01-11-99 Digital Gas announced that Qingdao Digital Gas Enhancement & Exploration Co. Ltd. has been formed and formally registered as a sole foreign corporation in China for the purpose of introducing Digital's state-of-the-art, leading-edge oil & gas field reservoir enhancement & exploration technologies in China. The agreement signed between Digital Gas and Taichang Company, Shengli Oilfield this past September 30th will be transferred by the respective parties to Qingdao Digital Gas and the Shengli Petroleum Association, which notified Digital of their acceptance of the plan earlier by letter.
The first area to be enhanced and explored by Qingdao Digital Gas Enhancement & Exploration will be the Shengli Basin where Digital management conservatively projects that on average it can enhance the production from existing wells by a factor of 200-1000 % their current levels.

The following description of the Shengli Oilfield has been reported to Digital during its due diligence. It is the second largest oilfield in China. Located in the Yellow River Delta area on the Bohai Sea in the northern part of China's Shandong Province, the Shengli Oilfield overlaps with 28 counties and districts under the jurisdiction of eight cities including, Dongying, Binzhou, Dezhou. Its main parts are scattered on both sides of the Yellow River estuary within the jurisdiction of Dongying. The Shengli Petroleum Administration is headquartered in Dongying City.
The discovery of the oilfield was based on the earlier oil surveys conducted in China's northern central region. The first successful drilling of industrial oil was made on April 16, 1961 with the well-coded Hua-8, which led to the discovery of the first oilfield in the basin of Bohai Bay known as Dongxin Oilfield. On September 23, 1962, the high-yield Ying-2 well was drilled on the Dongying Formation. On January 25, 1964, the Chinese Communist Party Central Committee authorised large-scale oil surveys and development in this area.
Shengli has five depressions with a total area of 65,000 sq. km. Current development is mainly focused in the Jiyang Depression, with major production fields concentrated within an area of 10,000 sq. km in the eastern part. Jiyang Depression is an oil/gas rich region with complicated geological features, such as the large number of faults, great variety of rock formation and reservoir types, and many differences in the physical features of reservoirs and qualities of crude oil. To date, 17 types of reservoirs have been found, including, sandstone, conglomeration, limestone, igneous and metamorphic rock, as well as others. There are 18 types of pools such as structural, fault, hidden, as well as others. The enrichment is about 2 mm tons per sq. km.

Over the past three decades more than 60 different oil/gas fields have been found and over 10,000 production wells have been drilled. A million tonnage offshore oilfield has also been established.