UPDATES ON THE LIUHUANGGOU CBM PROJECT

 

Petromin Resources Ltd. (“Company”) is pleased to announce that TerraWest Energy Corp. (“TWE”) has issued a new report on coalbed methane (“CBM”) resources at its Liuhuanggou CBM project in Xinjiang, China.

 

TWE has previously issued two independent assessments of natural gas resources at the Liuhuanggou project. The first report (“Norwest Report”), prepared by Norwest Corporation (“Norwest”) of Calgary, Canada, details of which have been disclosed in the circular of the Company dated 9 December 2010, focused on one area of the Liuhuanggou project area where drilling is sufficient to estimate CBM resources in place, discovered CBM resources and higher level CBM Contingent Resources according to reporting standard National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101) and Canadian Oil and Gas Evaluation Handbook. The Norwest Report provided an estimate of Discovered CBM gas initially in place (“Discovered GIIP”) which ranges from (Low) 70.00 to (High) 514.07 billion cubic feet (“BCF”) with a Best estimate of 147.43 BCF for the evaluation area.

 

The second report (“NSAI Report”) prepared by Netherland, Sewell and Associates, Inc. of Houston, the United States of America, details of which have been disclosed in the announcement of the Company dated 10 October 2011, evaluated the remainder of the project area and estimated CBM resources in place as well as natural gas resources in place in accordance with the Petroleum Resources Management System (PRMS) standard developed by the Society of Petroleum Engineers (SPE) of the United States of America. The NSAI Report provided an estimate of undiscovered original gas-in-place (OGIP) which ranges from (Low) 7.179 to (High) 19.185 trillion cubic feet (“TCF”) with a Best estimate of 11.825 TCF for the evaluation area.

 

The new report, also prepared by Norwest converts the CBM Discovered GIIP and Contingent Resources as previously estimated by Norwest to CBM categories according to China national reporting standard, CBM Resources / Reserves Specification DZ/T 0216 – 2010. Such conversion is another step in the process of outlining development areas and ultimately the determination of commercially recoverable CBM reserves.

 

Of particular note, Norwest’s estimate of (High) Contingent Resources totaling 244.18 Bcf may be classified as Probable Recoverable Reserves in China.

 

Summary of conversion to China standard classification:

 

CBM Resources / Reserves Conversion
National  Instrument 51-101	China’s  CBM Specification
Discovered GIIP  Best Estimate	Proved Original Coalbed Methane In Place
147.43 BCF	147.43 BCF
Discovered GIIP  Inferred Resource Estimate	Probable Original Coalbed Methane In Place
366.64 BCF	366.64 BCF
Contingent Resource High Estimate	Probable Recoverable Reserve
244.18 BCF	244.18 BCF

 

The report by Norwest is their expert opinion of the CBM resource estimates according to the China standard. The Norwest opinion estimates have not been certified by relevant Chinese authorities and such certification is expected to follow in due course after review by such authorities.

 

The evaluation area which holds the DZ/T 0216 – 2010 Probable Recoverable Reserves / NI51-101 CBM Contingent Resources is the most likely area of initial commercial development since it represents the area of Discovered CBM Resources and holds the highest level estimates at this time.

 

As at the date hereof, the Company held approximately 22.28% of the current issued common shares and preferred shares in the capital of TWE. TWE and China National Petroleum Corporation (“CNPC”) hold an interest of 47% and 53%, respectively, in a 30-year production sharing contract (“PSC”), which is located in Xinjiang, China. The PSC is now administered by PetroChina Coalbed Methane Company Ltd., an indirect subsidiary of CNPC. The PSC covers 653 square kilometres (255 square miles or 163,000 acres) and is located adjacent to the city of Urumqi, the capital of Xinjiang Uyghur Autonomous Region, China.