Gas production testing commenced

Following COVID-related and other logistical delays Elixir Energy (ASX:EXR) has commenced operations on its Nomgon pilot production program, spudding its first coalbed methane (CBM) gas well, the Nomgon-8 well, on Saturday.

The two well (Nomgon-8 and Nomgon-9) drilling program is expected to take less than 30 days, with pilot production testing operations to begin within weeks of the wells being completed.

The two pilot wells will be drilled by Major Drilling and will each reach a total depth of ~600m with well planning and casing sizes similar to that of most Australian CBM wells.

This is the first such test in the sub-basin so the timetable is uncertain. But as is the norm with CBM wells, water will initially be produced until the reservoir pressure is lowered and gas can be desorbed and flow. The gas will be flared during the production test.

This comes as welcome news to us as the maiden pilot production project was a key objective that we wanted to see EXR achieve this year, as per our Investment Memo.

Exploration continues

Alongside its production testing in the Nomgon sub-basin, EXR’s exploration program across its giant landholding in Mongolia continues, now utilising three local drilling rigs.

EXR publicly tendered for an additional and more technically advanced drilling rig to join the exploration campaign to improve drilling performance. That tender has now been awarded to Major Drilling, who will introduce a larger mineral-style rig at a cost effective price. EXR expects drilling using this new rig to commence within the next few weeks.

EXR also reports that since its last CBM operations update in July, it has drilled the Bulag Suuj-2, Yangir-5, Orio-1 and Big Slope-1 wells.

• Bulag Suuj-2 well determined that the coals intersected at Bulag Suuj-1 were deeper than 1,000m at this down-dip step-out location.
• The Orio-1 and Yangir-5 wells failed to reach their target depths due to various drilling problems.
• Big Slope-1 is still drilling, having already cored ~10 metres of coal. Visible gas was seen associated with the coals and appears to represent a new CBM discovery for EXR (subject to final logging).