A crucial five-year environmental approval from the Mongolian Government has smashed down exploration barriers to allow TMK Energy (ASX: TMK) to ramp up the company’s mammoth Gurvantes XXXV coal seam gas project.
Management says it is a “milestone” moment that will help move its existing 1.2 trillion cubic feet (TCF) resource towards the first stage of development while it pursues broader exploration drilling and appraisal works.
The approval of TMK’s detailed environmental impact assessment (DEIA) plan by the Ministry of Environment and Tourism of Mongolia follows a multi-month consultation period with local communities and government institutions. The DEIA was designed to ensure that the company’s proposals were in accord with strict environmental guidelines required by all stakeholders.
TMK says the environmental green light opens the door for up to 45 production wells and 95 exploration wells during the five-year term. Management noted that the company’s immediate focus remains on drilling additional production wells to accelerate the continued depressurisation of the reservoir and to demonstrate that gas can flow to surface at commercial rates in the short to medium term. It expects to begin drilling additional production wells in August.
The DEIA approval process has taken a significant amount of time and effort to achieve, but we are now rewarded with a clear pathway to drill a large number of production and exploration wells which we expect will add material value to the Project. With the drilling of a further 45 production wells approved, we have the option to accelerate a development program in 2025 and 2026 which should see us producing and selling gas and/or power into the local area and converting some of our contingent resources to reserves.
TMK Energy CEO Brendan Stats
Stats said that with up to 95 exploration wells also approved, the company had the opportunity to materially increase its already substantial contingent resource as its steps out from its core Nariin Sukhait area.
The Gurvantes tenure covers 8400 square kilometres, with the best-estimate (2C) contingent resource of 1.2 TCF limited to just 60 sq km of the landholdings – representing less than one per cent of the total area at the project.
To date, the company has been running a three-well pilot program at Nariin Sukhait, consisting of the Lucky Fox-1, 2 and 3 production wells. The wells are pumping down the reservoir pressure in an effort to hit critical desorption pressure, at which point gas flow rates to surface are expected to increase.
Management believes that drilling more production wells at Nariin Sukhait could provide the additional dewatering capacity to reach the target-critical desorption pressure needed to attain commercial gas flow, helping the company define a development plan, add further reserves and resources at the project and launch pre-feasibility studies.
A recent independent review of the Lucky Fox production wells by respected coal seam gas experts, Cipher Consulting, concluded that Gurvantes displays “excellent technical attributes” with the potential to blossom into a producing field of substantial scale and importance.
According to the company, Gurvantes already hosts the biggest contingent natural gas resource in Mongolia – a nation which currently has no gas production of its own. That creates a significant opportunity for local gas producers by helping Mongolia address its energy security needs.
The project also lies just 300km north of China’s main east-west gas pipeline, creating access to what is one of the world’s most prevalent gas markets.
TMK is picking up the pace in its Mongolian coal seam gas hunt, with the environmental approval opening serious doors for the Perth-based outfit as it looks to move Gurvantes towards commercial production and build on the vast resource already defined at the project.
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