China-focused coal-bed methane (CBM) developer G3 Exploration posted a net loss of US$24.6 million in 2017, but also increased production at one of its two operational blocks, according to a results statement. The loss was attributed mainly to the company discontinuing its downstream sales business in China.
G3 holds joint venture contracts for seven CBM blocks in several Chinese provinces, but only two are in production so far.
G3’s chairman, Randeep Grewal, said development had been stymied by long-drawn out production-sharing contract (PSC) negotiations with the company’s state-run partners.
“The year started with several challenges and ended with rewarding conclusions. These favourable conclusions allow the company to move forward after being forced into stagnation for almost eight years,” Grewal said.
G3, which was previously known as Green Dragon Gas, increased its CBM sales by 3% to 1.94 bcf (54.94 mcm) at its Shizhuang South Block (GSS) in Shanxi Province. But its sales fell to 1.37 bcf (38.8 mcm) at the Chenghuang Block (GCZ), also in Shanxi, from 1.53 bcf (43.33 mcm) in 2016, the statement said. G3 attributed GCZ’s production decline to no new wells being drilled while the partners were in dispute over contract terms.
The firm’s partners in GSS are China National Offshore Oil Corp. (CNOOC), while China National Petroleum Corp. (CNPC) is its partner in GCZ.
Grewal said that since the PSC partners had reached agreements in September 2017, both sides had been “working closely together to rapidly advance the producing wells”.
An agreement reached with CNPC in October 2017 for the further development of GCZ calls for the drilling of 147 news wells by the end of 2019 and combined investment of US$54 million, the G3 statement said. The production target for the block is 6 bcf (169.92 mcm) per year.
G3’s main foreign rival in CBM development in China, Australia-based Sino Gas & Energy, this month received a takeover offer of US$405 million from US-based private equity firm Lone Star. Sino Gas’ board has recommended acceptance of the offer on the grounds that shareholders will receive “cash certain value now versus the future risks and uncertainties associated with the business”.