Far East Energy Corporation has commenced the drilling of its HZ08V well, in its Shouyang Block in Shanxi Province, China. Like its predecessors, this well will be completed in the Number 15 coal seam, and it will be the fifth vertical well to be stimulated by cavitating the targeted coal seam with air. All wells drilled have revealed strong gas content and high permeability.
Accelerated Drilling Program: Based upon these results, Far East has determined to enter into a contract with Beijing China Coal Dadi Technology Development Company (Dadi) to drill an additional seven (7) wells in a pattern that represents an orderly progression of the field in a westerly direction. Far East will contract for a second drilling rig from Dadi so that it can drill two wells in this pattern simultaneously.
"While the ramp-up of production to commercial gas volumes is taking longer than expected (production for the past ninety days has ranged from approximately 30 to 100 mcf per day), our data indicates we have made significant progress toward the level of critical desorption pressure. Therefore, we are accelerating the pace of drilling, and that should hasten the onset of significant gas production while beginning the westward expansion of our field,” said Michael R. McElwrath, CEO and President of Far East.
Given the high permeability of the coal in this area of the Shouyang Block, the Company believes that vertical wells have the potential to be a very cost-effective approach to development of this field. The new wells may form the foundation for a Pilot Development Work Program (“PDWP”), which is the first official step in the development program for the Block under the terms of the Company’s Production Sharing Contract. Far East intends to complete most of these wells via air-based cavitation, but intends to stimulate at least two of these wells with a water-based fracture treatment. The expected drilling cost of the seven wells is approximately $2.5 million, reflecting a positive trend of lower costs per well.
Exploration Wells in New Areas: In addition, Far East confirmed plans to drill five exploratory wells at four to six kilometer intervals across the northern section of the Shouyang Block to expand its database of geologic information about the multiple prospective coal seams on the block. Each of these wells will be cored and production tested, with the goal to identify additional acreage that is prospective for subsequent pattern drilling programs.
“We are very hopeful that some or all of these exploratory wells will reveal high gas content associated with high permeability, similar to that discovered in the area of our current wells,” said McElwrath. “If so, we may have a field of very significant size.”
