HOUSTON, Dec. 16, 2013 /PRNewswire/ -- Far East Energy Corporation (OTCBB:FEEC), the U.S. listed company that operates the Shouyang Block Coalbed Methane (CBM) Production Sharing Contract (PSC) in Shanxi Province, People's Republic of China, today announced a substantial increase in its gas pricing for gas sales beginning January 1, 2014, as well as a continued increase in gas volumes.
Effective 2014, Far East Energy's contracted base gas sales price for its 20-year take-or-pay contract with Shanxi Provincial Guoxin (SPG) will be RMB 1.7/cubic meter, equivalent to US$7.90/Mcf, up 42% from the current RMB 1.2/cubic meter (US $5.58/Mcf). Because CBM prices are negotiated outside the State pricing regime management believes that this increase highlights the rising and strong demand for natural gas from Shanxi Province as it seeks to add more gas into its energy mix.
In addition to the increased base price, the current subsidies of 0.25 RMB/cubic meter will mean a total price of US $9.07/Mcf for gas production in 2014. If previous pronouncements made by various government sources to the effect that there will be an increase in the subsidy to a total of RMB 0.65/cubic meter are implemented, Far East Energy's price will then rise to approximately $10.93/Mcf; or, a 62% increase on current gas pricing based on the current RMB/USD exchange rate.
Commenting, CEO Mike McElwrath said, "Obviously this is an exceptionally high gas price and we are grateful for the assistance of CUCBM in our recent negotiations. This is pricing that would be exceptional for onshore gas anywhere in the world, and we are gratified by this accomplishment. This new pricing underlines the growth in demand for domestically produced natural gas in China as households, city fleets and industry are increasingly being converted to run on natural gas, substituting for more expensive and/or polluting coal, diesel and fuel oil. In and around Shouyang we are seeing the positive results of local households receiving our gas and residents are pleased to be receiving a clean domestic fuel source. The trend in Chinese natural gas prices is upward, and Far East is well-positioned to benefit from these current price increases."
Updating its announcement of December 12th that gas production had increased to 1,034,038 cubic feet per day (1,034Mcf/d), the Company announced that production for December 15th was 1,157,967 cubic feet per day (1,158Mcf/d).
