Fangzhou is a private company incorporated in the PRC and currently holds exploration and exploitation rights to two blocks of oilfields, namely Yingwang Oilfield and Jiyuan Oilfield. Fangzhou is the only private entity granted oil exploration and exploitation rights in Qingyang City by the Qingyang Municipal Government in Gansu.
Yingwang Oilfield encompasses a total area of approximately 400 sq km and is located at the region of Yima Nangou, Hong Yugou and Miaoyuan District. Jiyuan Oilfield encompasses a total area of approximately 976 sq km and is located at the region of Tianshui, Nanjiao, Xiao Nangou and Luo Shanchuan in Jiyuan Oil Zone in the south of Ordos Basin. The thickness of the oil reservoir of the Yingwang Oilfield and Jiyuan Oilfield is estimated to be 8 to 10 metres and their depth to reservoir is approximately 800 to 3,000 metres below surface. The total estimated proven reserve is 200 million tonnes (or approximately 1,470 million barrels of oil). The duration of the associated exploration and exploitation rights of these two oilfields is thirty years, from 2005 to 2035.
Mr Terence Kong, Executive Director, Genesis Energy noted: "We have been looking for further investment opportunities in the energy sector to broaden our business horizons and maximise return to shareholder. Yingwang Oilfield and Jiyuan Oilfield have an estimated total proven reserve of 200 million tonnes (approximately 1,470 million barrels), of which in accordance with state regulations Fangzhou holds the right to exploit 2% in the next 30 years. This translates to an annual output of 130,000 tonnes (approximately 970,000 barrels) of oil. Based on Fangzhou's share of 70% of the revenue generated from the two oilfields, it is expected that the project will deliver a significant income stream."
Under the MOU, Fangzhou has offered a 90-day exclusive right for the Company to perform relevant due diligence work on the two oilfields. The Company will appoint independent professional firms to conduct a preliminary geological/geophysical due diligence and legal and financial due diligence on Yingwang Oilfield and Jiyuan Oilfield.
Subject to the satisfactory results of the due diligence and taking into account of the resulting technical advice and the costs required for drilling, the parties will proceed to the negotiation for terms and conditions of a formal agreement in respect of the Possible Investment.
In close proximity to Yingwang and Jiyuan is Changqing Oilfield, currently being exploited by PetroChina with a promising daily output of 20 tonnes of oil per well.
This Possible Investment in Gansu is the latest of the Group's upstream expansion initiatives, which include the planned acquisition of the exploitation rights and ownership title in the Grassy Trails oil field in Utah, the US.
Mr Kong added: "Our goal is to achieve a turnaround in 2008 through a restructuring of existing assets and upstream acquisitions. We will also continue to improve our cash flow conditions by giving priority to profitable upstream oil and gas projects that secure immediate cash inflow for the Group. The management considers the oil prospects in Gansu an extremely good investment opportunity considering the very few number of large-scale oilfields in China available for sale to private enterprises."
About Genesis Energy Issued by : Through :
Genesis Energy Holdings Limited (702) is an energy company with focus on oil and gas exploitation and operations. The company is currently finalizing a number of investments in existing oil and gas fields and greenfield projects in the United States and China. Downstream, the company is engaged in crude oil transportation and pipelined gas businesses.
Genesis Energy Holdings Limited
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