cost recovery pool in August 2015.

As per the NSAI Reserve Report of 31 December 2016, GCZ Block has original gas in place of 275 Bcf. The Block has 14 Bcf in net 1P gas reserves, 29 Bcf in net 2P gas reserves and 51 Bcf in net 3P gas reserves with future NPV 10 of US$116 million in 1P, US$232 million in 2P and US$376 million in 3P.

* Exchange rate used in conversion of RMB-USD is 6.90.

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