AIM-listed Green Dragon Gas has signed an agreement with the coalbed methane-focused subsidiary of China National Offshore Oil Corporation to collaborate on five production sharing contracts.

Green Dragon, which is focused on the CBM industry in China, has entered into a binding agreement with China United Coalbed Methane Corporation (CUCBM) for five PSCs in China.

The deal secures interest and revenue share of about 1600 wells drilled by CUBCM in line with the PSCs.

The company has also committed to invest an extra $100 million in Green Dragon in return for an extra 10% working interest.

PSC exploration terms have been extended for a further two years.

Green Dragon chairman Randeep Grewal said the agreement de-risks the company’s assets to rapidly expand its production.

“We now have a well-capitalised, supportive partner committed to developing our vast acreage and producing the substantial multi-trillion cubic foot gas resource with us over the next 20 years,” he said.

“The company has a direct equity interest in over 1,800 drilled wells. The equity interest varies between 47% and 70% and the total invested capital exceeds $1 billion.”

Under the agreement, the companies will work jointly on the Shizhuang South, Shizhuang North Block, Qinyuan Block, Fencheng and Panxie East blocks in China.

At the Shizhuang Block, Green Dragon will continue as operator, with the company’s equity increasing from 60% to 70%.

CUCMB has pledged another $100 million for exploration at the Shizhuang North Block for an extra 10% interest.

The Qinyuan Block has been sub-divided into two equal-sized blocks, with Block A to be operated by CUCMB and Block B to be operated by Green Dragon.

Interest in the remaining two blocks will remain as is.

The company will convene meetings for each of the PSCs to discuss more technical information and development plans.