Here is the full article from the URL that puci posted. :-)It is...

Here is the full article from the URL that puci posted. :-)
It is well worth a read and puts todays MPO announcement in context.
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Fortune Oil PLC
18 April 2006



18 APRIL 2006

FORTUNE OIL PLC
('Fortune Oil' or 'the Company')

Liulin Coal Bed Methane


The Company is pleased to announce a conditional agreement to take a 60%
interest in a company formed to develop coal bed methane ('CBM') gas reserves in
the Liulin block in Shanxi Province, China. The other 40% shareholding will be
held by Molopo Australia Limited ('Molopo'), an ASX-listed company with
significant experience in the development of CBM in Australia. In 1999 a
subsidiary of Molopo signed a Production Sharing Contract ('PSC') for
development of the Liulin block with CUCBM (China United Coal Bed Methane
Company), a PRC government entity responsible for all CBM PSCs. Subject to
approval by the Ministry of Commerce, the foreign contractor rights in this PSC
will be extended and transferred to the new company, Fortune Liulin Gas Company
Limited, registered in Hong Kong. The initial obligation of Fortune Oil is to
commit US$2.5 million for further field appraisal, to be financed from the
Company's cashflow.


CBM consists of natural gas that is trapped within coal seams. China has one of
the world's largest reserves of CBM and its development is being encouraged
because of resource limitations and the need to remove gas from coal reserves on
safety grounds. To date CUCBM has signed over 20 PSCs with foreign companies
but the industry is only just emerging and China's CBM output is small at 100
million cubic metres per year. The industry has now been spurred by the
development of local gas markets and supply infrastructure, particularly in
Shanxi Province which has the two largest CBM basins.


We believe that Fortune Oil is the only foreign company controlling pipelines
and reticulation networks for supply of natural gas in Shanxi Province. This
gas is sourced from the Shaanxi-Beijing trunk pipelines which pass through the
province and are operated by our partner in the Fu Hua natural gas business. As
CBM fields are developed the gas will be supplied initially to local markets by
truck as compressed natural gas (CNG) and ultimately to Beijing as pipeline gas.
Therefore, once the Liulin block has been commercially developed, we envisage
the gas being supplied to Fortune Oil-controlled gas distribution companies such
as the Tongzhou CNG station in Beijing. This will provide Fortune Oil with an
independent source of gas and increase reliability of supply for our downstream
businesses.


The Liulin block is one of the best geologically proven CBM blocks in China.
Analysis from coal holes and exploration wells has indicated an in-place gas
resource of approximately 0.8 trillion cubic feet ('TCF'). With a successful
appraisal programme, this resource may be converted to recoverable reserves in
the order of 400 billion cubic feet (12 billion cubic metres) in an area of
approximately 200 square kilometres. The gas recovered to date is over 95%
methane, located in three main coal seams at a depth of 400 to 700 metres. The
coal parameters such as permeability, gas content and seam thickness are
favourable for CBM drilling, as advised by our technical consultants, Advanced
Resources International, Inc of Virginia, USA.


A Molopo subsidiary, Lowell Petroleum NL ('Lowell'), started to explore the
Liulin block over 10 years ago and drilled 4 vertical exploration wells under
the PSC in 2000. Under the terms of the agreement with Molopo, approval will be
sought from PRC authorities for the PSC to be extended and the rights
transferred from Lowell to Fortune Liulin Gas Company Limited. Fortune Oil
would then commit US$2.5 million for further appraisal over the next year and be
entitled to a 60% shareholding in the company, with Molopo retaining a 40%
interest. This would involve further drilling, in particular using techniques
recently applied successfully in China and Australia. Should this appraisal
work prove successful, then we anticipate commercial development of the block
commencing after two years.


The agreements for extension and transfer of the PSC are now being approved by
CUCBM for submission to the Ministry of Commerce for final approval, which we
expect to receive by end of May.



Bruce McGowan, Executive Vice-Chairman of Fortune Oil, stated:


'This is our first step into the upstream gas business. We are very excited by
the long-term potential of China's vast CBM resources and the synergies with our
gas distribution business. Development of Coal Bed Methane reserves is very
important for China to provide clean fuels for the community. Molopo's
experience in CBM development in Australia and its knowledge of the Liulin block
provide an ideal partner for Fortune Oil in developing our CBM business - the
combination is very powerful. All upstream developments have risk and we cannot
expect immediate results but the Company is very well placed to take advantage
of China's CBM opportunities and the accelerating demand for gas.'