Far East Energy Announces Increase in Production, Gas From a Second Coal Seam, and Gas From a Distant Parameter Well

HOUSTON -

Far East Energy Corporation (OTC Bulletin Board: FEEC) announced today that gas production in the Number 15 coal seam of its 1H Pilot Area in the Shouyang Block of Shanxi Province, China continues to rise. Far East also announced that preliminary results indicate that it may have discovered a second coal seam capable of significant gas production. Additionally, a parameter well some 7 kilometers distant from the 1H Pilot Area has started producing gas from the Number 15 coal seam and shows promise for production from the Number 9 seam.

Gas production in the 1H Pilot Area has now risen to over 300,000 cubic feet, or 300 Mcf per day. Although fluctuating daily, overall gas production has been increasing since January 1, 2009.

Additionally, Far East recompleted a well in the Number 9 coal seam in the 1H Pilot Area on June 30th, and that well began producing gas from the Number 9 coal seam on July 15, 2009. Production in that well has generally ranged between 20 and 37 Mcf per day since late July.

The P2 parameter well, which was drilled to test the production characteristics and potential of an area approximately seven kilometers away from the 1H Pilot Area, recently started producing gas from the Number 15 coal seam, the same seam that is highly permeable in the 1H Pilot Area and from which most of the current production is derived. Moreover, core from the Number 9 seam in the P2 parameter well has revealed very promising gas data.

“We reached critical desorption pressure in the Number 15 coal seam in a portion of the Pilot Area earlier this year, and more and more wells are beginning to produce,” said Bob Hockert, Operations Manager of Far East Energy. “This is the trend we have been waiting for. We currently have nine wells that appear to meet the volumetric element of the Chinese reserves standards, although some of the wells that have recently come on do not yet meet the time requirement for length of sustained production at the required volumes. That is up from four wells in April, and indicates that we are achieving critical desorption pressure in an ever-increasing area.”

“Furthermore,” continued Hockert, “getting gas production so quickly after recompleting a well in the 1H Pilot Area in the Number 9 coal seam gives us reason to hope that the Number 9 seam is nearly saturated and will give us two seams to target for production in our wells. And if the Number 15 seam and the Number 9 seam should prove to be productive some seven kilometers away from our current pilot area, that will be quite exciting.”

Due to the quantity of gas being produced in the field, Far East has begun discussions with its Chinese partner, China United Coalbed Methane Co. Ltd. (CUCBM), regarding a gas marketing agreement that would allow Far East to jointly market its gas with CUCBM through a gas sales facility. Far East believes that any initial gas sales facility would be a compressed natural gas (CNG) facility and would likely have a potential capacity to process 1 to 3 million cubic feet of gas per day. “We plan to begin negotiations for this facility after completing discussions with CUCBM for the marketing agreement, and believe we will begin gas sales in the last half of 2010,” stated Phil Christian, COO of Far East Energy.

In April 2009, Far East completed drilling and coring of the P2 parameter well. Parameter wells are wells drilled at some distance from the current pilot area with the objective of determining whether these distant areas also look prospective. The P2 parameter well is located nearly seven kilometers west of the 1H Pilot Area. Core analysis of the #9 coal seam in this well indicates that the coal seam is almost completely saturated at this location with a gas content of approximately 450 standard cubic feet per ton (scf/ton). The #15 coal seam has a gas content of approximately 490 scf/ton and is 75 to 80% gas saturated. A saturated coal seam, such as the #9 coal seam appears to be in this area, contains the maximum amount of gas that can exist in the coal based upon the reservoir temperature and pressure. In a saturated condition, the coal seam does not need to be dewatered to begin producing gas. This eliminates much of the delay in the start of gas production that is associated with dewatering.

It was on the basis of these encouraging results that, in late June 2009, Far East recompleted the existing 4H well in the 1H Pilot Area to the Number 9 coal seam and began production testing. Gas began to flow from the #9 coal seam within fifteen days of the commencement of production testing. This seems to indicate that the #9 coal seam is very close to being saturated in both the P2 parameter well area and in the 1H Pilot Area. Thus, the #9 coal seam is a completion and production target in nearly all of the 1H Pilot Area wells and in the area surrounding the P2 parameter well.

Production testing of the #15 coal seam in the P2 parameter well began in July 2009. The well has been on continuous water production since that time and recently began producing gas. As this well is nearly seven kilometers away from the existing 1H Pilot Area, achieving gas production in such a short period of time (i.e. less than 60 days) at this location seems to confirm the high gas saturation of the Number 15 coal seam in the area. Far East now plans to recomplete in the Number 9 seam in the P2 area in hopes of determining that both seams are prospective in the P2 parameter well area as well as in the IH Pilot Area.

The work plan for the remainder of 2009 has not been completed at this time. However, Far East anticipates that the work plan when completed will include additional testing of the #9 coal seam as well as a recompletion of another 1H Pilot Area well to the #3 coal seam to further testing of additional coal seams. We believe, based on a short flow test of an offset well in the 1H Pilot Area, that drainage of water due to a local mining activity may have liberated significant volumes of gas in the #3 coal seam in the 1H Pilot Area.

“We have now been producing significant volumes of water continuously since September of 2008, with positive results being seen since December 2008 and gas is being produced in more wells than at any point in the history of this development ,” said Michael R. McElwrath, CEO and President of Far East. He continued, “As the #15 coal seam gas production appears to be moving in the anticipated direction, we have elected to pursue additional uphole completion opportunities in this 1H area. This allows for cheaper prospecting of the reserve potential in this area without giving up the data gathering needed in the #15 coal seam. This prospecting in the Shouyang PSC includes the #3 and the #9 coal seams. We have recently completed one well to the #9 coal seam and discovered that this coal seam is nearly saturated and appears to have good production characteristics. Additional testing for the #3 coal seam is planned due to reported gas production from the local mine. For obvious reasons, with gas now flowing from the Pilot Area, we are anxious to determine whether our area of high permeability and high gas content extends across a broad swath of the Shouyang Block.”

About Far East Energy Corporation

Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan City, China, Far East Energy Corporation is focused on CBM exploration and development in China.

Statements contained in this press release that state the intentions, hopes, beliefs, anticipations, expectations or predictions of the future of Far East Energy Corporation and its management are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. It is important to note that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those projected in such forward-looking statements include: the gas produced at our wells may not increase to commercially viable quantities or may decrease; certain of the proposed transactions with Arrow may not close on a timely basis or at all, including due to a failure to satisfy closing conditions or otherwise; the anticipated benefits to us of the transactions with Arrow may not be realized; the final amounts received by us from Arrow may be different than anticipated; Chinese Ministry of Commerce (MOFCOM) may not approve the extensions of the Qinnan Production Sharing Contract (Qinnan PSC) on a timely basis or at all; PetroChina or MOFCOM may require certain changes to the terms and conditions of the Qinnan PSC in conjunction with their approval of any extension; our lack of operating history; limited and potentially inadequate management of our cash resources; risk and uncertainties associated with exploration, development and production of CBM; expropriation and other risks associated with foreign operations; disruptions in capital markets effecting fundraising; matters affecting the energy industry generally; lack of availability of oil and gas field goods and services; environmental risks; drilling and production risks; changes in laws or regulations affecting our operations, as well as other risks described in our Annual Report on Form 10-K for 2008 and subsequent filings with the Securities and Exchange Commission.

Source: Far East Energy Corporation

David Nahmias, +1-901-218-7770, dnahmias at fareastenergy.com, or Bruce Huff, +1-832-598-0470, bhuff at fareastenergy.com, or Catherine Gay, +1-832-598-0470, cgay at fareastenergy.com, all of Far East Energy Corporation