- Largest Coal Seam Gas (CSG) Contingent Resource in Mongolia and the closest to China’s major pipeline infrastructure
- Contingent Resources of 1C (398 Billion Cubic Feet (BCF)), 2C (1,214 BCF) and 3C (2,361 BCF) confirmed by independent top tier international reserves and resources certifier, Netherland, Sewell & Associates (NSAI)
- Combined Contingent and Prospective Resources* have increased by approximately 500 BCF (32%) for the 70km2 Nariin Sukhait area, following the highly successful 2022 drilling program
- Overall increase of ~9% for combined Contingent and Prospective Resources* for the entire ~8,400km2 Gurvantes Project
- Outstanding results delivered within nine months of the commencement of the exploration program demonstrate the world class nature of the Gurvantes Project
* best estimate categories (2C and 2U) which are unrisked for chance of development
TMK Energy Limited is delighted to deliver its maiden independently assessed Contingent Resource estimate for the Nariin Sukhait area within the Gurvantes XXXV Coal Seam Gas (CSG) Project in the South Gobi Basin in Mongolia, together with an updated Prospective Resource estimate for the Nariin Sukhait prospect area completed by NSAI.
Contingent Resources were estimated for the Upper Coal Seam package (Table 1) and a Lower Coal Seam package (Table 2), both of which were the focus of the 2022 exploration drilling program which consisted of the Snow Leopard wells and the associated testing of each of those wells.
Summary of Results
The Upper Coal Seam package, in which the Company was highly successful in its data gathering and recording good permeability tests, have been categorized as 1C, 2C and 3C. The Company did not attempt a permeability test of the Upper Coal Seam package in the deeper zones and there is no pilot production data available, therefore no 1C has been ascribed to the Upper Coal Seam package at that depth.
Likewise, the Company was only able to obtain minimal permeability data from the Lower Coal Seam package and in the absence of supporting pilot production data, NSAI have not ascribed any 1C or 2C Contingent Resources to the Lower Coal Seam package but have ascribed a significant quantity to the 3C category, indicating upside in the event the Lower Coal Seam can be shown to have adequate permeability and/or pilot production data from future drilling campaigns.
The Contingent Resources from the Upper Coal Seam package far exceed the Company’s pre-drill expectations and validate the scale and quality of the Gurvantes XXXV CSG Project. This is the largest CSG Contingent Resource (1C, 2C and 3C) recorded to date in Mongolia in what is an emerging and potentially significant industry for the country. Other operators in Mongolia have reported initial CSG Contingent Resources for their projects, however, none are as large as the initial Contingent Resources for the Gurvantes XXXV CSG Project and none are as close to China’s major pipeline infrastructure that supplies one of the fastest growing natural gas markets in the world.
The Company is currently planning a significant 2023 exploration program with the aim of converting more of the remaining Prospective Resources into Contingent Resources, along with conversion of 3C resources into the 1C or 2C category. Additionally, the Company is well advanced in planning for its initial pilot well program expected to commence drilling in the first quarter of 2023.
The Contingent Resources were independently estimated by NSAI as of 31 October 2022 and prepared in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resources Management System (PRMS). NSAI are highly regarded international petroleum consultants based in Dallas, Texas and are considered one of the most experienced and respected coal seam gas certifiers globally.
The Contingent Resources are classified in three categories of 1C, 2C and 3C based on the level of confidence that NSAI has with respect to the recoverability of gas from both the Upper Coal Seam package and Lower Coal Seam package that were intersected in the recent five well Snow Leopard drilling program and have been calculated by NSAI using deterministic methods.
Once all contingencies have been successfully addressed, the probability that the quantities of Contingent Resources recovered will equal or exceed the estimated volumes is 90 percent for the low estimate, 50 percent for the best estimate and 10 percent for the high estimate. The estimates of Contingent Resources included herein have not been adjusted for development risk (Chance of Development). The 1C, 2C and 3C Contingent Resources have been aggregated by arithmetic summation, therefore, these totals do not include the portfolio effect that might result from statistical aggregation.
For the Nariin Sukhait area Upper Coal Seam package, the Contingent Resources estimated are contingent upon the collection of additional technical data, through drilling core wells and conducting pilot operations, to establish commercial producibility of project development and, subsequently, the commitment to develop the resources. The project maturity subclass for the Nariin Sukhait area Upper Coal Seam package is development on hold.
For the Nariin Sukhait area Lower Coal Seam package, the Contingent Resources estimated are contingent upon the collection of additional technical data, through drilling core wells and conducting pilot operations, to demonstrate permeability and to establish commercial producibility of project development and, subsequently, the commitment to develop the resources. The project maturity subclass for the Nariin Sukhait area Lower Coal Seam package is development unclarified.
The data used by NSAI to calculate its estimates were obtained from the Company, public data sources, and the nonconfidential files of Netherland, Sewell & Associates, Inc., and were accepted as accurate. Data from the Company’s Snow Leopard core wells in the project area, coal exploration wells, and nearby coal mines were used to determine the lateral continuity and volume of coal to identify potentially attractive target areas.
Updated Prospective Resource Estimate
The Prospective Resources for the Nariin Sukhait area have been updated to reflect the results of exploration in 2022 and the conversion of some of the Prospective Resources to Contingent Resources. The Prospective Resources for Nariin Sukhait presented in Table 3 are exclusively from the lower coal seam identified at Nariin Sukhait. Prospective Resources for other regions within the Gurvantes XXXV Project area are unchanged from those previously reported (see the Company’s ASX announcement dated 16 December 2021).
The Prospective Resources shown in Table 3 have been determined by NSAI using probabilistic methods and are dependent on a CSG discovery being made. If a discovery is made and development is undertaken, the probability that the recoverable volumes will equal or exceed the unrisked estimated amounts is 90 percent for the low estimate, 50 percent for the best estimate, and 10 percent for the high estimate. The risked 1U, 2U, and 3U Prospective Resources have been aggregated by arithmetic summation; therefore, these totals do not include the portfolio effect that might result from statistical aggregation.
Further exploration wells are planned in 2023 along with additional seismic 2D data acquisition, all of which will be aimed at converting more of the Prospective Resources to Contingent Resources over the coming years. The Chance of Development has not been applied to the resources included in Table 3 and is estimated at 50% by the Company.
For the purposes of ASX Listing Rule 15.5, the Board has authorised for this announcement to be released.
Mr Brendan Stats, TMK Energy’s Chief Executive Officer commented:
“This maiden Contingent Resource of approximately 1.2 TCF (2C) is a fantastic result which demonstrates the world class potential of the Gurvantes XXXV CSG Project both in terms of size and quality. The ability to define such a material maiden contingent resource after only commencing our first and relatively small drilling program in March this year, demonstrates the quality of the asset, and the ability to advance the Project quickly, adding significant value for a relatively modest expenditure.
The Contingent Resource estimate has significantly exceeded our expectations and obviously provides us with huge confidence in the scale and future potential commerciality of the project going forward.
We are now focussed on the pilot well program which aims to flow gas to surface and will be another major step forward in demonstrating the commerciality of the Project. In addition to all the planning work being undertaken for the pilot well program, we are now actively planning a significant 2023 exploration drilling program which will be aided by a modest 2D seismic program we intend to complete prior to the end of this year.
All in all, it has been a highly successful year in the advancement of our Project, and for discovering the potential of the emerging CSG industry in Mongolia. I must thank our staff, particularly our strong local team in Mongolia, our partner Talon Energy and of course all our shareholders for their continued support on what is a significant milestone for our Company.”