Dart Energy increases interest in Liulin CBM PSC in China
Dart Energy has exercised its option to increase its equity stake in Fortune Liulin Gas from 45% to 50%. FLG is the operator of the Liulin CBM PSC in China
Dart Energy has exercised its option to increase its equity stake in Fortune Liulin Gas from 45% to 50%. FLG is the operator of the Liulin CBM PSC in China, and has a 50% equity stake in that project, with China United Coal Bed Methane holding the remainder. Dart's partner in FLG is Fortune Oil, a UK listed company with extensive upstream and mid stream oil and gas operations in China. CUCBM is jointly owned by CNOOC and China Coal, two large Chinese state-owned enterprises.
Dart Energy's involvement with the Liulin project began in December 2009 when Arrow Energy International acquired a 35% stake in FLG with the option to increase to 45% prior to 31 December 2010, and to 50% prior to 31 December 2011. Ultimately Dart has the ability to increase its shareholding to 75% of FLG by 30 June 2013.
The Liulin CBM project is one of the most advanced CBM projects in China with 86 BCF of certified 3P reserves and has been designated a State Special Pilot Project by the Chinese authorities. During 2011 FLG drilled four vertical pilot wells and completed three multilateral horizontal wells. Each of these wells is in the commissioning phase with initial gas production results expected in 1Q 2012.
The Liulin joint venture also has a Gas Sales Agreement in place and as such the initial production from the existing wells can be converted to sales during 2012. The project partners are currently working on an Overall Development Plan, which will be lodged during 1H 2012, enabling the project to move toward full commercial development from 2013.
In order to exercise the option, Dart has paid into FLG US$4m and Dart has been issued additional shares in FLG such that Dart's shareholding in FLG has been increased from 45% to 50%. The increased shareholding will trigger a number of changes to the working arrangements between Dart and Fortune in relation to FLG, designed to allow Dart to have greater oversight of the joint company. This includes additional board representation and ability to select key management personnel of the operating company. All funds paid into FLG by Dart will be used to fund the ongoing work program on Liulin during 2012.
Nick Davies, Dart Executive Chairman said: 'The Liulin project continues to move forward according to plan, and we have therefore exercised our second option to increase our stake to 50% in FLG and 25% in the underlying project. Liulin is our flagship project in China and offers us and our partners, over the next 12 months, the prospect of additional reserve certifications, first gas sales, and an ODP application leading to larger scale development and increased commercial sales in 2013 and beyond. We continue to enjoy a strong cooperative working relationship with our partners at both CUCBM and Fortune, and we are all united by a joint objective of achieving technical and commercial success at Liulin'