Green Dragon Gas hits key milestone as it finalises agreement with CNOOC
08:55 20 Sep 2017
“This material milestone concludes eight years of discussions and commences a committed close cooperation between the parties to unlock the lucrative monetisation of the GSS and GSN Blocks"
oil and gas operations
CUCBM is to invest US$100mln in the GSN project by March 2019
Green Dragon Gas Ltd (LON:GDG) told investors that state-backed China National Offshore Oil Corporation (CNOOC) is accelerating its plans for the group’s joint assets.
The company said that it has now finalised a memorandum of understanding with CNOOC subsidiary, China United Coalbed Methane Corporation (CUCBM), over five production sharing agreements and two supplementary agreements – all of which cover the Shizhuang South (GSS) and Shizhuang North (GSN) projects.
WATCH: Green Dragon to proceed with 'robust' gas sales after finalising CNOOC agreement
Green Dragon highlighted that the new agreements, which follow eight years of admin, resolve any uncertainty related to the historic drilling on the GSS and GSN Blocks.
As a result, GDG’s stake in the GSS block reverts to 70% in all 1,139 carried wells and at the same time, the company retains its interest and operatorship in 200 non-carried wells.
Independent audit of the production sharing contracts, for programmes between 2007 and 2014, results in some US$941mln of cost recovery booked to the joint account.
CUCBM is to invest US$100mln in the GSN project by March 2019. GDG’s costs will be fully carried in the programme, and in return CUCBM will earn an additional 10% stake in the asset. Subsequently, GSN will be a 50-50 joint venture.
READ: Green Dragon Gas set to bolster output as it gets State approval for US$53mln development of GCZ block
“We are very pleased with the amicable conclusion of these supplementary agreements,” said Randeep Grewal, Green Dragon chairman.
“This material milestone concludes eight years of discussions and commences a committed close cooperation between the parties to unlock the lucrative monetisation of the GSS and GSN Blocks.
“The joint cooperation will now fully focus on gas sales and achieving returns from the combined investment made by CUCBM and GDG.
“It will be the first time in eight years that the parties can focus on gas sales in the field rather than the administration of the PSC’s.
“We are pleased to have a similar close cooperation with CUCBM as we do with CNPC on the GCZ Block.”
READ: Green Dragon Gas expects expedited project development after regulatory decision
Grewal also highlighted that the company now expects to focus on concluding the development plan for the GSS Zaoyuan project area before the end of the year, enabling commercial gas sales from Areas 3 and 4, and a subsequent development for Area 5 following next year.
”GDG continues to conclude material objectives for the year,” Grewal added.
“With these agreements finalised, the balance sheet ambiguity has been eliminated, as we prioritise monetisation across our vast acreage.
“We are committed to keeping the market informed and will provide an update on progress in the near term.”
