The Brisbane-based company today said that under the deal, Arrow and energy giant PetroChina would negotiate a production sharing contract (PSC) covering coal seam methane in the Dajing Block.
Arrow said the Junggar Basin is already producing conventional gas, supplying the major east-west pipeline connecting to Beijing and Shanghai.
Chief executive Nick Davies said at the signing ceremony in Beijing that the LOI was an important step in Arrow’s strategy in China.
“We have carefully selected an area that we consider to be very prospective [for CSM] that is close to strong local markets including the Provincial capital of Urumqi – a city of over 4 million people, and within 70 km of the East-West pipeline,” he said.
The Dajing Block is estimated to contain more than 250 billion tonnes of coal resources, with seams up to 70m thick.
Preliminary data indicates the coal rank is ideal for CSM development, Arrow said.
Davies said that based on initial geological data, the gas in-place exploration target could be up to 35 trillion cubic feet.
“This could be an enormous resource,” he said.
“In comparison, the Powder River Basin, in the western USA, which has over 25,000 producing CBM wells, has about 25 TCF gas in place.”
Once the PSC terms are negotiated, Arrow plans to drill up to 20 exploration wells over the following 18 months to define the extent of the reservoir and refine the gas in-place estimates.
If successful, the company would install several pilots to determine how best to develop the CSM resources of the block.
In March, Arrow and US CSM company Orion Energy signed a LOI covering concession blocks in China’s Ordos and Qinshu Basins.
