TMK Energy has kicked off the new year with a bang after revealing a jaw-dropping 300 per cent increase in total gas production for January compared to the previous month.
The company’s flagship Gurvantes XXXV coal seam gas project in Southern Mongolia has delivered record-breaking output, with last month’s gas production jumping 40pc above its previous best-ever monthly record.
Wells LF-04, LF-05 and LF-06 in TMK’s newly drilled pilot production project came online on January 10. The three pilots and its existing wells have produced an impressive 8000 cubic metres of gas.
The numbers are all the more striking given the new wells also faced a few hiccups – well LF-05 needed a pump cleanout after becoming clogged up with downhole waste and well LF-06 needed a bigger pump.
In another positive sign for the project, water retrieval linked to well permeability and higher gas production increased by 230pc to 1000 barrels a day at the pilot well project. The company says the additional water production has also had a recharging effect on other wells. In particular, LF-02 has quadrupled gas production and is still climbing.
TMK Energy chief executive officer Dougal Ferguson said: “Despite not having all the new wells on production for the whole of January 2025, the project still managed to deliver a record month of production. The positive signs we are observing indicate that the project remains well on track to meet our objective of delivering a commercially significant outcome this year.”
Ferguson said production was expected to materially increase by March, however, he emphasised it is still early days in the evaluation process and too soon to predict when or at what level peak production will be reached.
Coal seam gas wells are distinct from conventional gas wells, which are typically drilled into reservoirs trapped within rock structures capped with a seal. Instead, CSG or unconventional wells are drilled directly into coal seams.
To unlock the gas, operators use a fracture stimulation technique known as fracking in which water, nitrogen, carbon dioxide and ceramic sands are injected into the well under pressure to open and clear a pathway for gas to flow.
As dewatering progresses the gas starts to flow, often delivering strong initial rates which then drop off. To minimise drop-off, coal seam gas projects typically require many more wells than conventional gas fields. Because horizontal drilling exposes a much bigger surface area, usually more gas can be extracted over time.
With domestic power generation at the top of the agenda, TMK’s progress is of huge interest to the Mongolian government. The company is in the box seat to become the first coal seam gas producer in-country with a best estimate (2C) contingent resource of 1.2 trillion cubic feet of gas.
In readiness for full production, the company signed a memorandum of understanding with German power generation company Jens Energie LLC to import a gas-fired power plant at no cost to TMK. The plant is currently en route to site.
Installation of the power generator is also at Jens’ cost. In exchange, TMK needs to deliver 5000 cubic metres of gas per day by the end of the financial year.
When key production targets are hit, the German-based company has agreed to take up to 15,000 cubic metres of gas per day from TMK across an initial two-year deal, with an option to extend for a further two years.
Beyond securing a major off-take deal, Jens will also handle all regulatory paperwork leaving TMK Energy to do what it does best – discover and produce gas.
As TMK gears up to full production, the company must be sporting a quiet smile. Having struck a deal only a year ago to buy Talon Energy’s 33pc earned interest in the project for the princely sum of $2 million in TMK shares, it was then repaid $850,000 by Talon to meet its joint venture obligations.
TMK is now only weeks away from potentially generating substantial cash flow as it becomes Mongolia’s first commercial coal seam gas producer, all without breaking the bank. That’s a good result if you can get it.
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