Far East Energy Corp., Houston, said it agreed with China United Coal Bed Methane Corp. to retain, relinquish, and extend the exploration period of CBM blocks in China.
The modification agreement will be forwarded to the Ministry of Commerce for formal approval.
On the Yunnan block in Yunnan Province, Far East would relinquish the Enhong area and retain the 119,340-acre Laochang area, which it considers to hold much greater potential.
Far East has drilled 11 wells in the Laochang area compared with three in Enhong, which has difficult topography, and considers large parts of Enhong marginal or nonprospective.
The company said that China in the last few weeks has discussed increasing CBM subsidies for producers to 0.5 yuan/cu m from the current 0.2 yuan. If enacted, that would increase the total for which gas produced by Far East may be sold to $7.85, including government subsidies.