Talon Energy Ltd (ASX:TPD) and partner TMK Energy Ltd have passed a key milestone in the Pilot Well Program at the Gurvantes XXXV CSG Project in southern Mongolia with the start of production testing.
This follows the commissioning of production facilities at the joint venture project in the South Gobi Basin, not far from the border with energy-hungry China.
Talon holds 33% of the coal seam gas (CSG) project while TMK holds 67% and is the operator.
Facilities commissioned
The three-well maiden Pilot Well Program has successfully been drilled and completed, and surface facilities have been installed and commissioned with the extended production phase now underway.
Talon’s managing director and chief executive officer Colby Hauser said: “We are pleased to announce an important milestone in the development of the Gurvantes XXXV Coal Seam Gas Project with the commencement of production testing.
"Over the last 18 months, we have seen the project progress from the drilling of the first CSG exploration wells, to discovery of a significant gas resource, and now commencement of production testing from the Pilot Well Program.”
Talon funding obligation
Additionally, Talon has now completed its stage 2 funding obligation under the Gurvantes XXXV farm-out agreement, having funded the first US$3.15 million of expenditure for the Pilot Well Program.
Moving forward, Talon and TMK will fund their proportionate share of further costs at levels of 33% and 67% respectively.
"Thank you to our partner TMK Energy and our contractors for getting us to this milestone. We look forward to a positive result from the extended production test,” Hauser added.
Commissioning work.
Recent progress
In the latter stages of the commissioning process, the pumps on all three wells began pumping operations at low speeds.
These wells are producing water for nearby storage ponds, which will be recycled by neighbouring mining operations.
Initial water rates are an indication of permeability and the rates being achieved at low pump speeds are in line with expectations.
In the coming weeks, the pump speeds will gradually be increased and the depressurisation of the reservoir will begin.
Next steps
Although initial gas breakthrough is not expected immediately, early modelling suggests that some gas breakthrough may occur at any time following the initial depressurisation of the reservoir.
Once gas breakthrough/production begins, gas will initially be flared at surface with gas and water production data to be analysed to provide valuable information for future commerciality and allow pre-feasibility studies to commence.
Upon achieving a sustained level of production, a decision on whether to use the Lucky Fox production wells for electricity generation for both internal use and potential sales revenue will be able to be made.
It is anticipated that the wells will initially flow high levels of water and low levels of methane gas and over the course of the production test, the gas rates are expected to increase while water rates are expected to decrease.