Far East Energy Corporation today announced that the Chinese news service Xinhua, has recently advised that the PRC's CBM subsidy will be increased this summer in conjunction with the release of the 12th Five Year Plan and could be increased as much as 0.2 RMB per cubic meter (or $0.86 per Mcf based on the March 31, 2011 exchange rate). "If implemented, this level of subsidy increase would take our current sales price of $6.27 up to $7.13 per Mcf (inclusive of taxes). This provides a very meaningful impact upon our economics and is one more example of the favorable climate for developing CBM resources in China. Considering that this would yield a wellhead price 1.6 times that of US Henry Hub gas prices on April 27, 2011, it provides a significant opportunity for Far East Energy."
Clearly the Company is pleased to report that in the 3.5 months since its 2010/2011 drilling program raise, 16 of the 60 wells planned at that time have either been drilled and are being fraced, or are currently underway, keeping us precisely on schedule. However, the biggest news of all is that the gas nomination process has commenced, and first payment for gas should be forthcoming before year-end. FEEC continues to check off major milestones according to projections, and we wish to thank all of our investors for their support.
We have not established a source of revenue. Although we expect that gas sales under the Gas Sales Agreement will commence late in the fourth quarter of 2010 or early first quarter of 2011, we are not able to predict exactly when we will recognize significant revenues. We have funded our exploration and development activities primarily through the sale and issuance of common stock.
On June 12, 2010, CUCBM and SPG executed the Gas Sales Agreement, to which we are an express beneficiary, to sell CBM produced in the CBM field (the "Shouyang Field") governed by the Shouyang PSC. Pursuant to the Gas Sales Agreement, SPG is initially required to purchase up to 300,000 cubic meters (10,584,000 cubic feet) per day of CBM (the "Daily Volume Limit") produced at the Shouyang Field on a take-or-pay basis, with the purchase of any quantities above such amount to be negotiated pursuant to a separate agreement. At the request of FEEB and CUCBM to provide competitive pricing options for offtake of CBM production in excess of the Daily Volume Limit with assured offtake capacity, the Gas Sales Agreement obligates SPG to commit to having demand capacity to accept at least 1 million cubic meters (approximately 35 million cubic feet) per day from the Shouyang Field by 2015 but does not obligate FEEB or CUCBM to sell gas in excess of the Daily Volume Limit. The term of the Gas Sales Agreement is 20 years. We anticipate that gas sales will commence shortly after completion of our in-field gathering system and compression facilities, which are currently scheduled to be completed and commissioned by late December 2010.
There can be no guarantee of future capital acquisition, fundraising or exploration success or that we will realize the value of our unevaluated exploratory well costs. Based on our planned work programs, which include an accelerated pace of drilling in late 2010 and in 2011, if we do not secure additional capital, whether from Dart Energy under the Farmout Agreement or through additional debt, project or equity related financing or refinancing existing debt, or enter into an agreement with a strategic partner, we believe that the funds currently available to us should provide sufficient cash to fund our planned expenditures under the Shouyang PSC and other minimum operating costs until near the end of the third quarter of 2011.