Starting to get up to speed on this one now. Mongolia is home to roughly 10% of the worlds coal and unsurprisingly generate around 86% of their energy needs from it. The Tavan Tolgoi coal project (90 km2) which the EXR ground (28,000 km2) surrounds has 6.4 billion tonnes of coal which is thought to average 7.65 cubic meters of methane per ton.
The development of the Tavan Tolgoi and Oyu Tolgoi coal projects bring multi billion dollar developments to the region which have a meaningful impact on the countries GPD therefore strong govt backing.
Policy Development and Legal Reform Mongolia is committed to creating an enabling environment for unconventional oil including CBM. Official state policy was approved by the Mongolian parliament in 2012 and 2014. In line with these state policies, the Mongolian parliament approved the new Law on Petroleum in 2014, which has created a convenient environment for conducting exploration, investigation and mining activities in the field of unconventional oil. Therefore, the new regulations on unconventional oil have been approved by the government, and have paved the way to support businesses operating in the shale oil, CBM and coal processing fields. The Petroleum Authority of Mongolia has received over 50 requests on prospecting agreements for unconventional oil over the last two years. There can be a clear sign of business interest in this new field. Also independent law firms have hailed the new law and recognized the step as “…it is another positive step in attracting more investors, foreign and domestic alike, into the petroleum sector.”
Due to the regional development, infrastructure such as road, rail and power (local and export) are all being rapidly developed
Infrastructure and govt backing set the development scene well so from there it really comes down to the ability of the coals to support economic development. With the major seams of the Tavan Tolgoi (#14 and #15) being 36m and 14m thick respectively and having a gas content of around 12 m3/t at depths between 462m and 637m the field ranks up there with the worlds best in terms of reservoir properties with permeability the main unknown at this stage. The analogue I see is to QLD's Fairview gas field (1400 km2) which Paul Basinski (RIP) used a few years back in a presentation as an example of one of the globes best coal seam gas plays. With David Wall from 88 Energy (88E) onboard as the largest EXR shareholder I would have to wonder if this was after consultation with Paul.
EXR have high graded around 2/5 of the land holding so roughly 11200 km2, to get some idea of the potential I have done some rough calcs
Assuming;
5000km2 of productive ground
Only the 2 thickest seams are targeted (50m combined)
10 m3/t of coal
5,000,000,000 m2 (area) x 50m (thickness) = 250,000,000,000 m3 of coal
250,000,000,000 m3 x 0.8 (coal density) = 200,000,000,000 tonnes of coal
200,000,000,000 t x 10m3 = 2 trillion m3 of contained gas
2 trillion / 28.3168 = 70,629,333,442 mcf which is equal to 74518 petajoules (PJ)
A PJ is worth somewhere around $8m which would put the potential value of the gas in place at $596 billion. With coal bed methane you never get it all out so the actual production would be probably only around 20% of this which still sets a fairly solid case for development, the reality is also that much of high graded ground won't be productive but the point I aim to make is that very even with limited ground and low overall recover recovery the project has potential to deliver revenues well into the double digit billions.
From where we are today it's a long road to being a producer however not such a long one to de-risking and creating shareholder value with the next key steps being to acquire the data to set a prospective resource, perform 2D seismic to isolate targets and then drill to test the thesis along with proving up the permeability.
EXR Price at posting:
6.4¢ Sentiment: Buy Disclosure: Held
