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| Operations Intro
Exploration History
Lishui 36-1 (Vicky) Gas Discovery
Lishui Gas Play
Block 25/34
Petroleum Contract
Dynamic Gas Market
Resource Report | China Energy Overview
The growth in China's economy has resulted in a sharp increase in demand for energy. In 1996, China became a net oil importer for the first time. Ten years later, China imports over 40% of its crude requirements, consuming over 6 million barrels a day. Today, China is the world's second largest oil consumer, although, on a per capita basis, China's consumption is still less than one tenth of that of the United States.
High international oil prices and environmental concerns have both served to increase the world's demand for cleaner natural gas. Currently, world gas consumption constitutes about 25% of the entire energy mix, whilst in China it is only about 3%. China's natural gas industry is still in the early stages of development, but natural gas development and utilisation is a key government energy policy. Construction of various major gas infrastructures has commenced in the last 5 years, including:
- A 4000+ km long "West to East Gas Pipeline" - this pipeline is intended to link Shanghai and all the cities along the line to the gas fields in the Tarim basin (completed) and eventually to the Central Asian resources.
- LNG terminals along the coast - the first terminal in Shenzhen received the first shipment in May 2006, and there are at least six other terminals under construction and planning.
- A coastal national gas grid intended to link major coastal cities is currently under development.
The gas resources from Block 25/34 are ideally positioned to benefit from this new government initiative and improved infrastructure.
Wenzhou's New Development
 Wenzhou is a city of 2 million people with an administrative region that covers a population of 7 million. It is one of the most dynamic economies in China. The last ten years have seen the continuation of growth in the region, with GDP tripling and export values increasing by over 12 times. Wenzhou is now one of the major manufacturing areas with a very high market share in China and the world for products such as shoes, garments, spectacles, metal-case cigarette lighters, hardware and electrical equipment, motor car parts and pumps.
For many years, Wenzhou's development has been hampered by the shortage of land and energy resources and industrial infrastructure. The local government has been striving to rectify the situation by implementing a policy of improving the infrastructure, with the construction of motorways, railways, port facilities, power stations as well as major reclamation projects. Many of these projects have been implemented and completed in the last five years.
 The "Peninsula Project" is one of the projects intended to implement the new Wenzhou economic strategy and turns Wenzhou into a more dynamic city with a greater mix of industries. This project includes the construction of roads and bridges linking the mainland with the five main islands offshore, major port facilities and reclamation of over 20 sq km of land along a 14 km dam. The project started about three years ago and is near completion. The reclaimed land will be mainly used for industrial installations. This establishment of the infrastructure and facilities on the islands will potentially shorten the planned pipeline from Block 25/34 to market from 140 km to around 100 km.
The development of Wenzhou's local economy and that of the entire East China Region has given Primeline improved confidence that the a commercially sustainable local gas market price will be established. The Company is continuing its discussions with the local government and industry in preparation for a gas sales contract once the Block 25/34 gas resource base is adequately increased. Whilst the demand from Wenzhou's local economy is more than sufficient to absorb Primeline's currently identified gas resources plus significant expansion of these resources, there are also many other nearby markets of a similar scale along the East China Coast which provide the demand to justify an accelerated exploration programme in the remainder of Block 25/34.
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