Commencement of CBM Drilling

7 Nov 2006 07:02

Fortune Oil PLC07 November 2006 07 NOVEMBER 2006 FORTUNE OIL PLC ("Fortune Oil" or "the Company") Fortune Commences CBM Drilling Fortune Oil is pleased to announce that its first coal bed methane well wasspudded in Liulin today, 7th November 2006. This vertical pilot productionwell, FL-EP2, is being drilled by Fortune Liulin Gas Company Limited, asubsidiary of Fortune Oil PLC which has entered into a Production SharingContract for development of the Liulin coal bed methane ("CBM") block in ShanxiProvince. The Company plans to drill this well to a total depth of 1155 metres and takecore samples from coal seams numbers 4, 5 and 8. A second vertical pilotproduction well, FL-EP1, will be drilled later this year to a planned totaldepth of 610 metres, with the timing depending on weather conditions. Seam 8 inboth wells will then be fracture stimulated and production rates of CBM gas andwater will be monitored over the coming months. The Liulin block is located in a promising CBM development area of the easternOrdos basin, one of the world's largest CBM resource areas. Coal seamthickness, depth, gas content and permeability all appear to be highlyprospective. There is substantial data already regarding the coal seamcharacteristics and gas content in and around the Liulin block as a result ofover 70 coal coreholes and several CBM exploration wells that have been drilledin the past. The Company has recently completed a joint study with the ShanxiCoal Bureau to analyse and map this data, which was then used to optimise thelocations for FL-EP1 and FL-EP2. These two wells should give significantreservoir and production data to assist in certification of the gas reserves inthe Liulin block, although it will not be possible to properly quantify theresults until the second quarter of 2007. Further pilot production andslim-hole data wells are planned for 2007 with the aim of declaringcommerciality for the block in 2008. The Company's CBM team comprises Chinese professionals, all of whom have beentrained by international operators particularly in regards to HSE (Health,Safety and Environment). All the operations of Fortune Liulin Gas Company andits drilling contractors are being monitored and assisted by Fortune Oil's GroupHSE Manager, and the Company has procured all necessary environmental permitsfor drilling in 2006 and 2007. Fortune Oil is very optimistic concerning its prospects for CBM development inChina. We expect CBM to be a major source of natural gas for China over thecoming years and our access to CBM will complement our growing natural gasdistribution business in Shanxi Province and the Beijing hinterland. The properextraction and utilisation of China's CBM will also have significant safetybenefits for the coal mine industry and will help reduce global warming. Fortune Oil is now the first international company in China to be operating inboth the upstream gas sector and in downstream gas distribution. This is amajor step forward along the Company's path of growing an integrated gasbusiness. The Company will continue to seek both CBM and gas distributioninvestment opportunities in and around Shanxi Province. Mr. Qian Benyuan, Chairman of Fortune Oil, commented: "This is a very significant step forward for Fortune Oil. In a relatively shorttime-frame we have assembled a highly professional upstream team, we havecompleted a geological study of the block and we have now commenced our firstpilot drilling. We would like to thank our government partner, CUCBM, for theirguidance and assistance in bringing us to this point." Enquiries: Fortune Oil PLCJohn Pexton - Deputy Chief Executive Tel: 00 852 2583 3113 (Hong Kong) Pelham Public RelationsArchie Berens Tel: 020 7743 6679 or 07802 442 486 This information is provided by RNS The company news service from the London Stock Exchange