TMK Energy (ASX: TMK) is one step closer to a pivotal drilling program at its giant Gurvantes XXXV coal seam gas project in Mongolia after selecting an experienced local contractor following a multi-month tendering process.
The company says its preferred contractor has excellent background knowledge of the existing pilot well project and offers fixed-price drilling to ensure cost certainty for the upcoming three-well program that is expected to kick off next month.
The winning tender also came with a 28 per cent reduction in total drilling and completion costs for Lucky Fox production wells 4, 5 and 6, when compared to last year’s pilot well program at Lucky Fox 1, 2 and 3.
Long-lead drilling items are already being delivered to TMK’s Nariin Sukhait pilot well site within the Gurvantes XXXV project that has a 1.2 trillion cubic feet (TCF) resource. Equipment is expected imminently and the drilling contract is expected to be negotiated and finalised within the coming weeks.
The project has been fast-tracked into life following a milestone environmental approval last month. The upcoming drilling campaign marks the start of a broadened workflow to expand from three to 45 production wells following proof of commercial gas flow rates, which is expected later this year.
It is even more encouraging that with the knowledge and experience gained from our 2023 drilling program, the drilling contractors have been able to offer not only cheaper drilling solutions, but also a fixed price, turnkey solution, that provides the Company with additional certainty on the cost of the program.
TMK Energy CEO Dougal Ferguson
The company says the detailed tendering process attracted several highly-competitive applications, including two Chinese drilling contractors with close ties to potential strategic partners.
Following a recent trip by TMK to Mongolia, management says its view has been reinforced that there is “real demand” for a source of domestically-produced natural gas in Mongolia. Energy security is key driver for the nation, in addition to cleaner and more affordable energy source for Ulaanbaatar – the coal-powered capital of Mongolia and the world’s most polluted city.
The Gurvantes project covers a giant 8400 square kilometres of Mongolia’s South Gobi basin. It is considered one of the world’s most prospective coal seam gas basins, with TMK’s best-estimate (2C) contingent resource of 1.2 TCF limited to just 60 square kilometres of the patch.
In addition to Mongolia, the company could also tap into adjacent markets such as China as the project expands into full-scale gas development. Gurvantes lies just 300km north of China’s main east-west gas pipeline, creating potential access to what is one of the world’s biggest gas markets.
China currently imports the third-most natural gas volumes globally. It primarily imports the fuel in gaseous form via long-distance pipelines from central Asia, Russia and Myanmar, with the additional 41 per cent of its demand imported in tanker-shipped liquefied natural gas (LNG).
As TMK approaches the final hurdle to initiate its final pilot well drilling program, it seems quietly optimistic that the additional three wells will prove commercial gas flow rates at Gurvantes, following further depressurisation of the reservoir.
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