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Far East Energy pressing big CBM schemes in China

Oil & Gas Journal

Infant dragon moves
Despite its fairly new status as a corporation, Far East is governed by personnel having a wealth of experience in the energy industry, particularly in CBM production, said Mike McElwrath, the company's chairman and CEO, and they recognized an opportunity to promptly put that expertise to work in China.
Far East personnel were aware that the Chinese government had created China United Coal Bed Methane Co. (CUCBM), giving it sole rights to develop China's CBM, McElwrath said. "It is also charged with contracting with foreign companies for the joint development of that resource base," he added. "And we were aware, through contacts in China, that CUCBM was actively seeking out American companies and American technology to develop the CUCBM potential, primarily because the United States is way out front in technology in the development of coalbed methane."

Still, how did a start-up company with few assets and no production or cash flow secure such contracts?
"That's a good question," McElwrath said, citing three factors that drove that decision: "First of all, CUCBM was looking for a company in South China that was willing to come in, recognizing that there was not a fully developed pipeline infrastructure incentive. There's an enormous estimated CBM gas in place, but there's not an existing major pipeline in place," he said. "We were willing to go in and take a risk on the basis of what we saw to be a readily expanding demand for gas in the south that was fostered in part by the central government.
"And there was the factor that we were an American company that could bring American technology to bear."
The third factor was Far East's leadership and board of advisors that included a former vice-chairman of Bechtel Group, Don Gunther, and McElwrath himself, a former acting assistant secretary of energy in the administration of President George H.W. Bush, among other experience, all of which lent the company substance and leadership.
"Our senior vice-president [of China operations], Tun Aye Sai, was the one who led the primary negotiations. But Americans such as former [Far East] CEO Bill Jackson were involved in that as well, he said.
McElwrath, who has been on the company's board of advisors since its inception at yearend 2001, became chairman and CEO Oct. 13, 2003.