Elixir Energy Ltd (ASX:EXR) has wrapped up its 2022 activities with flare – that is, the first flaring of gas from the company’s foundation asset, the Nomgon CBM PSC in southern Mongolia, close to the Chinese border.
The company was focused on the extended pilot production test in the Nomgon sub-basin and has been particularly buoyed to find that gas has flowed in sufficient quantities to ignite a flare – a first for Mongolia’s petroleum industry.
It aims to demonstrate a commercial flow rate from the pilot early in the new year, which would represent a major milestone in the company’s journey from the initial conceptualisation of the CBM opportunity in Mongolia to the booking of reserves.
In parallel to the pilot project, Elixir drilled 17 exploration and appraisal wells across the Nomgon CBM PSC in 2022.
It discovered new sub-basins hosting coals in the CBM window and added them to the inventory of such areas.
Crucially, Elixir believes it has successfully demonstrated a repeatable process of exploration to appraisal to pilot production. It hopes the success of this process is noted by potential future development partners.
Gobi H2 green hydrogen
Other activities for the year included partnering with Japan’s SB Energy Corp in the Gobi H2 green hydrogen venture.
Like the Nomgon CBM PSC project, Gobi H2 rests on the locational advantages of the south of Mongolia in potentially supplying the world’s largest energy importer: China.
The South Gobi region has superb renewable energy resources – both wind and solar (and an exceptionally strong combination of the two). The company’s measurement of these to a bankable standard has confirmed this resource quality.
In 2022 the strategy was validated by the establishment of an early-stage partnership with SB Energy Corp, a wholly-owned subsidiary of Japan’s SoftBank Group Corp, through the signing of a Memorandum of Understanding (MoU) in June.
Under the MoU, both parties have been pursuing various elements of the pre-feasibility work required to pursue a green hydrogen pilot project, including water procurement, site selection, engineering studies, off-taker engagement and project financing.
All of these elements are proceeding to plan and in 2023 Elixir looks forward to investigating with SB Energy Corp how the partnership might be strengthened and the project advanced.
Grandis Gas Project
Elixir responded to the Russian invasion of Ukraine, which had a dramatic impact on global energy markets, by acquiring the Grandis Gas Project in Queensland.
Grandis is to the south of Australia’s premier gas hub at Wallumbilla and is connected to local and international gas markets.
In recent weeks the Federal Government has legislated a gas price cap for upstream gas sales in Eastern Australia in 2023. Elixir managing director Neil Young responded to this announcement by saying: “Government interventions in markets are never welcomed and indeed higher prices in gas markets in recent times were a sign that those markets were in fact working.
“Higher prices induce new supplies which then re-balance prices downwards. However, the industry generally accepted that the Government needed to show – for political reasons – that it was ‘doing something’.
“The short-term price caps for 2023 were therefore seen as just one of those crosses that we would have to bear. The longer-term ‘reasonable pricing’ provisions were however not expected and have caused considerable consternation in the industry generally – including at Elixir, given our plans to drill Daydream-2 in 2023.”
Corporate
Elixir maintained its strong balance sheet in the year – in the company’s quarterly report for the period ended September 30, 2022, the cash balance was $19 million.
The company has a strong focus on developing multiple future funding options for all projects, including partnering in a number of possible ways, seeking various forms of government support when available and identifying possible project financing support.
About the company’s financials, Young, said: “In my view 2022 has seen the option value of Elixir increase substantially. At the same time as making great progress in our foundation Nomgon CBM asset we have grown two new assets of enormous and uncorrelated potential.
“The concept of optionality also underpins our strategy when it comes to the future funding needs of these projects – we are working on multiple ways of doing so.”