Drilling Update

RNS Number : 9683C

Green Dragon Gas Ltd

08 September 2008

 



8 September 2008

GREEN DRAGON GAS LTD.

('Green Dragon' or the 'Company')

SECOND SUCCESSFUL HORIZONTAL WELL DRILLED

AND OPERATIONS UPDATE

Green Dragon Gas Ltd (AIM: GDG), the Chinese coal bed methane ('CBM') business, today announces an update on its continued success in developing its large coal bed methane resource across its six blocks (including Guizhou block held by the Company's recently acquired subsidiary, Pacific Asia China Energy, Inc.) in conjunction with its joint-venture partner, CUCBM.

BLOCK	WELLS DRILLED SO FAR 2008	TOTAL WELLS   TO DATE	WELLS  ONLINE / DE-WATERING	TARGET WELLS ONLINE /  DEWATERING  YEAR END
SHIZHUANG SOUTH	10	132	42	46
SHIZHUANG NORTH	3	9	5	7
QINYUAN	5	12	6	10
FENGCHENG	4	19	10	16
PANXIE EAST	0	6	5	6
GUIZHOU	-	10	3	3
TOTAL WELLS	22	188	71	88

Horizontal Drilling:

In the Shizhuang South ('GSS') block, GSS031 became the second successful Dymaxion Coal Inseam well drilled in China, complementing the earlier successful GSS008 well which has been producing above expectations since beginning operation in March 2008 and continues to demonstrate its capability of producing in excess of 7,000 m3 per day.  These two consecutive successes indicate that the role of Mitchell Drilling's Dymaxion horizontal wells in fueling the CBM development in Australia may be replicated on the Company's blocks in China. These horizontal wells are expected to produce 10,000-15,000 m3 (353-530 mcf) per day within a month of commencing production compared to 3,000 m3 (106 mcf) per day for each of the vertical wells. The Company will continue to drill vertical wells with a higher number of Dymaxion wells as the pace of block development is increased.

Fracc Programmes:

27 wells have been successfully fracced in the GSS, Fengcheng ('GFC') and Quiyuan ('GQY') blocks. Post fraccing, the wells have demonstrated high casing pressures and rising fluid levels, providing favourable indications as to the success of the programmes. As the wells, depressurise from the fracc programmes, work overs will be performed and the wells put online. In the Shizhuang North ('GSN') and GQY blocks, the wells continue to de-water the coal seam and fracc programmes are being designed into the work programme. 

Work Over Programmes:

The GFC block wells were successfully fracced and are currently being worked over to clean the well bores post fraccing. Upon completion, the wells will be placed on production to begin their de-watering phase. The Panxie East ('GPX') block wells are currently in the de-watering process and currently awaiting the arrival of a work over rig. 

In-house Drilling Teams:

All five of the Company's US manufactured specialised CBM drilling rigs have now been delivered. The first three rigs are on-site at the GSS block while the remaining two are expected to arrive by the end of September 2008. The Company expects to spud its first in-house well within the next couple of weeks. This will mark the Company's successful launch of an in-house drilling company which is fully equipped and able to drill and work over vertical and horizontal wells, within ten months of the launch of Greka Technical Services in November 2007.

Technology: 

The Company's recent acquisition of a technology company is proving successful. The staff are diligently working on the first proprietary SCADA monitoring system for upstream application at the GSS block and downstream at the CNG station in Zhengzhou. This pilot SCADA system is expected to be operational by the end of this quarter and undergo testing through to the year end. Upon successful testing, the system will be implemented throughout the Company's integrated operations from drilling, production, transportation and gas sales allowing a virtual Operations Control Center to monitor and control the vast operations from a single hub in Zhengzhou. 

The Company's Chairman and CEO, Mr. Randeep S. Grewal, commented:

'We are very pleased with our Mitchell joint-venture with its obvious accretive value being demonstrated in the successful horizontal drilling at the GSS block. The second well was drilled successfully with an increase in the inseam length from 816 meters in GSS008 to 1280 meters in GSS031. We expect this increase to be demonstrative in the production when the well is put on. GSS008 continues to demonstrate its capability to produce in excess of 7,000 m3 per day.

'The Greka Technical Services division has developed from a strategic decision ten months ago to full implementation as a leading edge CBM drilling organisation. The latest US drilling rig technology coupled with comprehensive field training, has prepared our new employees to meet global drilling efficiency and productivity standards. Considering our 10 year drilling inventory, such an achievement is a key milestone for the Company to achieve. 

'The Company is focused on absorbing its string of acquisitions and integrating the businesses into an integrated value chain. The efficiency and productivity of our operation is being expedited through the development of a proprietary SCADA system which is expected to be online by the end of 2008. Consistent with the leadership Green Dragon has demonstrated within the niche Chinese CBM industry, the Company's unique and comprehensive vertically integrated business plan is being achieved by technology aimed at delivering operational control systems on a par with the biggest and best in the world. I fully expect that our Operations Control Center will be replicated by others in the years to follow.' 

The information contained in this announcement has been reviewed by Elton Dong, Vice General Manager - Production - Greka, Bachelor of Science at Xi'an Petroleum Institute, major in mechanics, designing and manufacturing

For further information on the Company and its activities, please refer to the website at www.greendragongas.com or contact:

Randeep S. Grewal / Betty Cheung, 

Green Dragon Gas,                                                                        [phone]

Dr Azhic Basirov / David Jones, 

Nomad & Broker, Smith &Williamson,                                            [phone]

Tim Redfern, 

Broker, Evolution Securities,                                                            [phone]

Tim Thompson / Christian Goodbody, 

Investor Relations, Buchanan,                                                          [phone]

 

END

 

 

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