Elixir Energy highlights potential for early coal seam gas production at Nomgon

Elixir Energy ASX EXR coal seam gas CSG Nomgon-1
Elixir Energy plans to spud its second Nomgon well in Mongolia shortly.

Absorption test results from Elixir Energy’s (ASX: EXR) Nomgon-1 well has indicated the coals are near fully gas-saturated, which could point to a simpler and cheaper pilot design for the Mongolian coal seam gas (CSG) project and the potential for early production.

The junior explorer today reported the final key laboratory results for its Nomgon-1 well, which was announced as a CSG discovery in February.

Elixir managing director Neil Young said the identification of fully gas-saturated coals suggest a “potentially very energy-intensive per acre resource” has been found.

The company has also recommenced its field program at the South Mongolian production sharing contract with the drilling of Nomgon-2 due to start “shortly”.

Simpler pilot design and early gas production

According to the company, full gas saturation for a CSG play can mean “potentially very positive” consequences including the possibility for pilot production design to be “substantially simpler and cheaper”.

In addition, Elixir expects production testing to be characterised by early gas generation as opposed to a lengthy water-producing phase to induce pressure draw-down and gas breakthrough.

The company said water management issues could also become simpler and cheaper in the development phase, thus “significantly improving gas production economics”.

“Identifying fully gas-saturated coals in Nomgon-1 is an excellent result, given the very positive consequences this should have for coal seam gas pilot production testing and ultimately, a field development,” Mr Young said.

Depending on the success of its appraisal campaign scheduled for this year, Elixir plans to conduct a pilot production test in 2021.

Nomgon-2 well spud imminent

The second Nomgon well is due to spud shortly and Elixir said it expects the well to produce the “same suite of test results” as Nomgon-1.

These results will become progressively available as the well reaches its target depth.

Samples will either be analysed on-site or sent to laboratories in Mongolia and China.

Overcoming COVID-19

Elixir has been fortunate to continue actively exploring during the COVID-19 pandemic with Mongolia’s strong border controls enabling it to effectively contain the spread of the virus.

According to the World Health Organisation, Mongolia has reported a total of 220 confirmed cases of COVID-19 and no deaths.

Elixir uses local management and sub-contractors and said no imports of equipment have been required.

However, travel and other COVID-19 related restrictions did impede on the transmission of the coal samples to a China-based laboratory for some months, hence the delay in receiving the test results.

Due to the limitations, only one sample was analysed in the main “100 series” coal seam, but Elixir said a broader range of samples will be tested in the future.

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