Arrow Energy has signed two agreements that will increase its involvement in Liaoning Province, north-east China.

One agreement is with Shenyang Gas, the company supplying gas to the Greater Shenyang area, which has a population of more than 24 million. Shenyang Gas has a substantial gas reticulation system in place serving residential and industrial customers and is now purchasing LNG to meet strong energy demand growth.

Shenyang Gas has rights to gas from nearby coal acreage owned by Fushun Mining. The Fushun coals are up to 70 metres thick, mid rank, tertiary age coals with high gas contents.

Arrow will drill and complete wells in this field and receive revenue based on gas produced to surface at global gas market prices. It is anticipated Arrow will drill its first well within the next few months and, if successful, gas can be sold immediately into Shenyang's gas grid. It is anticipated that a further four vertical and 14 horizontal wells would then follow over the next 12 months.

The second agreement is with Liaohe Petroleum Development Company (LPDC) to evaluate nine blocks in Liaoning Province, covering an area of about 9000sqkm of high potential thick coal ranging from high volatile bituminous to semi anthracite.

Arrow will undertake an initial technical evaluation of the project area and following a successful evaluation Arrow will finalize a Production Sharing Contract with LPDC to develop some or all of these blocks. LPDC is a subsidiary of China National Petroleum Corporation and operates over 10,000 producing oil wells in Liaoning province, and has more than 10,000 employees.

Arrow's CEO Nick Davies says: "The agreements mark a significant milestone in the development of Arrow's global growth strategy. China has the potential to provide a major component of Arrow's future growth and we look forward to continuing to grow the outstanding relationships we have developed across China and progressing project developments."