Elixir Energy turning on its Mongolian Nomgon IX gas pilot plant in October

Wed 28 Sep 22, 12:10pm (AEST)
A residential gas burner stovetop firing in a dimly lit kitchen
Source: Unsplash

Key Points

  • Elixir Energy has completed its Nomgon-9 well; the first well comprising its pilot plant gas production facility
  • Nomgon-8 will be completed throughout the next fortnight
  • In late October, operations at the pilot plant will commence

Patient Elixir Energy (ASX:EXR) shareholders closely watching the company’s coal bed methane project in Mongolia, called Nomgon IX, will be relieved today: the company has confirmed its gas production pilot plant facility goes live next month. 

Right now, the well tech team on-site are preparing a drill rig to perforate and complete the Nomgon-8 well; the second well that comprises Elixir’s vision for its pilot plant. 

The first well in that vision, Nomgon-9, has already been completed this week, and now sits ready to go. 

Nomgon-9 took around 11 days to meet its total depth (relatively shallow, compared to deepwater developments, at less than 500m), so shareholders should expect the same for Nomgon-8. Of course, geological particulars could interfere with that schedule. 

Once both Nomgon wells are complete, the company will then turn on the pumps at its Pilot Plant and begin the careful process of removing hydraulic fracture fluids from the wells, allowing the gas to flow. 

Once the company has marketable gas, it can then move on to its big-ticket vision: energy sales into China

Gas for Christmas 

“We are pleased to report our pilot production program is on track with the completion of Nomgon-9,” Elixir Energy MD Neil Young said. 

“We look forward to moving into the pilot production phase.” 

“However, the timing and quantums of water and gas flows from the wells is uncertain in such a new area, [but] we could see meaningful gas breakthroughs by Christmas.” 

What’s this about pumps? 

This is a typical procedure in all fracking operations, a technology which has actually been around for far longer than common lore predicts.

The first US patent for a fracking well was published in 1866.

Ultimately, a fracking well uses technology similar to a watercutting jet to break up rocks underground. That’s all well and good.

The hard part is getting the fluid back out without messing up the pressure dynamics of the well itself. 

Generally, a pump will be used to slowly remove the fluid at a measured pace, which is typically then deposited into a storage solution on-site. For the first few days, only water (and whatever abrasives were included in the fluid) will come out of the well. 

But, slowly, gas begins to flow out of the well along with the fluid. Keep pumping out that water, and the ‘cut’ of gas-to-fluid increases, until finally (depending on how fast you remove the fluid,) you’re left with nothing but gas coming out of the well. 

For the most part, this is all fracking entails, and as long as fluids removed from underground do not enter the environment, the practice is safe. The trouble, if it’s there, generally comes when fluids are pumped back underground. 

With Elixir going above regulatory requirements to establish an environmental monitoring station at the facility, it’s likely that the team will be keen to brag about its ESG credentials, and so shareholders will likely not need to worry about ecological risk profiles.

Elixir Energy's three month charts with volume information underlying
Elixir Energy's three month charts with volume information underlying
Disclaimer: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Elixir was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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