Elixir Energy to drill first coalbed methane well this weekend

Erdenedrilling's Atlas rig at Oyu Tolgoi last year. Image: Elixir Energy

Elixir Energy will commence its 2019 drilling campaign at the gigantic 30,000 square kilometres Nomgon IX coalbed methane (CBM) production sharing contract (PSC).

Elixir has a 100 per cent interest in the PSC, located in the Gobi Desert on the Mongolia-China border. It entered into the PSC with the Mongolian Government.

The PSC comes with an independently certified risked ‘best case’ prospective resource of 7.6  trillion cubic feet and an un-risked ‘best case’ prospective resource of 40 trillion cubic feet.

Elixir Energy will this weekend kick off its fully funded multi-well drill program beginning with the spud of the BO-CH-1 chip-hole.

The 2019 program was expanded to include two to four stratigraphic chip-holes in addition to the drilling of two firm and fully evaluated core-holes. Two rigs will be used and the option to drill a third core-hole remains.

The chip-holes are very low-cost wells that are put down much quicker than the core-holes, and don’t have the expensive testing program involved through the desorption and permeability testing involved with the core-holes.

The chip-holes will not only be used to gain valuable information about the general geology and confirm coal continuity, but they let Elixir confirm the existence of coal that the recently acquired 2D seismic program indicates should be there.

They also allow for better location selection for the second core-hole and help identify core-hole sites for next year’s program. As a very cheap exploration tool, it can be deployed at scale to open up new areas in the massive licence.

International standard desorption and permeability testing tools have arrived from the United States and Australia respectively, and initial training over the use thereof with the local contractors has been undertaken.

Elixir is using the highly respected Mongolian owned and operated drilling contractor, Erdenedrilling LLC for the drilling program.

The company expects to provide regular market updates as the planned wells deliver key data gathered on coal thickness, gas content and permeability.

On completion of the current 2019 exploration program (2D seismic, chip-hole and core hole drilling), the geological risk of the project will be significantly reduced.

“The commencement of our foreshadowed 2019 drilling campaign is a key step for Elixir exploration program over our very large, 100 per cent owned Nomgon IX CBM PSC,” Elixir managing director Neil Young said.

“The new chip-hole drilling component of the program is a highly cost-effective way of gathering geological information side by side with the core-holes.”

The stock rallied more than 10 per cent this morning on the news.

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