Mongolia - Nomgon IX CBM PSC
In October 2017, Elixir executed an option to acquire Golden Horde Limited (GOH) who, in 2011 secured CBM rights(also known as Coal Seam Gas or CSG) in Mongolia in an area adjacent to the existing gas markets of Northern China.
GOH undertook a detailed prospecting study in the Nomgon IX CBM PSC area prior to commencing negotiations with the Mineral Resources and Petroleum Authority of Mongolia (“MRPAM”) on the commercial terms for a PSC. The MRPAM is a division of the Mining Ministry, which in turn requires approval from the Cabinet of Mongolia (“Cabinet”) before any formal award of a PSC can be made.
On 12 September 2018, Elixir received official notice from GOH that the Mongolian Cabinet had authorised the MRPAM to sign the Nomgon IX CBM PSC with GOH LLC, a wholly owned subsidiary of GOH. On 18 September 2018, GOH notified Elixir that the Nomgon IX CBM PSC has been executed between MRPAM and GOH LLC.
With the PSC now signed, GOH has commenced exploration activities with the initial work consisting of field mapping prior to the onset of the northern winter, together with reprocessing of existing gravity data over the PSC area. This work will assist in determining the exact location of the proposed seismic acquisition programme, the 2019 proposed initial drilling programme and the preparation of an initial Prospective Resources Report of the Nomgon IX CBM PSC area.
In addition, GOH will soon commence an environmental impact study (EIS) over the Nomgon IX PSC, which can also be done over the upcoming northern winter and be completed in time for commencement of the 2019 exploration programme. Furthermore, the winter months will be used to set up the various administrative processes required to successfully operate a PSC in a foreign jurisdiction.
The Nomgon IX CBM PSC is the first unconventional PSC issued pursuant to the country’s updated Petroleum Law, which was passed by Parliament in 2014. Nomgon IX, which covers an area of over 7 million acres, lies adjacent to the Chinese border and is ideally placed for future gas sales into the extensive Northern China gas transmission and distribution network. In addition to Chinese gas demand, Mongolia currently has no gas production and there is a strong political desire to replace high pollution coal power and heat generation with low emission clean-burning gas fired generation. With the potential to find and develop multiple Tcfs of gas from CBM, both the Mongolian and Chinese markets could be supplied with Mongolian CBM.
The PSC is located in what is considered to be one of the most prospective basins in Mongolia for CBM. The PSC surrounds one of the world’s largest producing thermal coal deposits, Tavan Tolgoi, which has an estimated resource of over 6 billion tonnes and produced over 14 million tonnes of coal in 2016. Data from wells within the Tavan Tolgoi mine indicate gas contents of up to 15m3/tonne (480 cf/ton) at depths of 467 metres below surface which is considered high by world CBM standards and is a good indication that surrounding areas are likely to contain similar gas content levels.
Elixir, through its technical due diligence process, has high graded a number of areas (See below) which it considers the most prospective for CBM within the PSC. The planned 2019 exploration programme will be initially focussed on these areas where, based on existing gravity data and field mapping, it is interpreted that coals may be present and be at the right depth for CBM production.