TMK drills final Mongolian pilot hole amid development partnership talks

TMK Energy has received strong interest in its Gurvantes XXXV coal seam gas projects in Mongolia from potential partners with financial capability and proven track records in horizontal drilling and fracking.

Management has been encouraged by the response from potential project partners during a recent visit to Mongolia and China and will turn its focus to firming up new players as it executes its drilling schedule at Gurvantes XXXV.

The company has now finalised a drilling contract with specialists Major Drilling for an additional pilot production well at its Nariin Sukhait LF-07 site in Mongolia, after flagging the end of tendering earlier this month.

TMK expects to sign the drilling contract after a final review by the regulator, which is expected shortly. The company finished its final preparations for LF-07 in June and has spudding slated for the second half of July.

It says all its long lead-time items necessary for drilling are onsite and the company has completed drill pad preparation, sumps and other associated site works.

In an independent review delivered to TMK in July, technical consultant Dr Tim Moore of Cipher Consulting, recommended production should continue from a series of pilot wells at TMK’s flagship Gurvantes XXXV project.

Moore said that while a significant gas breakthrough is still awaited from the pilot wells, a slower-than-expected first gas flow is not uncommon in the initial development of greenfield coal seam gas plays, such as the Nariin Sukhait well.

The independent experts agreed that a further well for the pilot project - and its planned placement - are appropriate and that the program meets the company’s 2025 pilot well drilling commitment for its Gurvantes XXXV licence.

TMK is considering further recommendations in its imminent LF-07 pilot well program and in its ongoing development planning as the project advances. It has already put in place an improved mud system for drilling LF-07.

The company will use a bigger, more powerful drill rig than it used for its previous pilot wells. The drilling contract has been structured as a fixed price ‘turnkey’ contract, which reduces the company’s risk exposure to potential cost overruns.

Drilling of LF-07 will most likely be the last vertical pilot well drilled in the current pilot well complex. From this point, the company will design and plan a potential deviated or horizontal drilling and hydraulic fracturing program for next year.

The company last month undertook additional pressure build-up tests on its LF-01 and LF-03 wells to validate and confirm a pressure decline it had measured at LF-02 in April. The tests showed the pressure reduction at LF-02 is also seen at LF-01 and LF-03.

Encouragingly, the reductions suggest the broader area around the pilot production wells is being depressurised. This points to good connectivity between the wells and is key information that can be integrated into the reservoir model.

With the pressure build-up tests completed, the company is now focussing on having all the wells consistently pumping to reach the critical desorption pressure necessary to yield a material increase in well gas flows.

During May, gas production continued from the pilot production well complex in line with expectations and the preceding month’s figures to produce about 8300 cubic metres of gas.

The operating pilot wells continued to produce consistently through May, despite shutdowns required to undertake pressure build-up tests at LF-01 and LF-03 and while awaiting remediation of the LF-05 well.

The equipment required to remediate LF-05 is in Mongolia after some production delays in China, and TMK expects Major Drilling will mobilise its workover rig to the Nariin Sukhait site later this week.

With the timing of LF-07 drilling now locked in, our focus will turn to introducing project partners to the Gurvantes XXXV project. Key attractions of the project to potential partners include the significant size and technical attributes of the resource, its proximity (~20km) to one of the key border crossings between China and Mongolia, the desire of the Mongolian government to develop a gas industry and the enormous and continuing demand from the energy market in China.

TMK is buoyed by the early interest shown in the project and says discussions are continuing with several parties, including potential project partners with the financial capability and technical competency to help advance the project.

The company is also chasing strategic technical partnerships with selected service providers, particularly China-based companies with proven track records and extensive coal seam gas expertise and the equipment to undertake horizontal drilling and fracking operations for production hole development.

The company sees the significant interest as a strong validation of its project and its significant potential to be a material gas-producing field.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au