Petromin prepares to start CO2 injection at Shanxi

2010-04-21 10:27 ET - News Release

Mr. A. Ross Gorrell reports

COMPANY MOVES FORWARD ON ENHANCED HYDROCARBON RECOVERY - CO(2) INJECTION PROCESS UNDERWAY AT ECBM PILOT PROJECT

The process leading to injection of carbon dioxide (CO2) into the target coal seams at the site of Petromin Resources Ltd.'s deep unminable coal CO2 sequestration and enhanced coalbed methane (ECBM) production project in Shanxi, the People's Republic of China, is scheduled to start this week.

Additionally, on March 10, 2010, the company, China United Coalbed Methane Corp. Ltd. (CUCBM) and Enviro Energy International Holdings Ltd. entered into a supplemental agreement that formally expanded the pilot test area to over 1,152 acres (five square kilometres) and extended the term of their joint venture from five years to 5.5 years.

The CO2 injection process, which begins with establishing the CO2 inventory at site, well monitoring and a short well workover, is under way and follows a period of shut in, which was initiated during the week of March 22, 2010. The well produced water and coalbed methane for several weeks leading up to the shut in.

The company and Enviro Energy contribute financing and specialized services to the project as well as training to the Chinese party. A company representative attended the well operations during the fist quarter to assist start-up procedures, evaluate equipment and set up monitoring procedures.

The project, operated by CUCBM, is located in the Shizhuang North area of Qinshui basin of Shanxi province, which is one of the most prolific CBM-producing areas in China. The expanded project area provides sufficient land area to test the CO2 storage capacity of coal seams, as well as the effectiveness of CO2 as a driver of ECBM production, and the extended term provides sufficient time to complete planned activities.

The CO2 injection is the first ever such activity in China to be undertaken under leadership of state-owned and private enterprises while being assisted by support and funding from the Chinese and Canadian governments. As announced by the company in Stockwatch on Dec. 7, 2009, the project has received matching funding support from the Canadian government under the auspices of the Asia Pacific Partnership on Clean Development and Climate (APP), a seven-country co-operative effort to encourage clean energy developments in the region. The APP includes Canada, China, Australia, United States, India, Japan and Korea, and the funding support clearly reflects the international significance of the project. As an international collaboration that includes the company from Canada, Enviro Energy from Hong Kong and CUCBM from China, the project fully reflects the co-operative principles of the APP.

The project has taken on added significance following the announcement by the central government of China that the country will make notable reductions in greenhouse gas emissions, including CO2, in the foreseeable future. The Chinese government proposes, by 2020, to reduce carbon intensity -- or the amount of CO2 emitted per unit of economic output -- by 40 to 45 per cent compared with 2005 levels. CO2 sequestration and storage in coal seams is expected to be an important element of Chinese and global emission reduction plans, and coalbed methane production is being encouraged in many regions across China.

The board considers the company's investment in the project to be a corporate initiative of strategic importance. Enhanced hydrocarbon production including the utilization of CO2 and unconventional natural gas form important elements of the group's business planning looking ahead.