Australia's Sino Gas signs new fixed-price gas sales agreement


Australia’s Sino Gas & Energy (SGE) has signed an agreement for the sale of gas from its Linxing production sharing contract in the Shanxi province, China.

Under the gas sales agreement (GSA), SGE will sell gas at a fixed price of $6.40 per million cubic feet equivalent from the Linxing central gathering system (CGS) to its existing buyer Shanxi GuoHua Energy, a gas distribution company.

GuoHua will be entitled to a minimum quantity of 14 million standard cubic feet per day (mmscfpd), according to the contract.

Sino Gas & Energy managing director Glenn Corrie said: "The GSA recognises the continued strength of the China gas market, significant operational progress we have made towards delivering predictable and reliable production and the strong relationships we have built with the dominant gas off-takers in our target markets.

“The fixed-price offtake contract is expected to underpin cash flows as we ramp up production from the field.”

"The fixed-price offtake contract is expected to underpin cash flows as we ramp up production from the field."

It is noted that the shortfall will not attract penalties and SGE expects adherence to the commitment on the back of depth of the market demand and reliability of the Linxing CGS.

Furthermore, the company noted that it is currently engaged in negotiations with GuoHua for additional gas sales agreements for gas from both Sanjiaobei and Linxing fields.

The Linxing PSC is a jointly held project between SGE and China United Coalbed Methane (CUCBM).

SGE holds 64.75% interest in the project, where drilling results and previous seismic analysis are being used to determine further exploration.

Linxing and Sanjiaobei PSCs are located in the Ordos Basin and cover an area of around 3,000km².