FTO.L Regulatory News (FTO)

17 December 2010

FORTUNE OIL PLC

("Fortune Oil" or the "Company")

Liulin Gas Update

Fortune Oil is pleased to provide the following update in respect of the CBM Liulin Block in China operated by Fortune Liulin Gas Co Ltd ("FLG"). The Liulin CBM project is one of the most advanced CBM projects in China, and is a designated State Special Pilot Project.

Drilling of 4 horizontal in-seam wells on Liulin has been completed. 2 of the wells within 3/4/5 seam have been successfully dewatered and are collectively producing gas at the rate of 18,689 cubic meters per day (660,000 cubic feet per day). Both of these wells are commercially viable at this production rate with the expectation that flow levels can materially increase as the wells are further optimised.

In addition there is an additional well in the 3/4/5 seam and a single well in the 8/9 seam that remain in the dewatering phase.

As previously announced, an initial Gas Sales Agreement ("GSA") in relation to Liulin gas was recently signed. FLG, which has a 50% equity stake in the project, and its partner China United Coal Bed Methane ("CUCBM") who hold the remaining 50%, are in the process of securing additional GSAs.

As a result of the encouraging technical and commercial progress on Liulin, Dart Energy Limited ("Dart") has exercised its option to increase its equity stake in FLG to 45% for US$8.7m payable in two equal tranches - upon exercise and the 2nd tranche is payable on or before 30 March 2011. Fortune Oil will hold the remaining 55% in FLG. In addition, FLG will receive a reserve bonus payment from Dart referencing FLG's 2P reserve position on 30 June 2011. 

FLG will apply the proceeds paid by Dart Energy to finance additional reserve certification, development planning and submitting the Overall Development Plan ("ODP") for the Liulin Block in 2011. 

Mr. Qian Benyuan, Chairman of Fortune Oil, commented:

"We are extremely pleased with the progress of the Liulin block which is a key part of our overall CBM strategy in China - end-to-end gas from production to consumption. We look forward to applying for ODP in 2011 and if successful Fortune Oil will be the 1st foreign company to be granted ODP in China."

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