Elixir hits total depth first corehole, Permian section thicker than expected

Elixir Energy Limited (ASX:EXR) has today announced progress of its maiden drilling program at its 100% owned Nomgon IX coalbed methane (CBM) production sharing contract (PSC), explaining that its initial core hole has reached total depth, while there is “plenty more to come” from the exploration program at the 30,000km² PSC on the Mongolia-China border.

Elixir report that the Ugtaal-1 core-hole reached total depth (TD) at 752 metres yesterday. This was deeper than the company previously planned as the Permian section proved to be thicker than expected, with a total of 470 metres intersected (basement was not reached and TD was called largely due to the plan to move on to the next stage of the program).

The well-side geologists noted that 43 metres of total net coal was intersected, while wireline logs will be run in coming days to confirm this. Also noted was that gas recovered from the cores appears to be predominantly methane, although final gas composition analysis is still to be received.

Coring has been successful, averaging 99% recovery, and coal cores are being desorbed in the well-site laboratory to determine gas content. Data from this process will progressively become available and feed into the resource estimation process for the local area in the coming months.

Permeability testing will follow in the next few weeks and will also be a key input into this process.

Elixir’s Managing Director, Mr Neil Young, said: “I recently visited our company’s drilling team in the South Gobi and was impressed by their professionalism and high morale in what we would in Australia consider very cold conditions. The Ugtaal-1 well reaching TD is a milestone for the company’s maiden Mongolian CSG drilling program in our vast PSC, but there is plenty more to come.”

Elixir also reported that the BO-CH-2 well is drilling ahead, having reached a depth of 770 metres as of yesterday morning. The well has just entered the Permian section and the first coals have been encountered.

Additional core drilling will be undertaken in the BO-CH-2 well with the aim of recovering coal cores and commencing the testing thereof. Thereafter, Elixir plan to replicate the process at the BO-CH-1 well, subject to hole conditions.

A location for an additional exploration orientated stratigraphic chip-hole in a new region of the PSC is being finalised.

Regional gas industry seeing significant investment

Speaking of location, the broader region is seeing a heightened focus on gas and developing assets to supply the anticipated local growth in gas demand.

This comes as China aims to significantly reduce its reliance on coal and is taking steps to cut carbon dioxide and other emissions, as air pollution is a critical issue across its cities. China’s crackdown on coal use has not only seen demand rise for renewable energy sources, but also for gas — which it’s struggling to meet.

The Power of Siberia — the 3,000 kilometre $55 billion gas pipeline project to deliver natural gas from Russia to China — last week transported its first gas. This will go some way to help China meet its growing gas needs, but is far from being an absolute solution.

There’s real potential here for Mongolia to play a role.

The Prime Minister of Mongolia Uknaagiin Khurelsukh, last week met with Russia President Vladimir Putin. The pair signed a Memorandum of Understanding (MoU) to look into the feasibility of a further natural gas pipeline between Russia and China that would run through Mongolia, providing further opportunity for Mongolia to take part in the regional energy integration.

Khurelsukh underlined that the pipeline project within the framework of the China-Mongolia-Russia Economic Corridor will contribute greatly to the economic and social development of Mongolia, Russia, and China.