Elixir drilling first early-stage production gas well in Mongolia; new CBM discovery logged

Local drilling contractors have commenced drilling the first well at Elixir Energy’s (ASX:EXR) pilot plant at its Nomgon IX coalbed methane project in the Mongolian South Gobi region. 

Over the weekend, the Nomgon-8 well was drilled by a newly selected drilling contractor, Major Drilling. 

The company notes Major came to Elixir with an offer to use a larger rig on-site with an advanced mud system, supervised by a superior team. Costs are still competitive. 

The two pilot plant wells, Nomgon-8 and 9, will be drilled to a depth of some 600m. The program is expected to take less than 30 days overall; drilling at Nomgon-8 commenced over the weekend. 

Drills had originally been intended to kick-off for the pilot plant wells in August. 

Pilot plant to allow for production testing

Elixir’s pilot plant will see the construction of a bare bones facility designed to facilitate early-stage production of natural gas on-site. 

It is located within the 100% owned Production Sharing Contract (PSC) boundaries, which for all intents and purposes, can be thought of as an exploration permit with a royalty attached. The Mongolian government awards PSCs. 

Because the PSC involves the government, Elixir technically sees Major Drilling on-site in response to a tender, meaning the company has a stronger legal backing from a contractual POV to see through the pilot plant wells to planned completion. 

Elixir will begin flaring gas during a production test following the completion of both pilot wells, and once water is removed from the well per normal practice. 

Typically, water will be removed from the well slowly to ensure pressure dynamics downhole remain unchanged, until eventually, more gas than water flows out of the drillhole. Worth noting is that Elixir is essentially fracking the Gobi. 

New discovery logged downhole Big Slope-1

Also worth noting for shareholders and investors alike is that the Big Slope-1 well, unrelated to the pilot plant and spudded by the company earlier this year, returned a 10m thick core of gassy coal on the project acreage. 

The Big Slope-1 well remains incomplete, though, steadily progressing towards its planned total depth. 

The company believes Big Slope-1 represents a new coal bed methane discovery within Elixir’s overall  exploration campaign. 

The Biulag Suuj-1 and 2 wells nearby also intersected coal at deeper than 1000m. Orio-1 and Yangir-5, meanwhile, appear set to be abandoned, given “various drilling problems.”

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