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Downstream Market

Access to established infrastructure enables sales to target markets with significant demand for CBM

Both the Panzhuang and Mabi concessions are located close to established gas transportation and processing infrastructure. This infrastructure was constructed and connected to our concessions by third parties who were attracted by the quality and significant potential volume of the CBM in the Qinshui Basin. This infrastructure provides us with access to gas distribution facilities and our markets and customers, which include industrial users, city gas distributors, pipeline gas distributors and LNG producers in Shanxi, Henan and Shandong provinces and in other coastal regions in China. Because of this infrastructure, we are able to contract for the sale of most of our CBM under long-term take-or-pay sales agreements. Our access to infrastructure will allow us to take to market our increased production volumes as we continue to ramp up production in our concessions.

We also sell our gas to various LNG producers, such as ENN Energy and Shuntianda. Both ENN Energy and Shuntianda have built plants connected to our gas gathering stations in thePanzhuang concession in order to process and transport our CBM to downstream users in Henan Province as well as coastal cities. We have been selling gas to ENN Energy since 2008, to Shuntianda since October 2013, and to Sanxia Yizhong, a LNG producer connected to the Tongyu Pipeline in Henan Province, since December 2014. There are a number of additional LNG producers in the vicinity of our concessions that we can sell to.