TMK Energy has joined forces with Terra Energy to accelerate exploration at its Gurvantes XXXV coal seam gas project in Mongolia by acquiring seismic data and drilling at least four fully-cored wells.
The two-year exploration cooperation agreement will see the companies evenly split the cost of the wells and the acquisition of 40km of two-dimensional seismic data. TMK says it has already launched a new drilling campaign in an exploration program that is expected to take about two months, but may be extended on the back of positive results.
Terra is the owner-operator of the Baruun Noyon Uul Coal Mine, which sits about 100km east of TMK’s recent Lucky Fox-1, 2 and 3 coal seam gas pilot wells that flowed continuous gas to surface for the first time earlier this month.
TMK says Terra is an experienced, Australian-led coal mining operator with several large tenements in the eastern portion of the Gurvantes XXXV project area. Although the rights to explore for and develop coal and coal seam gas are unique, TMK says both companies will benefit from the significant overlap in the geological data collected from drilling and exploration activities.
Management says the agreement will allow it to quickly and economically acquire critical subsurface data, while further developing its relationship with other mining operators in the Gurvantes area.
Once the wells are drilled and the seismic is acquired, any additional costs associated specifically with coal seam gas exploration will be borne by the Gurvantes project joint venture partners – TMK with 67 per cent and Talon Energy with 33 per cent. Any costs associated with coal mining activities will be paid by Terra.
With drilling and construction of our pilot well program now complete, we have taken advantage of what is a very timely opportunity to immediately commence what could be another high impact, low cost exploration program over an area which already has an extensive data set and where we know that coal targets are present. We are pleased to have entered into this Agreement with Terra Energy so quickly which will assist our efforts in accelerating an exploration program in this area. Terra is an Australian led mine operator, and we both share very similar values with respect to running a safe and efficient exploration program. TMK Energy chief executive officer Brendan Stats
Water has been pumped to surface at a rate of about 600 barrels of water per day at TMK’s Lucky Fox pilot wells in an effort to gradually reduce downhole pressures and in turn, expose the gas-bearing coal intervals to incrementally higher-pressure differentials.
The company revealed earlier this month that the coals had reached “critical desorption pressure”, giving up the gas contained in their pore space, allowing it to flow into the wells and sustain a flare at surface. The gas breakthrough demonstrates “proof of concept” that simple, unstimulated, shallow vertical wells can support a sustained surface gas flare.
TMK says it will continue to pump down the hydrostatic head, brought about by the column of water, in the wells and based on projections and assuming no pump downtime, it forecasts several more weeks before the pressures are reduced to the optimal level. Once that is achieved, it will maintain pump rates and expects to report an initial combined gas flow rate prior to the wells entering six months of extended production testing.
The company is forecasting an increased gas flow rate during the testing as pumping continues and the pressure sink expands outward from the wells, reaching more of the coal seams in the field and subsequently releasing more gas.
The data from the extended production test is critical to enable TMK to model gas delivery rates and create a production profile, giving rise to commercial estimates for Gurvantes XXXV and feeding its prefeasibility study for the project, which has an estimated best-estimate (2C) contingent resource of 1.2 trillion cubic feet of high-methane gas.
TMK has a clear and immediate pathway to commercialisation through an energy offtake agreement, signed in March this year with coal miner Mongol Alt LLC (MAK), which operates nearby. 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 while produced water is being piped to MAK’s coal mine.
The exploration push over the massive 8400-square-kilometre Gurvantes XXXV project has the potential for the company to book more coal seam gas resources in an area where it has recently proven gas can be flowed to surface from reservoir in its virgin state.
With China’s massive energy market hungry for power options and its main east-west gas pipeline about 300km to the south, it seems logical that any Gurvantes gas that is not chewed up by the Mongolian domestic market or nearby mines will surely not go to waste.
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