Further to its announcement of in-principle approval on 29 March 2018, Sino Gas & Energy Holdings Limited is pleased to announce that its Joint Venture company, Sino Gas & Energy Limited has received approval for the first Linxing Production Sharing Contract (“PSC” Overall Development Plan (“ODP”) from SOE partner China United Coalbed Methane (“CUCBM”).

This landmark achievement reflects the recognition of the Linxing project as a strategically important source of low-cost domestic natural gas supply in the rapidly growing China natural gas market by the central government under the 13th Five Year Plan, the Shanxi provincial government and CUCBM.

The first Linxing ODP focuses on core development and pilot production areas representing ~20% of the current discovered area of Linxing East and West. CUCBM has supported a staged approval process to facilitate the continued ramp-up of production in parallel with phased approvals. Future ODP submissions to support the development of the remaining discovered area are expected to be appended to this initial ODP.

As announced on 9 May 2018, CUCBM expects to obtain full Linxing project investment committee approval from its parent, China National Offshore Oil Corporation (“CNOOC”) by mid-2019. CUCBM is considering its level of participation in the Linxing PSC and is currently expected to provide formal notification to SGE prior to mid-2019. Sino Gas continues to retain adequate financial flexibility to fund field development.

In April 2017, Sino Gas purchased an Option to acquire on ODP approval 7.5% of SGE’s participating interest in the Linxing PSC by reimbursing SGE for 7.5% of historical back costs 1. Given the staged nature of ODP approvals, Sino Gas is considering the most appropriate time to exercise the Option.

In addition, confidential commercial discussions continue with CUCBM regarding the on-going development and partnership terms and other matters relating to the Linxing PSC.

Sino Gas continues to expect approval of the first Sanjiaobei ODP in the first half of this year.

Commenting on this development, Sino Gas’ Managing Director Glenn Corrie said:

“The approval of the first Linxing ODP is the result of extensive collaboration between SGE and CUCBM and recognises the strategic importance of Linxing as a low-cost source of natural gas supply to meet rapidly growing Chinese demand. The Linxing ODP area is expected to be expanded as SGE continues to ramp-up production with a target of total gross plateau production of 350 to over 550 million standard cubic feet per day from Linxing and Sanjiaobei 2”.