China Focused CBM Player Far East Energy Reports Higher Gas Sales in September

Far East Energy Corporation, operator of Shouyang CBM block in Shanxi Province in China has reported a higher gas sales figure for first half of September.

“Partially as a result of production increases from gathered wells in the production area and also improved efficiencies across the summer, sales have increased from an average of 1.4 million cubic feet per day in May to 1.55 million cubic feet per day thus far in September,” the company announced on Monday.

The company has also welcomed the recent announcement by China’s National Development and Reform Commission (NDRC) to raise city-gate gas prices by 20% for base volume non-residential customers.

Effective September 1, 2014, city-gate natural gas prices for base volumes rose by RMB 0.4/cubic meter (equivalent to $1.83 per Mcf), or approximately 20%. 

In July 2013, the NDRC introduced a new pricing structure to bring its domestic natural gas prices closer to the cost of imports in order to not only encourage higher domestic output but to address pollution problems as well. 

A similar price hike of RMB 0.4/cubic meter announced in July of 2013 allowed the Far East Energy to successfully negotiate a 42% increase in the wellhead gas price received for its gas, the company said.

"We welcome this increase because it should translate into significantly higher pricing for our gas.  And we believe that gas prices in China will maintain their upward trend, hopefully providing an ongoing opportunity for significant annual enhancement to the price we receive at the wellhead,”  CEO Michael McElwrath said.

Far East Energy Corporation expects to enter into a new round of gas price negotiations before the end of 2014 at which time management would expect to secure another increase in gas prices for future gas sales.