The contract covers three blocks in Hengshanpu District, located some 40 kilometers to the southeast of Yinchuan, the capital city of Ningxia. The total contracted area amounts to 1,708 square kilometers. Potential coal-bed methane resources within a depth of 2,000 meters in the area are pegged at 230 billion cubic meters.

Under the contract, VIRGIN will bear all the exploration risks in a period of four years. Once discoveries of commercial value are struck, the two companies will jointly invest and share revenues generated from the sale of coal-bed methane.

According to CUCBM's vice-president, Sun Maoyuan, the geological conditions of coal-bed methane reservoirs in the contracted area are favorable for industrial development.

Sun noted that China's ongoing campaign to develop the western part of the country will give a boost to the smooth operation of the contract.

In addition, VIRGIN is expected to enjoy the preferential investment policies that the state has granted to foreign-funded projects in the west.

It is estimated that by 2010 the natural gas demand in Ningxia will reach three billion cubic meters. This will help promote the development of the local coal-bed methane resources, Sun said.

Besides, the contracted district is on the route of China's planned west-east gas pipeline to send natural gas from the Tarim Basin to Shanghai. The construction of the pipeline project will also facilitate the transmission of coal-bed methane in Ningxia,Sun noted.

With the signing of this contract, CUCBM has inked 11 production sharing contracts with foreign companies for joint development of coal-bed methane reserves in China. The total contracted area covers 22,000 square kilometers.

Established in 1996, CUCBM is dedicated to the exploration, development and utilization of coal-bed methane resources. It enjoys the government-granted exclusive rights for Sino-foreign cooperation in the coal-bed methane sector.

China's coal-bed methane resources buried within a depth of 2,000 meters are estimated at 30 to 35 trillion cubic meters, ranking third in the world. China is the second country after the United States to have conducted large-scale field exploration of coal-bed methane.

(21dnn 01/11/2002)