OREANDA-NEWS.  June 22, 2012. Dart Energy (ASX: DTE) is carrying out early commercialisation work on its Liuling coal seam gas project in China and expects to start initial gas sales in the first half of 2013.

The company is currently working to bring 2 wells drilled this year into production, bringing the total number of production wells up to 5.

These are expected to provide enough gas to meet requirements of the existing gas sales agreement with Shaanxi-CUCBM for up to 1.75 million cubic feet per day.

Dart is currently producing 500,000 cubic feet of gas per day from the first 3 multilateral horizontal wells at the project. This production rate is increasing on a daily basis as dewatering and bottom hole pressure reduction continues.

Liulin development and gas sales

Initial gas sales from Liulin will be carried out through a compressed natural gas plant that is currently under construction and expected to be ready for commissioning in the second half of 2012.

The plant is owned and operated by Shaanxi-CUCBM while gas sold is expected to yield about USD 7.10 per thousand cubic feet, or about USD 4.1 million per annum in potential revenue net to Fortune Liulin Gas, which Dart owns a 50% interest in.

Dart has already completed engineering design of a field gathering system and has an engineering procurement construction contract in place.

Construction of the gathering system and associated equipment is expected to take between six to nine months and will commence immediately upon receipt of relevant approvals.

Meanwhile, the company is preparing a full field overall development plant for submission before the end of this year.

This covers all of the technical work, engineering designs and environmental studies required to allow for full scale development of the field, bringing about a major increase in gas sales.

China gas demand

Chinese gas demand is expected to double over the next 5 years, fuelling a large part of the expected 17% increase in global demand over the same time frame.

The International Energy Agency said China will emerge as the third largest gas user by 2013.

China is expected to meet this demand through an increase in gas imports including liquefied natural gas as well as increasing domestic production, which state owned China National Petroleum Corporation believes could hit 200 billion cubic metres by 2020.

Much of this is expected to be met by unconventional sources such as coal seam gas and shale gas.