ASX-listed energy explorer strides closer to gas production

Elixir Energy’s (ASX: EXR) management team is further convinced commercialisation of its Nomgon IX Coal Bed Methane production-sharing project in the South Gobi Basin, Mongolia, is closer than ever, as revealed in its latest operations update on the Nomgon Pilot Project.

On the back of recent results, the Board has decided to expand the two-well pilot project by extending the “flow period” – which refers to the length of time during which gas is extracted from a well. 

The company will also drill an additional pilot well, which will help to further determine the viability of the gas reserves.

Elixir believes that coalbed methane (CBM) development in Mongolia has significant advantages compared to Australia, due to lower drilling costs and access to higher gas prices in the East Asian region.

“Our strategy to invest in Mongolian CBM rests on the strong regional combination of high gas prices and low costs and the results to date are highly encouraging in this context,” explained Elixir’s managing director Neil Young.

Activity update

The company recently completed a workover of the project, which included the removal, cleaning and replacement of existing “completions” - devices used to control the flow of gas from the wells.

Other activity included:

• Installation of smaller pumps that are better suited to the site’s actual water flow rates.

• Repositioning of pumps and associated gauges lower in the wellbore (the hole drilled to access the gas reservoir). This allowed the fluid levels to be relocated below the level of the coal seam.

With the well now successfully brought back online, the company is conducting various experiments to control the flow rate of the gas that is being produced. This has ranged up to 76,000 standard cubic feet per day, which suggests that the well has significant CBM output potential. 

But the company is monitoring the back pressure and fluid (water) level in the well while these experiments are underway. Water flow rates have remained stable at around 105 barrels per day, another potential indicator of increased gas flows in the future.

The Nomgon-8 well is currently shut in and being used primarily as a monitoring well to measure interference pressure. 

Additionally, management is planning to drill a new pilot well (Nomgon-10), which should provide additional data on the overall Nomgon Pilot Project. 

What’s next? 

Elixir is currently seeking to lock in a drilling contractor for this well as part of its broader 2023 drilling program, which is due to start shortly. 

Mongolian-owned and operated TopDiamond Drilling LLC - which has been used in the previous two years – is the successful tenderer for the company’s five-well exploration program.

The exploration work is expected to kick off within the next week or two, once regulatory hurdles have been cleared. 

Formal regulatory processes for the 2023 drilling program’s preferred tenderer are also nearing completion.

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