Sino Oil Continues Progress on CBM Projects

Sino Oil and Gas continues to focus on coal bed methane as it develops related infrastructure, the company said while presenting its financial results.

Through a wholly-owned subsidiary Orion Energy International Inc, the company continued with the preparation and reporting work in respect of the Overall Development Program of the Sanjiao Program. The Overall Development Program (NDRC) will be submitted to the National Development and Reform Commission through PetroChina CBM within April 2012 for approval. It is expected that NDRC's preliminary approval will be obtained shortly.

The company has commenced the tendering for drilling works in 2012. It is expected that 50-60 new horizontal, vertical and directional wells will be drilled within this year.

Apart from selling natural gas in the form of CNG, the Group is also actively paving the way for selling piped and liquefied natural gas (LNG). Plans are under way to realize piped gas and LNG supply in the second half of this year.

Construction works of a new pipeline mainly invested in by a local state-owned enterprise in Shanxi Province were completed in the fourth quarter of 2011. The new pipeline is designated for CBM transportation and passes through the main CBM blocks on the eastern fringe of Erdos Baisn. The length of the gas pipeline is 130 kilometers with an annual transportation capacity of 1.1 billion cubic meters. The pipeline will be located about 20 kilometers east of the Sanjiao Block.

Shanxi Provincial Government has also approved the construction of two small-scale LNG plants within the Sanjiao Block. The Group expects the construction of local pipelines in Shanxi and the LNG plants to drive the production scale expansion of the CBM project, and to bring further improvements in the project's revenues and profitability.