Sino Gas to Start Producing Coal-Seam Gas in Ordos Next Year
Comment of the Day

December 08 2011

Commentary by David Fuller

Sino Gas to Start Producing Coal-Seam Gas in Ordos Next Year

This article from Bloomberg News may be of interest to subscribers. Here is a section:
Sino Gas & Energy Holdings Ltd., an Australian company developing natural gas in China, said it will start producing coal-bed methane at the Ordos Basin in northern Shaanxi province next year.

The projects at the basin will reach full output in 2013, Chairman Gavin Harper said in an interview in Beijing today.

Sino Gas acquired the Ordos projects from Chevron Corp. in 2006 after the U.S. company made little progress on finding gas. The Australian explorer, which has slumped 57 percent in Sydney since its 2009 listing, has discovered 5.4 trillion cubic meters of methane reserves trapped between layers of coal at the basin, one of the largest deposits in the country, Harper said.

David Fuller's view China's per capita energy consumption is on a secular upward trajectory as living standards improve. The government is well aware of this trend and has been aggressively pursuing access to new discoveries across Asia for much of the last decade. A parallel strategy has been to invest in companies with technology that can help China grow its domestic energy sector.

Royal Dutch Shell has been notable for its cooperation with China in developing its domestic sector and helping it gain access to international supply. While China has made stewardship of the environment a priority over the last few years, it is unlikely to forego the opportunity to lessen its dependence on foreign resources. Unconventional gas and oil development is likely to represent an increasingly important part of the country's energy mix.

Sino Gas & Energy Holdings Ltd is a small company with a market cap of only AU$50 million. It has been trending lower over the last year and while it has steadied in the region of A4¢, a sustained move above A4.5¢ s would be required check the supply dominated medium-term environment.

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