NATURAL GAS WILL PLAY AN IMPORTANT ROLE IN MONGOLIA’S ECONOMY

B. Ariunaa

Have you completed the methane gas exploration phase and moved on to the next phase? There was information that pilot production wells were drilled last July and the results were very positive, is this true?

Last year we started the exploration phase for coalbed methane gas. We still continue to work in this phase. It is too early to say that the f irst phase is over and we have entered the next one. Exploration is a continuous process. Last year we drilled 7 exploration wells. This year we drilled 3 pilot production wells. We have been operating these three wells for two months already. The results are very positive.

The gas from the well was flared for 3 months so that we could evaluate the production reserves.

The technology for extracting methane from coal seams is inherently different from mining. This technology allows the gas accumulated in coal seams deep underground to be discovered and extracted by drilling.

The process of extracting methane gas from coal seams is the most environmentally friendly. A 22.8-30.5 cm (9-12 inches) diameter borehole is drilled in a 3x3 basketball court-sized area to extract the methane gas stored deep underground. It causes very little damage to the surface soil and is very effective.

During the production phase, the gas yield is initially very low. The gas level then increases over time and peaks in about two years. It then gradually declines over a period of 10-15 years. This is a typical production cycle. We work in the Nariinsukhait area in Gurvantes soum of Umnugobi aimag. There are a large number of coal mines here that need reliable and cheap energy. We intend to use this gas to generate electricity and supply it to local consumers.

Also on back, it say “no environmental impact”. Everything has an impact, i think it should be “minimal” or “relatively low” environmental impact.

When your company first discovered methane gas in Mongolia, it increased the pumping rate of three wells to increase gas flow and conducted an extended pilot operation, achieving significant results. What are the economic benefits of methane gas?

Rather than talking about profitability, it is more important to talk about how long this project will be sustainable. We are still at the exploration and evaluation phase. It is too early to talk about economic benefits.

Natural gas can play an important role in Mongolia’s economy. Methane gas is a clean, cheap and reliable source of energy. We aim to become the largest supplier of clean energy in Mongolia. We have successfully laid the foundation of the project.

Our gas is of very high quality. 96% of the gas is methane. This means that our gas does not require any additional processing. In other words, it is pipeline quality gas.

A number of wells have been drilled in the exploration and pilot production area. What challenges does an international company face in Mongolia? Probably the most important condition is a favorable legal environment?

Our company has obtained all necessary permits and approvals in accordance with the Mongolian laws. Operations continue as usual. The investment and legal environment is relatively clear. We have signed a production sharing agreement with the government and entered into a cooperation agreement with MAK. In Australia, too, there are considerable obstacles to the implementation of such a project. In Mongolia, we are moving the project forward relatively quickly. However, it differs from the Australian project in that it requires a large number of approvals from local authorities.

Coalbed methane gas production is a new industry for Mongolia, so it is important to provide sufficient information to the public. Methane gas is a much cleaner source of energy than coal and diesel. We believe that methane gas can play a very important role in the development of the domestic energy market.

Methane gas is a relatively new industry. How is the situation with human resources in your company? What are you doing to strengthen the capacity and improve the skills of domestic employees?

We spend a significant amount of time and resources on training our employees. Training and developing Mongolian staff is the most sustainable model of operation. I see this as a huge investment in personnel. The company currently employs 25 people. Of these, there are four Australian specialists and 21 Mongolians. The aim is to train and build the capacity of oil and gas specialists and engineers and provide skilled experts to other mining companies.

The Australia Mongolia Extractives Program (AMEР) study estimates Mongolia’s potential reserves at about 7.5 trillion cubic meters. How much resources does your project have?

It is a very large number. Our project has independently identified 6.5 trillion cubic feet of gas resources (184 billion m3). 1.2 trillion (33.9 billion m3) is a 2c contingent resource. Contingent resource means you drilled and identified gas in the ground. In addition to that we have 5.3 trillion cubic feet of gas (154 billion m3) - a prospective resource.

We are an exploration company. When we move to the exploration phase, we will have to develop a new plan.

We are at the beginning of our journey and we have a lot of work to do. In any case, we must succeed. We will work to create an independent energy source and become the largest and most experienced clean energy provider in Mongolia.

Mongolia will benefit from this project. Again, methane gas production has no negative impact on the environment and is considered the most friendly. Based on the general experience in Australia, we expect to drill 20-100 wells, the distance between which will be 0.5-1 km.

When will your company start infrastructure works at the project site related to gas production?

We do not have sufficient information on the timing of this project, the amount of gas to be produced, the type of products to be supplied to the market. Therefore, we have not developed a comprehensive feasibility study of the project, including the production site, buildings, facilities and equipment. But in a similar project in Queensland (Australia), production wells are located at a distance of 1 km from each other and are connected by underground pipes. The gas is then fed into a collector and then delivered to the customer. We are working on implementing this method.

The design and construction of the facilities will depend on whether they will produce electricity from methane gas, LNG or directly supply gas to customers. But in general, compared to mineral extraction, gas production facilities are relatively small and require fewer people. Currently, the facilities include 3 wells, an office and a camp located two kilometers away.