Many observers look at the Chinese market and see potential. They look, however, with a scale reminiscent of current western perception of market size and potential. As that observer looks toward China for market potential, it means rethinking common doctrine about scale and return. In this regard, thinking about anything China means multiplying by 25 anything one might consider. The country is big, the regions are big, the population is big and the potential profits are big when dealing on a big scale.
Far East Energy Corp., a US based coalbed methane exploration/development company, works primarily in China to develop coalbed methane for the Chinese market. Through its primary agreements with ConocoPhillips and China United Coalbed Methane Company Ltd. the company has exploration rights to vast tracks of undeveloped coalbed methane land that have been the subject of study for some time. Full negotiating authorization has been granted to China United to make all decisions going forward with the company as they relate to Chinese policy.
The coalbed methane development market in China is a game of numbers in just about any sense. Its two primary parcels in the South of China are comprised of approximately 2.65 million acres with more development drill holes (1,561) then might be necessary to indicate probable reserves completed. The company originally negotiated a 60%-40% agreement with its Chinese partner but has since seen its end of that bargain take several different turns as development and contract agreements with Phillips- China began. Untangling the percentages might take a bit of doing but the estimated in-place reserves of 23.5 Trillion Cubic feet (Tcf) is a nice profitable reward for the effort – it should be pointed out that these 23.5 Tcf are in-place and that a 50% recovery figure is more representative of actual profit potential.
China has definitive plans for the use of its coalbed methane reserves in its overall energy strategy. Coalbed methane is a clean fuel with distinct environmental benefits – even over that of the environmental benefits of natural gas. Bringing the gas to market is the current issue facing all parties involved. Far East Energy may currently be considered as an exploration and development company but it is surely one that has a solid up-side potential with known coalbed methane reserves ready for the taking. Profit is available; all the company needs to do with its partners is get the product to market so it can profit by it.
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