Sino Gas & Energy has won approval from its Chinese government-backed joint venture partner for the first phase of development at its Linxing natural gas project in Shanxi Province.
According to an ASX announcement, China United Coalbed Methane, a subsidiary of China government-backed CNOOC, has approved Sino Gas’ plans to develop the first stage of the Linxing project.
The approval is considered to be an important milestone for Sino Gas, which has ambitions of becoming a major low-cost gas producer by 2020.
Sino Gas initially signed a production sharing contract with China United in October 2013, covering 30 per cent of production at Linxing.
The company is targeting production of between 350 million and 550 million standard cubic feet of gas per day by 2022, with the Linxing project considered to be a strategically important source of supply for China’s domestic market.
Gas demand in China has been forecast to triple by 2030, according to the IHS Markit China Natural Gas Price Outlook.
Demand grew by 17 per cent in the first quarter of 2018, continuing ongoing trends from the previous 12 months.
The Chinese government has mandated for gas to make up 10 per cent of the country’s primary energy mix by 2020, and 15 per cent by 2030.
Sino Gas’ first Linxing development plan focuses on around 20 per cent of its project area, which covers around 3,000 square kilometres in Shanxi’s Ordos Basin.
It said China United supported a staged approval process to facilitate continued ramping up of production alongside the approvals process.
CNOOC is expected to provide China United with full Linxing project investment approval by the middle of next year.
Sino Gas anticipates its share of the development will be fully funded by a $US100 million funding facility, for which it has already secured a commitment from Macquarie Bank.
Mr Corrie said the approval of the first Linxing ODP was the result of extensive collaboration between the two partners.
Commercial discussions between Sino Gas and China United regarding the second and third phases of development at Linxing are ongoing.