The Dajing block is an exploration block with an area of 3,969sqkm located in the East Junggar Basin in the Xinjiang Autonomous Region (XAR) in China’s far-west. It is supported by extensive infrastructure including the west-east pipeline (located approximately 150km to the south).

The PSC signed between the two parties requires regulatory approval in China and PetroChina will submit the PSC for required approvals following completion of the Arrow Demerger Scheme and Acquisition Scheme and the issue of a usual performance guarantee by Arrow. The Dajing block will be a key asset in China for the demerged Dart Energy.

According to Arrow Energy, the XAR has about 30% of China’s oil reserves and 35% of its gas reserves. It is a major energy and chemicals base. Most cities have access to piped gas and there is a growing demand from local chemical and industrial users.

Exports of gas to eastern China’s major population centers are via the West East pipelines I and II, with a WEP III planned for 2012-15. There is estimated to be over 500Tcf of CSG resources in XAR accounting for about 25% of the Chinese national total.

Large parts of the East Junggar basin, including significant portions of the Dajing block, are known to have extensive coal resource at less than 650mt depth, and coal seams of up to 70mt thickness are known to occur, Arrow Energy said.

Arrow’s first year work program at Dajing involves the drilling of 14 exploration wells specifically aimed at determining key gas reservoir characteristics, and an assessment of the long-term commercial viability of the Dajing block.

The estimated cost of the planned preliminary work program in this period is $4m. Arrow’s current plans suggest commencement of a full commercial development from 2014 onwards, with expected gas sales building to approximately 20Bcf per annum.