Perth-based TMK Energy says it has proven mobile gas can be flowed to surface at its Gurvantes XXXV coal-seam gas project in Mongolia’s South Gobi Basin, flaring first gas from its Lucky Fox-1 well for three hours.
The company says it will now complete an extended production test at the project as it aims to prove continuous gas flow by increasing pump rates in all three of its wells – Lucky Fox-1, 2 and 3. It believes that will cause more coal seams to reach critical desorption pressure and release their stored gas pay.
The three production wells combined are currently producing about 500 barrels of water per day, in line with reservoir modelling and current pump rates. And the produced water will not go to waste in the arid Gobi Desert, with TMK agreeing to provide coal miner Mongol Alt LLC (MAK), which also owns the Gurvantes lease, with early-stage water from the well tests to feed its nearby power and water-hungry coal mining operations.
The early signs we are seeing from the performance of the three pilot wells is in line with our reservoir modelling work and bodes well for the extended production test. The good water rates combined with the decreasing fluid levels in each of the wells is very encouraging. The flaring of the gas for over three hours proves there is gas in the system that can be and is flowing to surface, and we now aim to demonstrate that gas can be produced at a sustained economic rate as we proceed with the extended production test. The results to date from this maiden Pilot Well Program are very encouraging for the future of the Project, the Company, and its shareholders.
The company has moved with purpose at Gurvantes since earlier this year when it discovered thick gassy coal intervals of up to 68m in its Lucky Fox wells. It has installed three sets of downhole pumps and driveheads, in addition to surface gas-handling facilities in preparation for production testing.
Management last week continued the momentum by commissioning production testing and now proving first gas to surface.
As the extended production test matures in coming weeks and steady gas flow at surface is achieved, TMK will have a clear and immediate pathway to commercialisation through an energy offtake agreement, signed in March this year between TMK and MAK. As part of the deal, the produced gas will be used for modular power generation at site before being on-sold to MAK at the prevailing local energy wholesale price.
The company says it expects to demonstrate sustained economic gas flow rates at surface to propel Gurvantes from the exploration phase firmly into appraisal and commercial development. The test data will feed into TMK’s prefeasibility study for the project, which has an estimated (2C) contingent resource of 1.2 trillion cubic feet of high-methane gas.
Gurvantes is operated by TMK as part of a joint venture with Perth-based partner Talon Energy and signals the company’s commitment to long-term gas production in Mongolia, where it has an exploration licence for 15 years in an area widely regarded as one of the most prospective coal-seam gas basins in the world.
In addition to the local Mongolian need for gas, other market opportunities for TMK includes China’s significant natural gas market, currently serviced by importing via long-distance pipelines from central Asia, Russia and Myanmar.
China is hungry for natural gas to feed its power and manufacturing industries. Mordor Intelligence estimates the compound annual growth rate for China’s LNG market at about 7 per cent from this year to 2028, in part due to the phasing out of coal-fired power in a step towards reduced carbon emissions.
Gurvantes is tantalisingly close to the Chinese border, which is less than 20km south of the project. China’s huge west-east gas pipeline sits another 280km across the border.
Outcropping coal seams are underfoot along strike of Gurvantes where the company believes there is more gas potential. It will investigate that possibility with a planned 2D seismic survey, in addition to eight more exploration wells.
The market seemed to resonate with TMK’s gas flow confirmation today as the company’s stock jumped more than 14 per cent. And with production test data on the horizon, it should not be too long a wait to find out just how much gas is tied up within the Mongolian coals.
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Read More: TMK gets first Gurvantes gas to surface in Mongolia