TMK coal seam gas rates surge to new record in Mongolia

TMK Energy has ticked off a key milestone in Mongolia, setting a new daily gas production record at its Gurvantes XXXV project and delivering its clearest sign yet that the pilot is edging into commercial gas territory.

The company revealed gas rates climbed to more than 25,000 standard cubic feet per day (scfd), or 720 cubic metres at the project. Gas flows appear to be accelerating, too, up almost 7 per cent on the previous all-time high of 674 cubic metres recorded at the start of the month and 21 per cent higher than the January average.

The result follows a brief dip earlier this month when TMK temporarily shut in two wells to conduct pressure build-up testing, a routine and critical step in coal seam gas development.

TMK says pressure data from wells LF-01 and LF-04 confirmed reservoir pressure is declining broadly in line with expectations, a key precondition for gas to begin desorbing from coal seams and flowing more freely.

‘We are excited to see the recent trend that is developing at the LF-07 well.’

TMK Energy chief executive officer Dougal Ferguson

TMK says it believes a small area of the project has now started releasing gas naturally, hinting at a shift towards sustained production. As water continues to be removed and pressures fall, the company expects the gas flow to extend across a larger area of the structure.

The star of the show, however, is LF-07, now clearly emerging as the pace-setter. Gas production from the well has surged past 13,000scfd in recent days and is still trending upward, marking it as the strongest performer in the field to date.

Notably, LF-07 sits high in the geological structure, positioning it favourably as pressure drawdown continues across the pilot area.

While LF-07 has stolen the limelight, the company says gas and water production from the remaining pilot wells continue to track in line with its understanding of the coal and reservoir properties, suggesting the overall system remains stable and predictable as operations ramp up.

TMK Energy chief executive officer Dougal Ferguson said: “LF-07 is the most recent well drilled and the only well in the field where the fluid level in the well was left above the top of the coal seam, meaning the coals have never been exposed to atmospheric pressure, thereby potentially limiting reservoir damage.”

Seeing gas flow rates rising rapidly has given the company confidence that it may yet resurrect a binding memorandum of understanding it signed with German power plant manufacturer Jens Energie 12 months ago.

Under that deal, TMK agreed to supply gas from its Gurvantes XXXV project, initially at a rate of 5000 cubic metres, with Jens set to convert that gas into electricity for the local market using a German-imported gas-fired power plant to be installed under the arrangement.

With the odds of a successful deal shortening by the month, TMK says it is now looking beyond simply proving the wells can produce gas. The company is already planning to link the pilot wells so the gas can be used to generate on-site power, with any surplus electricity potentially sold into the local grid as an early revenue stream.

Saleable gas would also be a big win for Mongolia, which is keen to boost its domestic energy security. A locally supplied, scalable gas project fits neatly with that goal. At the same time, for TMK, the rising production opens up new options as it moves into the next stage of development and discussions with regulators and potential buyers.

With the company’s share price up as much as 29 per cent on the latest news to 12.5 cents, the market is clearly starting to sit up and take notice now. If the LF-07 well’s performance can be sustained and replicated across additional wells, the Gurvantes XXXV pilot could soon shift from technical proof-of-concept to a more compelling commercial gas story in the heart of Mongolia.

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