Oil and Gas News

Elixir to commence follow up drilling after Mongolia’s first gas discovery

Elixir Energy has reported its final gas content figures from its Nomgon-1 well at its 7 million acre (30,000km2) coalbed methane (CBM) production sharing contract (PSC) in Mongolia’s South Gobi Desert on the Chinese border.

The impressive results follow Elixir’s completion of its initial exploration program in February, capped off with Mongolia’s first ever CBM — or coal seam gas (CSG) as it is known in Australia — discovery at the Nomgon-1 well during its initial season of exploration.

Now, with final Nomgon-1 well gas content figures in hand, and cash in the bank following a recent heavily oversubscribed capital raising, Elixir is embarking on an expedited second year of exploration with a follow up drilling and seismic campaign.

The company’s 100 per cent owned PSC lies over a major Permian coal bearing region and has a giant independently certified CBM risked mid-case prospective resource of 7.6 Tcf and an un-risked prospective resource of 40 Tcf.

Final gas content figures from Nomgon-1 post well analysis were made available on 26 June.

The Raw gas content figure was 5.3 m3/t, recorded at the largest coal seam (37m net), known locally as the “100” series.

Most gas content numbers quoted are done on a DAF basis, rather than Raw, so the more important figure to note is Elixir’s reported Average Gas Content (DAF) figure of 8.9 m3/t for “100” series coal.

That said, gas content reporting is often poorly done and is quite inconsistent, making it quite challenging to compare results. Many companies will only report good results, or only provide broad ranges, or don’t even define the unit of measurement.

Yet the figures reported by Elixir do look to compare very well with CSG projects globally.

Elixir’s 8.9 m3/t DAF gas content figure from “100” series coal at the Nomgon-1 well stacks up against a number of recognisable names in Australia.

Galilee Energy’s flagship Glenaras Gas Project in Queensland’s Galilee Basin, for example, that has a reported DAF gas content of 5.3 m3/t.

Similarly, Sunshine Gas’ Lacerta CSG field in the Surat Basin in Queensland — which is now owned by Senex Energy — has a reported maximum 5.0 m3/t DAF gas content.

Also in Queensland, is Comet Ridge’s Mahalo Project where average gas content ranged between ~5.0 and 7.6m3/t.

Following the success of the initial exploration campaign, Elixir is now pushing forward with its second season of drilling and seismic program at the Nomgon IX PSC that’s set to commence in July.

In its second-year work program, Elixir will acquire new 2D seismic data along prospective trends and explore in new sub-basins that will involve drilling on 2019 and 2020 seismic.

The company will appraise the Nomgon-1 well CSG discovery and provide further data for a contingent resource booking in the Nomgon sub-basin, which is targeted for the year’s end.

The upcoming work program will also see Elixir build the sub-surface foundations for offtake projects such as Small Scale LNG (SSLNG) and/or small scale gas fired generation.

Elixir is undertaking a stepped approach where it plans to prove up its discovery through small scale LNG and/or power developments to demonstrate commerciality to potential farm-in partners.

Having recently completed a heavily oversubscribed Placement and Share Purchase Plan (SPP), Elixir is well funded to expedite delineation and further exploration efforts at the PSC.

The company has also recently secured its first offtake project, partnering with one of Mongolia’s largest fuel retailing firms, MT Group, to develop the country’s first Small Scale LNG (SSLNG) plant supplied from local CBM.

A project of this scale, coupled with its proximity to a gas hungry China, means Elixir has the scale to attract a high quality farm out partner in the future.

But first, the company must continue to prove up the resource potential ahead of a contingent resource booking by the end of the year.

Longer term, Elixir has an eye on proving up the potential in its vast PSC block and ultimately bringing in high quality partners who can help bring a very large potential resource into production.