Highlights
- Drilling operations commenced on the initial four gas production well program
- Program designed to establish gas flow rates leading to commercial gas production and first revenue generation
- Jade aims to take advantage of high local gas demand, in particular for Liquified Natural Gas (LNG) sales to replace diesel consumption in the South Gobi region
- Initial four gas production well program to be followed by fully funded twenty gas production wells aimed at generating a significant income stream.
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Jade Gas Holdings Limited (ASX:JGH) (Jade or the Company) is pleased to announce that it has commenced field operations for the initial four gas production well program at the Red Lake Gas Project, which aims to establish commercial gas production in the South Gobi region of Mongolia.
Initial Gas Production Program
Jades’ Red Lake gas field development plan is focused on establishing commercial gas production and near term gas sales. The Company has commenced drilling on its initial four production well program that aims to demonstrate commercial gas production and establish gas reserves. The planned four lateral production wells, each to be drilled and completed over a 1km horizontal length, are targeted to be completed and commissioned by the end of 2024. The production well program will also include a monitoring well (Red Lake 16) with a planned total depth of 420m. This well will be used to monitor:
- Dynamic parameters during production, (eg pressure and permeability),
- Interference between wells will provide information for better spacing for future production drilling,
- Data for reserve calculations and reservoir modelling.
The early gas production drilling program is designed to take advantage of growing customer demand for gas in Mongolia with close customer markets that have an immediate and visible need for gas. Jade has a number of partnerships in place for future gas sales from the TTCBM Project, with HK-Listed Mongolian Mining Corporation (MMC) (ASX Announcement 29 February 2024), and UB Metan LLC (UBM) (ASX Announcement 8 March 2024). A displacement of diesel continues to remain a priority market, with Liquified Natural Gas (LNG) to play a major role in diesel replacement in the South Gobi region.
A drilling pad, large enough to drill 4 lateral gas production wells, has been constructed. The first operational phase will now comprise the drilling of the surface hole for the four gas development wells to a depth of about 60m. After completion of the surface holes the drilling rig capable of drilling the lateral wells will immediately move onto the horizontal production section. All four gas production wells will be drilled to a Total Depth of approximately 1,700m measured depth (MD) including a planned 1,000m lateral production component.
Fully Funded Production Wells
Jade recently announced it had signed a non-binding term sheet for a major gas production partnership with China based Yan’an Drilling Wellking Energy Technology Service Company Limited (DWK) to develop Jade’s Red Lake gas resource (ASX Announcement 15 July 2024). This commercial transaction is subject to the success of the first four gas production wells. The planned twenty production well drilling and completion program will then commence once regulator approval has been received. This gas production well program will see DWK commit to funding the capital required to drill, complete and commission the next 20 production wells at Red Lake.
The Company aims to replicate the success demonstrated by DWK’s previous experience with coal bed methane production wells in the Qinshui Basin, China. The successful gas well development at Qinshui has been established over a 20 year period by the drilling of thousands of coal seam gas production wells. DWK’s assessment of the Red Lake Gas Project technical parameters and conditional agreement to fund twenty gas production wells provides the Company with confidence that DWK will be able to replicate the Qinshui Basin gas development success at Red Lake.
Commenting on the commencement of the production well program, Jade Executive Chairman, Dennis Morton, said:
“The pathway to gas production is now largely dependent of the drilling, completion and establishment of gas production from the four planned gas production wells in Red Lake Gas Field. Establishment of commercial gas production will enable the company to capitalise on the strong gas demand on our doorstep. Jade has a significant opportunity to supply cleaner energy LNG as a diesel replacement in the South Gobi region.
Beyond the initial four gas production wells, the Company is also working on the next twenty production well program as a part of our partnership with DWK in order to accelerate larger scale gas production.”
Media and Investor inquiries:
Elvis Jurcevic
Investor Relations
+61 408 268 271
ej@jadegas.com.au