Australia’s Arrow Energy on Monday signed a 30-year production sharing contract (PSC) with PetroChina for the Dajing block in western China.Arrow said its subsidiary Arrow Dajing and PetroChina will explore the block for unconventional gas with Arrow to act as operator.The Dajing block is located in the East Junggar Basin in the Xinjiang Autonomous Region (“XAR”) in China’s far-west. The XAR holds about 30% of China’s oil reserves and 35% of its gas reserves including an estimated 500 Tcf of coal-bed methane.It is located close to extensive infrastructure including the west-east pipeline which transports gas from the XAR to the urbanised eastern areas of the country where gas demand is high. Currently there are two west-east pipelines with a third scheduled to come on-stream in 2012-2015.Arrow said the first year work program at Dajing will involve the drilling of 14 exploration wells at a total cost of $4 million to determine key gas reservoir characteristics, and an assessment of the long-term commercial viability of the block. Arrow expects start up of a full commercial development from 2014 with gas sales expected to build to approximately 20 Bcf/y.PetroChina will submit the PSC for the required approvals in China following completion of the Arrow Demerger Scheme and Acquisition Scheme and the issue of a usual performance guarantee by Arrow.Earlier this year Shell and PetroChina succeeded with a joint takeover bid for Arrow Energy whose coal-bed methane resources they want to supply a coal-bed methane to LNG project in Queensland, Australia. However Arrow’s international assets will be spun off into a separate company called Dart Energy. Arrow’s international assets are held mainly in China, India, Indonesia and Vietnam. – JO’C
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