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TMK Energy set to plunge back into Mongolian coal seam gas giant

Updated: Apr 19


TMK Energy’s Lucky Fox-1 well drilling operations in Mongolia. Credit: File.

With a 1.2-trillion-cubic-feet (Tcf) coal seam gas (CSG) project just across the border from China, TMK Energy (ASX: TMK) is cashed up and on the hunt for a dance partner, while planning more drilling to increase gas flow rates at its Gurvantes XXXV project in Mongolia.


The current three-well pilot program at Gurvantes has ticked all the boxes and allowed independent verification to conclude that the project has “excellent technical attributes for a world-class coal seam gas project”. That glowing review, by well-regarded Brisbane-based CSG experts Cipher Consulting, found that Gurvantes is well designed, being effectively managed and making good progress in reducing the reservoir pressure.


Cipher says the past six months of data from the project indicates that, like most successful CSG pilot well programs worldwide, Gurvantes will need more time and more drilling for the coal reservoirs to hit critical desorption pressures. When coal reservoirs are pumped down, or de-pressurised, the methane gas molecules bound within tiny fractures are unlocked, or de-sorbed, and can be produced to surface through wellbores.


And that is exactly what is currently happening at Gurvantes through the Lucky Fox-1, 2 and 3 wells that 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. More wells mean more pumping, resulting in the vast Mongolian coal reservoir being exposed to greater pressure drawdown – and sooner.


With that in mind, TMK is planning to drill infill production wells at the project and has now secured the funding to fuel the mission – confirming today that it had raised about $4 million through a share placement and purchase plan.


The company says it has received binding commitments from sophisticated and institutional investors for a $2.5 million placement at 0.4c per share, with a free attaching one-for-one option exercisable at 0.8c. Management will also offer its existing shareholders the opportunity to participate in a share purchase plan, at a cap of $30,000 each, to raise an additional $1.5 million on the same terms as those under the placement.


In a show of in-house support for the proposition, TMK says its management will throw about $200,000 of their own cash into the share purchase plan.


The Gurvantes project is sitting on a best-estimate contingent resource (2C) of 1.2Tcf of gas – which is the now the biggest, independently-certified contingent resource for a coalbed methane project in Mongolia for any ASX-listed company.


The three Lucky Fox wells were shut-in sequentially in January and February and the company says measurements show reservoir pressure had been significantly reduced by about 500 kilopascals (kPa) by the early phases of pumping in its extended production test.


TMK says it expects that once the pressure is further reduced to between about 750kPa and 1000kPa, there will be a material uplift in gas production rates from the pilot wells.


Management says results so far are encouraging as the pressure reduction has been gradual rather than rapid, which it interprets as being indicative of good reservoir permeability and connectivity and should mean higher gas recovery from each production well.


There should be plenty of news flow to come from the Gurvantes pilot well program, as it is still in the phase-one stage of dewatering and gas build-up. The project is steadily advancing towards the second phase of peak gas production, which may be accelerated by the company’s upcoming drilling.


Sitting in Mongolia’s South Gobi Desert and only 300km north of China’s main east-west gas pipeline, TMK is eager to get business partners on the books and the resource monetized. Management says funds from the latest capital raise will also be put into commercialisation efforts, including the sourcing of strategic partnerships.


Is your ASX-listed company doing something interesting? Contact: office@bullsnbears.com.au

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