Further to our May 30, 2008 news release, Petromin Resources Ltd. (PTR) is pleased to announce that TerraWest Energy Corp. (TWE) - a private company in which PTR is a major shareholder - has now finalized contractual arrangements for Xinjiang Geologic Engineering Co. Ltd. to commence immediately the drilling of up to two wide diameter wells (1500m and 800m) this October 2008 on TWE's 655 sq km (253 square miles) Production Sharing Contract (PSC) acreage in Liuhuanggou area of Xinjiang province, P.R. China.
Subject to availability, two separate rigs are to be used over the anticipated 45-day drilling program.
The 1500m well (08-03) offsets a TWE 2006 coal coring drillhole and gas desorption location (06-01) completed in 2006 which encountered approximately 30 plus meters of Jurassic aged (Xishanyao or J2x formation) coal with gas content of up to 100 cu.ft / ton at a depth of approximately 450m.
This 1500m well is designed to also test for a deeper second Jurassic aged (Badaowan or J1b formation) coal at approximately 1100m and test various sandstones for gas potential along the way. The hole will be logged and the well is expected to be cased to 1500m with coring of the deeper coal and later production testing of the various zones of interest including well stimulation with a frac anticipated in the upper coal.
The 800m well (08-01) offsets another TWE coal coring drillhole and gas desorption location (06-03) and is designed to be drilled and cased to the top of the J2x coal and then to run open hole permeability and production flow tests of the 40m plus J2x coal seams.
TWE is also negotiating for a third well anticipated to be drilled this fall which would be a step out location (08-02) to the northeast for further drillhole coring and gas desorption testing thus expanding the potential resource area of the J2x coal and if successful follow up with another offsetting production test well.
The TWE PSC is located on the southern margin of the Junggar sedimentary basin, which is a productive petroleum and natural gas region considered highly prospective for CBM based on the extensive coal resources. There are a number of active coal mines in the southern sector of the Junggar basin and new CBM exploration projects have been recently announced. There is an existing natural gas pipeline infrastructure adjacent to the TWE PSC project area that carries conventional natural gas produced in the Junggar Basin to the nearby provincial capital city of Urumqi and links the area to the major trans-national West-East pipeline. Urumqi, a city of over 2mm people, is located adjacent to the PSC project area and is an emerging natural gas market in its own right. The Junggar Basin is targeted for further oil and natural gas pipeline development. The preliminary estimate of CBM potential for the whole Junggar Basin, as reported by China United Coalbed Methane Corporation (CUCBM), is 69 Tcf (i.e. approximately 2 Trillion cubic meters).
TWE holds 47% of the PSC signed between TWE and CUCBM in December, 2005 which is one of the CBM production sharing contracts in the P.R. China with a foreign party on an area leased by PetroChina. TWE is operator. Three drillholes were previously drilled in the acreage and intersected coal seams with an aggregate thickness of over 40 meters. Gas desorption from the drill holes indicated a gas content of 65-100 Scf/ton. Preliminary calculations indicated more than 8 Bcf per square mile (section) of gas potential in the areas where the intersected coal seams are well developed. As indicated, this gas potential does not include the deeper Badaowan (J1b) formation coal seams.
To encourage the development and production of domestic CBM, the Chinese Government has: (1) waived value-added tax on CBM gas production, (2) given CBM gas priority over conventional gas for pipeline access; and (3) granted a price subsidy for CBM gas sales (approximately $1.00 US per Mcf). -- www.cnxmarketlink.com
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