The company announced in December that it will separate its main producing assets – blocks GSS and GCZ in the southern Qinshui Basin, Shanxi Province, China – into a new Hong Kong listed business to be called Green Dragon Gas (GDG).
The remaining development and exploration blocks, including GGZ, GSN, GQY A & B, GFC and GPX, will stay in G3E and remain listed in London.
G3E will also maintain a direct shareholding of up to 25% in Green Dragon following the split and initial public offering on the Hong Kong Stock Exchange.
Lots of gas in reserve
In the group’s annual independent updated reserves report, the company said it had total net proved 1P reserves of 96.7 billion cubic feet of natural gas (bcf) valued at US$474mln.
Total net proved and probable 2P reserves stood at 377.1 Bcf valued at US$2.42bn while 3P reserves were 2044.4 bcf worth US$12.75bn.
Grewal added that the GGZ block in the Guizhou Province of China is “progressing well” towards development with first gas anticipated this year, as planned.
In October, G3 Exploration received final approval from China’s National Development and Reform Commission (NDRC) to develop further the Chengzhuang Block (GCZ).
The overall development plan approval covers 33 sq km of the 67sq km licence, which is situated in Shanxi Jincheng Qinshui county.
G3 has a 47% participating interest alongside state-controlled China National Petroleum Corporation (CNPC), which holds the remaining 53%.
So far,114 wells have been drilled on the acreage, of which 85 wells are selling gas.
The development plan includes the drilling of an additional 147 production wells, which will increase capacity to 6.35Bcf per year.
Recoverable proved reserves are 176 billion cubic feet (Bcf) of gas.
Development will take place over the next two years starting in the fourth quarter of 2018 and cost US$55mln that will be met on a pro-rata basis.
Randeep Grewal, G3 Exploration’s chairman, said the approval simplifies the future expansion and development of the commercially producing area within the block.
More ODPs to follow
He added that given the push for gas as an energy source in China, the GCZ approval should be followed by the go-ahead for an ODP for the GSS Zaoyuan block.
That is 50 sq km in size and is expected to be the first of several ODPs within the 388 sq km GSS licence.
ODP approval opens up domestic financing to fund the development, Grewal added.
“Once ODP approval is in place it's almost as if banks are sanctioned to provide financing for domestic gas production and funding becomes very easy.”
“We fully expect that we would see more ODP approvals for us and other Chinese domestic companies that are in the gas production business.
Grewal says it is in the middle of a capital raise for Green Dragon Gas.
Once that is complete, G3 shareholders will receive a dividend in specie for the Hong Kong-listed Green Dragon.